ap micro unit 1

scarce

resources are limited but human wants are unlimited

resources

inputs used to make goods and services

land labor capital

what are the types of resources?

land

natural resources (soil, water, minerals) 

labor 

human effort (physical, mental work) 

physical capital

man made tools → machines, buildings to produce goods.

human capital

knowledge, skills, education → make workers productive

command economy

gov make all econ decisions (produce, how produce, who)

market

decisions made by ppl and buisnesses through supply and demand.

mixed economy

market + gov economy

property rights

legal right to own and control resources, goods, or services

allocation

way resources are distributed and assigned to uses.

Production Possibilities Curve (PPC)

graph showing the maximum possible output combinations of goods given resources and technology.

opportunity cost

What you give up to get something else (the “next best alternative” → the first choice alternative)

Absolute Advantage

When someone can produce more of a good with the same resources. → the overall of who produces more of a good (w/out considering for OC and CA) 

Comparative Advantage

When someone has a lower opportunity cost of producing a good.

Terms of Trade

rate at which goods are exchanged between countries

how much of one good you give up to get another good in trade

rational

Making choices that maximize benefit and minimize cost.

Total Benefit

overall gain from consuming a certain amount of goods or services.

Utility

satisfaction or happiness from consuming goods/services.

Total Net Benefit

total benefit - total cost

Marginal Benefit (MB)

extra benefit from consuming one more unit.

Marginal Cost (MC)

xtra cost from producing/consuming one more unit.

Diminishing Marginal Utility

idea that each additional unit consumed gives less extra satisfaction.

Marginal Analysis

Comparing MB and MC to make decisions.

Optimal

The best possible outcome, where MB = MC.

Sunk Costs

Costs already paid and cannot be recovered (should not affect current decisions bc they should be based on future costs/benefits)