AP Econ Monster Vocab

PPC

An economic model that measures production efficiency based on available resources.

Opportunity Costs

The potential lost profit from a missed opportunity - the results of choosing one option over another.

Factors of Production

The resources people use to produce goods and services.

Terms of Trade

A measure of a country's export prices relative to its import prices.

Law of Demand

The price of an item and the quantity demanded have an inverse relationship.

Change in Quantity Demanded

A change in the specific quantity of a product that buyers are willing and able to buy.

Change in Demand

A shift in consumer desire to purchase a particular good/service, regardless of price variations.

Capital Goods

Physical assets/resources that are used in the production of goods/services.

Consumer Goods

Any goods purchased for consumption and not later used to produce other consumer goods.

Comparative Advantage

Someone's ability to produce a particular good/service at a lower opportunity cost.

Determinants of Demand

Factors such as income, prices of related goods and services, tastes and preferences, and expectations that affect demand.

Complementary Goods

A good whose use is related to the use of an associated good.

Substitute Goods

A product or service that consumers see as essentially the same or similar.

Demand Schedule

A table that shows the quantity demanded of a good at different price levels.

Equilibrium Price

The market price where the quantity of goods supplied is equal to the quantity of goods demanded.

Equilibrium Quantity

When there is no shortage or surplus of a product in the market.

Surplus

An amount of a resource that exceeds the portion that is utilized.

Shortage

The condition in which the quantity of a good demanded is more than the quantity supplied.

Price Ceiling

The highest price at which a good/service can be sold.

Price Floor

The lowest legal price that can be paid for goods/services, labor, or capital.

Law of Supply

As the price of a good increases, the quantity supplied also increases.

Determinants of Supply

Factors that affect supply, including administrative supply, price speculations, technology intervention, and prices of related items.

Change in Quantity Supplied

A movement along the supply curve caused by a change in price.

GDP

The total monetary value of all finished goods/services produced within a country’s borders in a specific time period.

Expenditure Approach to measuring GDP

Total current year spending on final domestic goods and services.

Income Approach to measuring GDP

Total current year factor income equals Total National Income.

Consumption

The use of goods and services by households.

Investment

The production of goods that will be used to produce other goods.

Rent

The income derived from the ownership of land and other free gifts of nature.

Wages

Payment made by an employer to an employee for work done in a specific period of time.

Interest

The price paid to borrow money or the return earned on savings and investments.

Profits

The financial benefit realized when revenue exceeds expenses, costs, and taxes.

Circular Flow of Economic Activity

The endless cycle of how money and capital flow through an economy.

Working Age Population

The number of people ages 16 and older.

Civilian Labor Force

The number of people classified as either employed or unemployed (excluding military and institutionalized).

Employed

People who have worked at least one hour in the last 2 weeks (includes full and part-time employment).

Unemployed

People not classified as employed but available for work and have submitted a job application in the last 4 weeks.

Marginally Attached Worker

People available for work within the last 12 months not classified as employed or unemployed.

Discouraged Worker

People previously classified as unemployed who exited the civilian labor force without finding employment.

Labor Force Participation Rate

The percentage of the civilian noninstitutional population 16+ that is working or actively seeking work.

Formula: (Civilian Labor Force / Working Age Population) x 100

Actual Unemployment Rate

The percentage of the labor force that is unemployed.

Formula: (# of people classified as unemployed / civilian labor force) x 100

Frictional Unemployment

Associated with voluntary job search and entry into the civilian labor force.

Structural Unemployment

Associated with a skill or geographic mismatch between individuals and available jobs.

Cyclical Unemployment

Joblessness caused by economic recession.

Natural Rate of Unemployment

The sum of frictional and structural unemployment, occurring at full employment output.

Formula: Frictional rate of unemployment + structural rate of unemployment

The Minsky Moment

A sudden market collapse after a prolonged period of speculative investment.