AP Econ Summer Assignments

Economics

the study of scarcity and choice

individual choice

decisions by individuals about what to do, which necessarily involve decisions about what not to do

Economy

a system for coordinating a society's productive and consumptive activities

market economy

An economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services

Command Economy

An economy in which production, investment, prices, and incomes are determined centrally by a government.

Incentives

rewards or punishments that motivate particular choices

property rights

the rights individuals or firms have to the exclusive use of their property, including the right to buy or sell it, and to trade with each other

Marginal Analysis

the study of the costs and benefits of doing a little bit more of an activity versus a little bit less

resource

anything that can be used to produce something else

Land resources

materials that come from the earth

labor resources

Human effort directed toward producing goods and services

capital resources

The tools, equipment, and buildings that are used to produce goods and services

Entrepreneurship resources

People whose efforts are to organize resources for production, taking risks for new enterprises, innovating to develop new products/processes

opportunity cost

Cost of the next best alternative use of money, time, or resources when one choice is made rather than another

Macroeconomics

the study of worldwide economy-wide phenomena, including inflation, unemployment, and economic growth

Microeconomics

the study of how individuals, households, and firms make decisions and how those decisions interact

economic aggregates

economic measures that summarize data across different markets for goods, services, workers, and assets

positive economics

the branch of economic analysis that describes the way the economy actually works, objectively and factually

normative economics

The part of economics involving value judgments about what the economy should be like; focused on which economic goals and policies should be implemented; policy economics that are subjective and based on values

Scarcity

A situation in which unlimited wants exceed the limited resources available to fulfill those wants

economic system

the structure of methods and principles that a society uses to produce and distribute goods and services

business cycle

Alternating periods of economic expansion and economic recession

recessions

periods of economic downturns when output and employment are falling

expansions

periods of economic upturns when output and employment are rising

depression

A long-term economic state characterized by unemployment and low prices and low levels of trade and investment

employment

The number of people currently working for pay in the economy

unemployment

the number of people who are actively looking for work but aren't currently employed

labor force

the total number of workers, including both the employed and the unemployed

unemployment rate

the percentage of the labor force that is unemployed

output

quantities of goods and services produced

Aggregate output

the economy's total production of goods and services for a given time period

inflation

a general increase in prices and fall in the purchasing value of money.

deflation

a sustained drop in the price level

price stability

when the overall level of prices changes slowly or not at all

economic growth

an increase in the amount of goods and services produced per head of the population over a period of time.

model

a simplified representation of a real situation that is used to better understand real-life situations, such as the economy

Other things equal assumption

The assumption that factors other than those being considered do not change

Trade-off

the act of giving up one benefit in order to gain another, greater benefit

Production possibility curve

a curve measuring the maximum combination of outputs that can be obtained from a given number of inputs

efficient economy

an economy in which all benefits are maximized to the point that one party cannot increase their benefits without decreasing the benefits of others

productive efficiency

when it is impossible to produce more of one good (or service) without decreasing the quantity produced of another good (or service), producing at a point on its PPC

allocative efficiency

A state of the economy in which production is in accordance with consumer preferences; in particular, every good or service is produced up to the point where the last unit provides a marginal benefit to society equal to the marginal cost of producing it

technology

technical means for producing goods and services

trade

providing goods and services to others and receiving goods and services in return

gains from trade

people can get more of what they want through trade than they could if they tried to be self-sufficient

specialization

Each person specializes in what they are good at to increase output

comparative advantage

when the opportunity cost of producing the good or service is lower for an individual than for others

absolute advantage

the ability of an individual, a firm, or a country to produce more of a good or service than competitors, using the same amount of resources

terms of trade

the rate at which a country can trade its exports for imports from other countries

competitive market

a market in which there are many buyers and many sellers so that each has a negligible impact on the market price

supply and demand model

a model of how a competitive market behaves

elements of supply and demand model

demand curve, supply curve, and market equilibrium

demand schedule

a table that shows the relationship between the price of a good and the quantity demanded

quantity demand

the actual amount of a good or service consumers are willing and able to buy at some specific price

demand curve

a graph of demand schedule and the relationship between the price of a good and the quantity demanded

Law of Demand

the claim that, other things being equal, the quantity demanded of a good falls when the price of the good rises

change in demand

a shift of the demand curve, which changes the quantity demanded at any given price

movement along the demand curve

a change in the quantity demanded of a good that is the result of a change in that good's price

substitutes

two goods for which an increase in the price of one leads to an increase in the demand for the other

complements

two goods for which an increase in the price of one leads to a decrease in the demand for the other

normal good

a good for which, other things equal, an increase in income leads to an increase in demand

inferior good

a good for which, other things equal, an increase in income leads to a decrease in demand

Individual demand curve

A graphical representation of the relationship between quantity demanded and price for an individual consumer

quantity supplied

the actual amount of a good or service people are willing to sell at some specific price

supply schedule

a table that shows the relationship between the price of a good and the quantity supplied

supply curve

a graph of the relationship between the price of a good and the quantity supplied

law of supply

the claim that, other things equal, the quantity supplied of a good rises when the price of the good rises

change in supply

a shift of the supply curve, which changes the quantity supplied at any given price

Movement along supply curve

A change in the quantity supplied of a good arising from a change in the good's price

Factors shifting supply curve

Input prices, prices of related goods/services, producer expectations, number of producers, and technology

input

a good or service that is used to produce another good or service

individual supply curve

illustrates the relationship between quantity supplied and price for an individual producer

equilibrium

equilibrium price

the price at which the quantity demanded equals the quantity supplied

equilibrium quantity

the quantity at which quantity demanded and quantity supplied are equal for a certain price level

surplus

A situation in which quantity supplied is greater than quantity demanded

shortage

a situation in which consumers want more of a good or service than producers are willing to make available at a particular price, when the quantity demanded exceeds the quantity supplied

price controls

government-imposed limits on the prices that producers may charge in the market

price ceiling

A legal maximum on the price at which a good can be sold

Price floor

A legal minimum on the price at which a good can be sold

inefficient allocation to consumers

people who want the good badly and are willing to pay a high price don't get it, and those who care relatively little about the good and are only willing to pay a relatively low price do get it

wasted resources

Price ceilings typically lead to inefficiency in the form of wasted resources. People expend money, effort, and time to cope with the shortages caused by the price ceiling.

inefficiently low quality

sellers offer low quality goods at a low price even though buyers would prefer a higher quality at a higher price

Black market

a market in which buying and selling take place at prices that violate government price regulations

minimum wage

a minimum price that an employer can pay a worker for an hour of labor

inefficient allocation of sales among sellers

Sellers who are willing to sell at the lowest price are unable to make sales while sales go to sellers who are only willing to sell at a higher price

inefficiently high quality

sellers offer high-quality goods at a high price, even though buyers would prefer a lower quality at a lower price

quantity control (quota)

An upper limit on the quantity of some good that can be bought or sold

license

A clear way to define the copyright of your creative work so people know how it can be used.

demand price

the price of a given quantity at which consumers will demand that quantity

supply price

of a given quantity is the price at which producers will supply that quantity

wedge

A device that is thick at one end and tapers to a thin edge at the other end.

deadweight loss

the reduction in economic surplus resulting from a market not being in competitive equilibrium