AP Macro Unit 1

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Scarcity

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27 Terms

1

Scarcity

having unlimited wants, but limited resources

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2

4 Factors of Production

Land, Labor, Capital (Physical and Human), Entrepreneurship

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3

Capital Goods

goods made for indirect consumption or that help to make consumer goods (ex. machinery)

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4

Human Capital

skills, knowledge, traits, and experience that make workers more productive (ex. education)

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5

Trade-offs

ALL the options given up when an action is taken

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6

Opportunity

the specific next best alternative

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7

PPC/PPF

Production Possibility Curve (PPC)/Production Possibility Frontier (PPF)

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8

What does the PPC show?

there are a limited number of goods that can be produced due to scarcity; when more of one good is produced, less of the other good is produced

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9

PPC, efficient point

somewhere on the curve/line

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10

PPC, inefficient point

inside of the curve/line

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11

PPC, unattainable point

outside of the curve/line

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12

PPC Shifters

change in resources: quantity or quality, change in technology, increase/decrease in population

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13

Law of Demand

that there is an indirect relationship between price and quantity demanded

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14

5 Shifters of Demand

tastes and preferences, number of consumers, price of related goods, income, future expectations

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15

Law of Supply

that there is a direct (or positive) relationship between price and quantity supplied (as price increases, quantity increases/as price decreases, quantity decreases)

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16

5 Shifters of Supply

price/availability of inputs (resources), number of sellers, technology, government action: taxes and subsidies, expectations of future profit

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17

Double Shift Rule

when 2 curves shift at the same time either price or quantity will be indeterminate

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18

Shortage

when the quantity demanded is greater than the quantity supplied (caused by a decrease in price)

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19

Surplus

when the quantity demanded is less than the quantity supplied (caused by an increase in price)

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20

Absolute Advantage

the producer that can produce the most output OR requires the least amount of inputs (resources)

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21

Comparative Advantage

the producer with the lowest opportunity cost

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22

Output Problems

OOO = Output: Other goes Over

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23

Input Problems

IOU = Input: Other goes Under

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24

Capital Goods & Future Growth

companies that produce more capital goods will have more growth in the future

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25

Normal Goods

as income increases, demand increases/as income falls, demand falls

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26

Inferior Goods

as income increases, demand falls/as income falls, demand increases

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27

Change in Price

DOESN'T SHIFT THE CURVE, it only causes a movement along the curve

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