AP Microeconomics MOD 1 Essential Notes

Economics

the study of scarcity and choice

factors of production

land, labor, capital, entrepreneurship; anything that can be used to produce something else

Land

all resources that come from nature, such as minerals, timber, and petroleum

Labor

the effort of workers

Capital

refers to 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

scarce

resource is not available in sufficient quantities to satisfy all the various ways a society wants to use it

opportunity cost

The value of the next best alternative that you must give up in order to get the item

Microeconomics

the study of how individuals, households, and firms make decisions and how those decisions interact

household

is a person or a group of people that share their income

Firm

any organization that produces goods or services for sale

Macroeconomics

concerned with the overall ups and downs in the economy

normative economics

the study of what the goals of the economy should be

Model

Any simplified version of reality used to better understand real-life situation

Thought Experiments

hypothetical, imaginative scenario used to explore and illustrate economic concepts

production possibilities curve

illustrates the trade-offs facing an economy that produces only two goods. It shows the maximum quantity of one good that can be produced for each possible quantity of the other good produced

Efficiency

An economy is efficient if there is no way to make anyone better off without making at least one person worse off. No missed opportunities