AP Econ Chapter 1 terms

Limits, Alternatives, and Choices

Economics

The social science that studies how individuals, institutions, and society make optimal (the best choices under conditions of scarcity)

Economic perspective

A viewpoint that envisions society making logical decisions by comparing marginal costs and benefits brought by their actions

Scarcity

The limits placed on the amounts and types of goods that restricts options and demands people to make choices

Opportunity costs

The products you give up to obtain more of something else

Utility

The satisfaction obtained from consuming a good or service

Marginal analysis

Comparing costs and benefits to make logical decisions about purchasing goods

Economic principle

a widely accepted generalization/theory about how individuals and institutions economically act, used to predict the outcomes/effects of certain actions

Other-things-equal-assumption

the assumption that the factors other than those being studied do not change

Microeconomics

examines decision making by individuals, customers, firms, families, and other “smaller” groups

Macroeconomics

examines the behavior/performance of the economy as a whole. Major topics include, growth, inflation, interest rates, and the business cycle

Aggregate

a collection of specific economic units grouped together as if they were one unit

Positive economics

The analysis of facts or data to establish generalizations about economic behvior

Normative economics

A part of economics that makes judgements about what the economy should be like, focused on what goals and policies should be implemented

Economizing problem

having unlimited human wants but limited resources to satisfy them, which forces society to make choices

Budget line

a line on a graph that shows the different combinations of two products a consumer can purchase with a specific income, given the products’ prices

Economic resources

all natural, human, and manufactured resources that go into the production of goods and services

Land

all natural resources used (forests, oil deposits, sunlight, etc.)

Labor

the physical + mental actions people contribute to the production of goods and services

Capital/ capital goods

manufactured assistance in producing goods and services (factory, storage, roads)

Entrepreneurial ability

a special human resource supplied by entrepreneurs who take initiative, make strategic business decisions, innovate, and bear risk.

Entrepreneurs

A person who creates a business, makes financial risks, innovates and tries to make profits

Consumer goods

finished products purchased by consumers that satisfy wants directly

Capital goods

Indirectly satisfy wants by aiding production of goods

Production possibilities curve

a display that shows the different combinations of goods/services you can produce

Law of increasing opportunity costs

as you produce more of one item, you have to sacrifice larger and larger amounts of another item

Economic Growth