AP Microeconomic vocabulary

Scarcity

Limited resources, unlimited wants

Microeconomic

The study of firms or individuals, cost of production, market structure,..etc

Macroeconomic

The study of behavior of the entire economy such as growth, unemployment, inflation, policy impact

Command economy

When government owns the factors of production and have all the rights to make all of decision about what, how and who recieve the output

Free-market economy

When private firms/businesses owns or take up the whole economy

Mixed economy

The combination of free-market and command economy

Opportunity cost

The next best choice that is given up when an economic decision is made

Production Possibility Curve

A curve graph showing production combination of two goods when all the resources are full allocated

Absolute advantage

The ability to produce more of something with fixed resources

Comparative advantage

The ability to produce at a lower opportunity cost

Cost

The value of resources that given up in order to produce a good or service

Explicit cost

The value that involves monetary payment

Implicit cost

Opportunity cost that occurs from allocation of resources for a specific purpose which cannot easily be assigned a monetary value

Marginal

Changes in total

Marginal benefit

The changes in total benefit

Marginal cost

The changes in the total cost

Benefit maximization

When marginal benefit is equals to marginal cost

Law of diminishing marginal utility

The additional satisfaction gained from consuming a good decreases with each additional unit consumed

Law of demand

As price increases, the quantity demanded decrease - ceteris paribus

Demand

The willingness and the ability to buy a good or service at a given price over a period of time

Quantity demanded

The exact amount of good or service that buyers willing and able to pay at a given price over a long period of time

INSPECT

Income, number of consumers, subsitution, preferences, expectation about future price, completement goods, tastes

Supply

The total amount of a particular of goods or services that producers are willing and able to sell/provide at a range of price over a period of time

Price elasticity of demand

How much more or less people buy when there is a change in price

Quantity supplied

The exact number of a good or service that producers willing and able to sell at a given price over a long period of time

SCENIC JET

Subsidy, Cost of production, Expectation about future price, Number of firms, Indirect tax, Competitive supply, Joint supply, Environmental, Technology

Price elasticity of supply

How much the change in price impact the quantity supply

Cross price elasticity

How price of one good impacts demand for other

Market equilibirum

The number of people wanting to equals the number of people willing to sell at a particular price

Consumer surplus

The difference between the value to the consumer and the price

Producer surplus

The difference between the marginal cost of production and the price

Economic surplus

When producer surplus adds with consumer surplus

Efficiency loss / dead weight loss

A reduction of economic surplus

Market

A place where connects sellers and buyers

Quantity control

When the governemnt estabilishes a specific amount of production within the market

Price floor

A minimum price for a product that makes it illegal to charge less than a particular price

Price ceillings

A maximum price for a product and make it illegal to charge more than the mandated price

Subsidy

The payment to producer or consumer for a product

Autarky

When a country is indepdence and don’t trade with the world

Quota system

Places a cap on the amount of imported goods

Fixed cost

not change with output

Variable cost

change with output

Economic system

The society uses to decide what, how, for whom to produce

Tranditional economy

An economic system guided by customs, trandition, and belief passed down through generation

Resource allocation

The process of distributing limited factor of production (land, labour, capital) in order to satisfy human needs and wants as efficiently as possible

Incentives

Rewards or penatilies that motivate producers and consumers to act a certain way

Private property

The right of individual or firm to own, use, and sell resources or assets

Government intervention

State actions like taxes, regulation, spending that shapes market outcomes

Monopoly

One business dominates an entire market

Oligopoly

A market structure where a few large firms dominate the market

Monopolistic Competition

A market structure where there is a lot of busineses that differentiate their products and have lots of competition

Price discrimination

When a firm sells different unit of output at different prices