AP Microeconomics: Unit 1 Vocabulary

Vocabulary flashcards covering fundamental economic concepts and terms for AP Microeconomics Unit 1 based on lecture notes.

Economics

How an individual in society experiences limitless wants, and chooses to allocate its limited resources to satisfy wants; also defined as the study of scarcity and individual choices.

Efficiency

Receiving the maximum benefits from limited resources

Opportunity Cost

What one sacrifices in order to obtain what one wants

Marginal

Extra

Market Economy

Decisions of individual producers and consumers largely determine what, how, and for whom to produce, with little government involvement in decisions

Productivity

Quantity of goods and services produced from each unit of labor

Business Cycle

Fluctuations in economic activity between economic downturns, recessions, and economic upturns known as expansions

Traditional Economic System

Economic tasks are passed on from generation to generation

Command Economic System

Government answers each question

Mixed Economic System

Producers, consumers, and government answers economic questions

Scarcity

Limited amount of a desired resource

Four main resources

Land, Labor, Capital, and Entrepreneurship

Land

Anything that comes from the earth

Labor

Payment for salary and wages

Capital

Goods that produce other goods for future use

Entrepreneurship

Business risk and payment comes in the form of profit and loss

Economy

System for coordinating a society's productive and consumptive activities

Command Economy

Industry is publicly owned and a central authority makes production and consumption decisions

Marginal Analysis

Study of the costs and benefits of doing a little bit more of an activity vs. less

Microeconomics

Study of how individuals make decisions and how those decisions interact

Macroeconomics

Concerned with overall ups and downs in the economy

Positive Economics

Objective (non-opinionated) statements that while they may not be true, they CAN be TESTED

Normative Economics

Subjective statement that CAN'T BE TESTED

Economic Growth

Increase in the maximum amount of goods and services an economy can produce

Trade-off

All the things given up to get what you want