AP Econ Unit 1 Exam

Macroeconomics

study of the performance and behavior of the economy as a whole

Scarcity

limits placed on the amounts and types of resources, goods, and services

Fundamental economic problem

scarce resources with unlimited wants and needs

Opportunity cost

the amount of other products or services that must be sacrificed to produce a unit of a product

Absolute advantage

one country produces more of a good or service than another

Comparative advantage

one country produces a good at service at a cheaper opportunity cost

Law of Supply

all other things being equal, producers will produce and sell more of a good at a higher price than a lower price

Market Equilibrium

the only price at which consumers demand the exact quantity producers are willing to supply

Law of Demand

all other things being equal, consumers will purchase more of a good at a lower price than a higher price

Surplus

quantity supplied exceeds quantity demanded

Shortage

quantity demanded exceeds quantity supplied

Price Ceiling

government sets a maximum price for a good, only effective if it is set below the equilibrium point

Price Floor

government sets a minimum price for a good, only effective if it is above equilibrium point