AP macro - chapter 1

Trade Off

decision making (going to make a decision…not made yet)

opportunity cost

what you gave up when making a choice

efficiency

a society getting the maximum benefits from its scarce resouces

equality

where a society’s benefits are distributed evenly among society’s members

Marginal changes

small changes to a plan

incentive

something that induces a person to act

(a higher price leads to buyers having the incentive to buy less, and for sellers to produce more)

trade…

allows each person to specialize in what they are best at.

→ by trading with others, people can buy a greater variety of goods at lower costs.

market

a group of buyers & sellers

important role for the government

* enforce property rights

externalities

when the production or consumption of a good affect bystanders

market power

government may alter the market outcome to promote equalities

→ ex: differences in paying taxes depending on how rich or poor you are

productivity

the amount of goods and services produces per unit of labor

inflation

an increase in the overall level of prices in the economy

short run

* 1\~2 years
* a period in which wages and some other prices do not respond to changes in economic conditions

property rights

the ability of an individual to own and excerise control over scarce resources

market failure

a situation in which a market left on its own fails to allocate resources efficiently

market power (ik there’s two but the textbook and mr baird’s definitions were a bit different wtf you want me to do) → (they are basically the same thing except the other one mentions the government specifically idfk man)

the ability of a single economic actor (or small group of actors to have a substantial influence on market prices)

the 2 roles in economy (occupations)

* scientists: try to explain the world
* policy advisors: try to improve it

assumptions

makes things easier to understand

model → you dont need to know this one (probably..?)

a simplified version of reality