AP Macroeconomics Unit 1 Vocab

absolute advantage

a situation in which a person or country can produce more of a particular product from a specific quantity of resources than some other person or country

business cycle

recurring increases and decreases in the level of economic activity over periods of years; consists of peak, recession, trough, and expansion phases

capital

human-made resources (buildings, machinery, and equipment) used to produce goods and services; goods that do not directly satisfy human wants; also called capital goods

ceteris paribus

The assumption that factors other than those being considered are held constant

comparative advantage

a situation in which a person or country can produce a specific product at a lower opportunity cost than some other person or country; the basis for specialization and trade

complements

products and services that are used together. When the price of one falls, the demand for the other increases (and conversely)

constant costs

Costs that are paid consistently and can be expected before they are paid

demand

A schedule showing the amounts of a good service that buyers (or a buyer) wish to purchase at various prices during some time period

economic growth

An increase in the capacity of an economy to produce goods and services, compared from one period of time to another

economics

The social science concerned with how individuals, institutions, and society make best choices under conditions of scarcity

equilibrium price

The price in a competitive market at which the quantity demanded and the quantity supplied are equal, there is neither a shortage nor a surplus, and there is no tendency for price to rise or fall

equilibrium quantity

The quantity at which the intentions of buyers and sellers in a particular market match at a particular price such that the quantity demanded and the quantity supplied are equal; the profit maximizing output of a firm

factors of production

Economic resources: land, capital, labor, and entrepreneurial ability

fallacy of composition

The false notion that what is true for the individual (or part) is necessarily true for the group (or whole)

inferior goods

A good or service whose consumption declines as income rises, prices held constant

inflation

A rise in the general level of prices in an economy

inputs

Raw materials of a good or product

law of demand

The principle that, other things equal, an increase in a product's price will reduce the quantity of it demanded, and conversely for a decrease in price

law of increasing opportunity cost

The principle that as the production of a good increases, the opportunity cost of producing an additional unit rises

law of supply

The principle that, other things equal, an increase in the price of a product will increase the quantity of it supplied, and conversely for a price decrease

macroeconomics

The part of economics concerned with the economy as a whole; with such major aggregates as the household, business, and government sectors, and with measures of the total economy

market demand

The demand for a product

market equilibrium

A point at which the supply and demand is at equilibrium

microeconomics

The part of economics concerned with decision making by individual units such as a household, a firm, or an industry and with individual markets, specific goods and services, and product and resource prices

model

Something to work off of or from

normal goods

A good or service whose consumption increases when income increases and falls when income decreases, price remaining constant

normative economics

The part of economics involving value judgments about what the economy should be like; focused on which economics goals and policies should be implemented; policy economics

opportunity cost

The amount of other products that must be forgone or sacrificed to produce a unit of a product

positive economics

The analysis of facts or data to establish scientific generalizations about economic behavior

production possibilities

A curve showing the different combinations of two goods or services that can be produced in a full employment, full production economy where the available supplies of resources and technology are fixed

quantity demanded

The amount of a good or service that buyers (or a buyer) are willing and able to purchase at a specific price during a specified period of time

quantity supplied

The amount of a good or service that producers (or a producer) are willing and able to make available for sale at a specific price during a specified period of time

recession

A period of declining real GDP, accompanied by lower real income and higher unemployment

recovery

A period after recession where real GDP starts to increase, accompanied by increasing real income and falling unemployment

scarcity

The ease of which you can obtain a certain good or product

specialization

The use of the resources of an individual, a firm, a region, or a nation to concentrate production on one or a small number of goods and services

substitutes

An alternate good of another good or a competitor

supply

A schedule showing the amounts of a good or service that sellers (or a seller) will offer at various prices during some period

terms of trade

The rate at which units of one product can be changed for units of another product; the price of a good or service the amount of one good or service that must be given up to obtain 1 unit of another good or service

trough

the point in a business cycle at which business activity has reached a temporary minimum; the point at which a recession has ended and an expansion (recovery) begins

unemployment

The failure to use all available economic resources to produce desired goods and services; the failure of the economy to fully employ its labor force