AP Micro Vocab

economics

the study of choice of how to use resources under conditions of scarcity

individual choice

the decisions made by individuals about how to allocate limited resources influenced by tradeoffs, opportunity costs and personal preferences

tradeoffs

when you give up one thing to get something else

opportunity cost

the value of the choice; the next best alternative that is foregone when a choice is made; it represents the benefits or opportunities lost by choosing one option over the other

all resources are

scarce. The quantity available isn’t large enough to satisfy all productive uses

Resource

anything that can be used to produce something else

Microeconomics

studies smaller concerns that affect individuals, families, or business. Microeconomics focuses on specific goals, markets, and individual decision makers

Land

anything drawn from nature for use in the production of goods and services

Labor

the time and effort people contribute to the production process

Capital

anything long lasting that is created by humans for use in the production of other things

entrepreneurship

the willingness of people to organize, and assume the risks involved with business ventures

incentive

something that motivates or drives one to do something or behave in a certain way and is a key component to understanding economics

intrinsic incentive

comes from within; ie. personal satisfaction

extrinsic incentive

do something in order to gain an external reward

needs

goods or services that are required for surivial

wants

goods or services that are not necessary but that we desire or wish for

goods

physical items produced in an economy

services

activities produced in an economy

economy

a system for coordinating the production and distribution of goods and services

Adam Smith

A scottish scholar who lived from 1723-1790. He publoshed an economics book called the wealth of nations

economic system

organizational structure for addressing what, how, and whom to produce

market economy

a system where most economic decisions are made by businesses owners and consumers

capitalism

an economic and political system where trade and industry are controlled by private owners for profit not by the state

command economics

central planners make the important decisions about what, how, and for whom to produce

socialism

an economic system under whoch most resources and businesses are publicly owned, and economic decisions are made by groups of workers and consumers

communism

a political economic system under which all resources and businesses are publicly owned and economic decisions are made by central authorities

traditional economy

decisions about resources are made by habit, custom, superstition, or religious tradtion

mixed economy

combines a market economy with significant government involvement and elements of tradition

marginal analysis

is an examination of the additional benefits of an activity compared to the additional costs incurred by that same activity

property rights

theoretical socially, enforced constructs in economics for determining how a resource or economic good is used and owned

public property

property owned by all but its access and use are controlled by the state or community

common property

property owned by a group of individuals access, use, and exclusion are controlled by the joint owners

private property

property owned by individuals or private entities

Fifth amendment - takings clause

includes a provision known as the Takings clause - “private property shall not be taken for public use without just compensation”

eminent domain

The power of a government to take private property for public use

intellectual property

a work or invention that is the result of creativity to which one has rights to

supply and demand model

a model of how a competitive market works

demand schedule

shows how much of a good or service consumers will want to buy at different prices

demand curve

graphical demonstration of a demand schedule

6 factors that shift the demand curve

substitutes

complements

normal goods

inferior goods

changes in taste

changes in expectations

9 factors that shift the supply curve

cost of inputs

policies

regulations

subsidies

taxes

number of firms

technological change

expectations about future prices

natural disasters and weather

substitutes

a good that can be used in place of another; products that a consumer perceives as similar or comparable

complements

two goods are complements if fall in the price of one good makes people more willing to buy the other good

normal goods

any good for which demand increases when income increases

inferior goods

a good whose demand decreases when consumer income rises

change in tastes

change in demand due to fads, beliefs, cultural shifts, and so on

changes in expectations

expectations of a future drop in price leads to a decrease in demand today expectations of a future rise in price are likely to cause an increase in demand today

cost of inputs

what is put in by any process or system

policies

activities that support/provide active encouragement

regulations

a rule or oder that is created and enforced

subsidies

a sum of money granted by the government

taxes

mandatory payment that the government imposes on businesses

number of firms

total count of businesses operating within a specific market

technological change

efficiency of production