AP Microeconomics - AMSCO - Unit 1

Economics

The study of how people seek to satisfy their needs and wants by making choices

Constraint

limitation or restriction

Opportunity cost

the most desirable alternative given up as the result of a decision

Microeconomics

the study of how households and firms make decisions and how they interact in markets

Macroeconomics

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

Goods

Items purchased to satisfy needs and wants

Service

Any activity that fulfills a human want or need and returns money to those who provide it.

Consumer

A person who purchases goods and services for personal use

Consumption

Spending by households on goods and services, with the exception of purchases of new housing

Economic resource

The means through which goods and services are produced

Factors of production

Land, labor, capital, entrepreneurship

Land

all natural resources used to produce goods and services

Labor

Human effort directed toward producing goods and services

Capital

Human-made resources used in the production of goods and services.

Human capital

the skills and knowledge gained by a worker through education and experience

Entrepreneurship

The activity of setting up a business or businesses, taking on financial risks in the hope of profit.

Rival nature

a type of product or service that can only be possessed or consumed by a single user, creating competition and demand for it.

Non-rival nature

A good that can be consumed or possessed by multiple users

Economic systems

the method used by a society to produce and distribute goods and services

Traditional economy

economic system that relies on habit, custom, or ritual to decide questions of production and consumption of goods and services

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

Capitalism

an economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state.

Command economy

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

Mixed economy

an economic system combining private and public enterprise.