AP Macroeconomics Unit 1 Vocab Review

Economics

The study of scarcity and choice

Trade-Off

You make a trade-off when you give up something in order to get something else

Resource of Factor Production

Anything that can be used to produce something else

Land

All resources that come from nature, such as timber, wind, and petroleum

Labor

The effort of workers

Capital

Manufactured goods used to make other goods and services

Entrepreneurship

The efforts of entrepreneurs in organizing resources for production, taking risks to create new enterprises, and innovating to develop new products and production processes

Scarcity

When unlimited wants exceed limited resources

Opportunity Cost

The value of the next best alternative that you have given up in order to get an item

Macroeconomics

Concerned with the overall ups and downs of the economy (large scale)

Household

A person or group of people that share their income

Firm

Any organization that produces goods or services for sale

PPC (Production Possibilities Curve)

Illustrates the necessary trade-offs in an economy that produces only two goods

Ceteris Paribus

'Other things equal' means that all other relevant factors remain unchanged

Efficient

There are no missed opportunities - there is no way to make some people better off without making other people worse off

Economic Growth

An increase in the maximum amount of goods and services an economy can produce

Trade

Providing goods and services to others and receiving goods and services in return

Specialization

When each person focuses on the task that they are good at performing

Comparative Advantage

Having the lowest opportunity cost among the people or countries that can produce that good or service

Absolute Advantage

Being able to produce more of a good or service with the given amount of time and resources

Terms of Trade

The rate at which one good can be exchanged for another and have both parties benefit

Quantity Demanded

The amount of a good or service consumers are willing and able to buy at some specific price

Demand Curve

A graphical representation of the demand schedule showing the relationship between quantity demanded and price

Law of Demand

States that a higher price for a good or service leads to a smaller quantity demanded

Change in Demand

A shift of the demand curve changing the quantity demanded at any given price

Movement along the Demand Curve

A change in the quantity demanded of a good resulting from a change in that good's price

Substitutes

Goods that are used in place of one another; a rise in the price of one leads to an increase in demand for the other

Complements

Goods that are bought together; a rise in the price of one leads to a decrease in demand for the other

Normal Good

When a rise in consumer income increases the demand for the good

Inferior Good

When a rise in consumer income decreases the demand for the good

Quantity Supplied

The actual amount of a good or service people are willing to sell at some specific price

Supply Curve

The relationship between the quantity supplied and the price

Law of Supply

States that all other things being equal, the price and quantity supplied are positively related

Change in Supply

A shift of the supply curve indicating a change in quantity supplied at any given price

Movement along the Supply Curve

A change in the quantity supplied of a good arising from a change in the good's price

Input

A good or service used in the production of another good or service

Tax

Treated as an input cost, fees producers must pay to the federal government

Subsidy

Payments from the government to producers to assist in the production of certain goods or services

Substitutes in Production

Goods that producers can use the same inputs to make either one good or the other

Complements in Production

Goods where increased production of either creates more of the other good

Equilibrium

The point where Quantity Supplied equals Quantity Demanded

Surplus

Exists at a price above equilibrium where Quantity Supplied is greater than Quantity Demanded

Shortage

Exists at a price below equilibrium where Quantity Demanded is greater than Quantity Supplied