AP Microeconomics Module 1-3 Key Terms

economics

the study of scarcity and choice

market economy

businesses make their own decisions on what to produce while people make their own decisions on what to consume.

command economy

the government owns businesses and decides what gets made and how much people can buy.

marginal analysis

the concept of the costs and benefits of doing a little bit more of an activity.

resource

something that can be used to produce something else

land

resources that come from nature (rivers, trees, etc.) (one of the 4 categories of economic resources)

labor

effort of workers (one of the 4 categories of economic resources)

capital

manufactured goods used to make other goods/services (one of the 4 categories of economic resources)

entrepreneurship

risk taking, innovation & organization of resources for production (one of the 4 categories of economic resources)

scarcity

when resources aren’t available in sufficient quantities to satisfy every way a society wants to use them.

opportunity cost

the real cost of something is what you must give up for it.

microeconomics

the study of how people make decisions and how these decisions interact

macroeconomics

the concern of the ups and downs within the economy

aggregate

the total quantity of goods/services that producers are willing to supply at various price levels within an economy

positive economics

the study of how the world works by answering questions with right or wrong answers

normative economics

when economists/people talk about how they think the economy should work

production possibilites curve (ppc)

a model that helps economists think about the trade-offs every economy faces.

trade-offs

choosing one option means giving up the opportunity to pursue another

efficient

there are no missed opportunities for anyone & the most good is produced for consumers.

allocate

the way societies decide to distribute scarce resources to produce goods & resources.

increasing opportunity cost

as you produce more of one good, the opportunity cost of producing even more of that good increases.

economic growth

the economy can produce more of everything because of an expansion of the economy’s production possibilities.