AP Economics

Economics

the study of how human beings coordinate their wants and desires, given the decision-making mechanisms, social customs, and political realities of the society

Scarcity

the goods available are too few to satisfy individuals’ desires

Microeconomics

the study of individual choice, and how that choice is influenced by economic forces

Macroeconomics

the study of the economy as a whole

Marginal cost

the additional cost over and above costs already incurred

Marginal benefit

the additional benefit above what has already derived

Economic reasoning

based on the premise that everything has a cost

MB > MC

do it!

MC > MB

don’t do it!

Opportunity cost

the benefit that you might have gained from choosing the next-best alternative

Implicit costs

costs associated with a decision that often are not included in normal accounting costs

Illusionary sunk costs

costs that show up in financial accounts that are already spent

A market force

an economic force that is given relatively free rein by society to work through the market

The invisible hand

the price mechanism that guides our actions in a market. is an example of a market force

An economic model

a framework that places the generalized insights of the theory in a more specific contextual setting

An economic principle

a commonly held insight stated as a law or general assumption

Theorems

propositions that are logically true based on the assumptions of the model

Arrive at policy precepts

policy rules that conclude that a particular course of action is preferable

Efficiency

achieving a goal as cheaply as possible

Economic institutions

laws, common practices, and organizations in a society that affect the economy

Economic policies

actions (or inaction) taken by the government to influence economic actions

Objective policy analysis

keeps value judgments separate from the analysis

Subjective policy analysis

reflects the analyst’s views of how things should be

Positive economics

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the study of what is and how the economy works

Normative economics

the study of what the goals of the economy should be

The art of economics

using the knowledge of positive economics to achieve the goals determined in normative economics