AP Econ terms

please study

allocatively efficient

p=mc

A market structure characterized by a small number of firms that dominate the market, none of which can keep the other firm from having significant influence.

Oligopoly

Goods that are consumed together, where the demand for one increases the demand for the other.

complementary goods

Goods that can replace each other, where an increase in the price of one leads to an increase in demand for the other.

substitute goods

Goods whose demand increases when consumer incomes fall, and decreases when incomes rise.

inferior goods

Goods whose demand increases when consumer incomes rise, and decreases when incomes fall.

normal goods

The difference between what consumers are willing to pay for a good or service and what they actually pay.

consumer surplus

The difference between the price producers receive for a good or service and the minimum price they would accept to produce it.

producer surplus

A market situation where the actions of one firm significantly impact the decisions of other firms, often seen in oligopolistic markets.

mutually interdependence

The reduction in average costs that occurs when production increases

economies of scale

The increase in average costs that occurs when production increases

diseconomies of scale

The average cost per unit of production that decreases as output increases, calculated by dividing total fixed costs by the number of units produced.

Average fixed costs

The total cost of production divided by the number of units produced, encompassing both fixed and variable costs.

Average total cost

The costs that vary with the level of output, including expenses like labor and materials, calculated by dividing total variable costs by the number of units produced.

Average variable costs

The establishment of rules or laws by a governing body to control or manage specific activities, often aimed at protecting the public interest and promoting fair competition.

regulation

Rules set by government regarding taxation, including how taxes are applied, collected, and enforced.

tax laws

Taxes imposed on imported goods to raise revenue and protect domestic industries.

tariffs

Financial assistance provided by the government to support businesses or economic sectors, aiming to lower production costs or encourage certain activities.

subsidies

The additional revenue generated from employing one more unit of labor, reflecting the value of output produced by that unit.

marginal revenue product of labor

process of trading goods or services between individuals or firms.

exchanging hands

based off facts; avoid value judgements (what is)

positive statements

are based on opinions and value judgments, indicating what ought to be rather than what is.

Normative statements

the value of the next best alternative foregone when a choice is made.

opportunity cost

a situation where demand for a product or service exceeds its supply in a market, temporary

shortage

products that are purchased for personal use by consumers

consumer goods

manufactured assets used in the production of goods and services.

capital goods

refers to tangible assets such as machinery, tools, and buildings that are used in the production process to create goods and services.

physical capital

the economic value of a worker's skills and experience.

human capital

The ability of an individual or group to carry out a particular economic activity more efficiently than another individual or group.

absolute advantage

the ability of an individual or group to carry out a particular economic activity more efficiently than another activity.

comparative advantage

A marketplace where final goods and services are bought and sold, involving interactions between consumers and businesses.

product market

A marketplace where factors of production, such as labor, capital, and land, are bought and sold.

factor market

The demand for a factor of production that results from the demand for the final goods and services that it helps to produce.

derived demand

Firms should hire labor until…

VMPL = MRC

Additional cost of another worker

Marginal resource cost (MRC)

Demand curve for resources

VMPL = demand

The difference between total revenue and total explicit costs, excluding implicit costs.

Accounting profits

the difference between total revenue and total costs, including both explicit and implicit costs.

economic profits

Refers to demand that is sensitive to price changes, where a small change in price leads to a significant change in quantity demanded.

relatively elastic

refers to a situation where the quantity demanded or supplied responds less than proportionately to a change in price.

relatively inelastic

A type of demand where any change in price leads to an infinite change in quantity demanded, resulting in a horizontal demand curve.

perfectly elastic

describes a situation where the quantity demanded or supplied remains constant regardless of price changes.

perfectly inelastic

the principle that as more of a variable input is added to a fixed input, output increases at a decreasing rate

diminishing marginal returns

Describes a situation where the percentage change in quantity demanded or supplied is equal to the percentage change in price, resulting in a total revenue that remains constant.

unit elastic

measures how the quantity demanded of a good responds to a change in consumer income, indicating whether a good is a normal or inferior good.

income elasticity

vmpl =….

P* Marginal product of labor(MPL)

A loss of economic efficiency that occurs when the equilibrium outcome is not achieved or is not achievable. It usually arises from taxes or subsidies.

dead weight loss

The practice of charging different prices for the same good or service to different consumers, based on their willingness to pay.

price discriminate

The excess of total revenue over total cost that a monopolist earns from its market power, compared to perfect competition.

monopolist profit

monopolist economic profit

(P-ATC)Q

markets that influence each other's prices and outputs.

interrelated