AP macroeconomics

Gross domestic product

total value of goods and services produced in the economy during a given period, usually a year

Unemployment

the total number of people who are actively looking for work, but aren’t currently employed

Inflation

a rise in overall price levels

Utility

The want satisfying power of a good and service

Economic resources

The land, labor, capital and entrepreneurial abilities that are used to produce goods or services

factors of production

Economic resources (inputs) Land, capital, labor, entrepreneurship

Land

natural resources used to produce goods or services

Capital

Human made resources- machines, equipment-used to produce goods and services

Labor

Physical and mental talents and efforts of people used to produce goods and services

Entrepreneurship

Taking risks to create new enterprises (businesses); innovating to develop new products and production process

Full employment

Use of all available resources, which satisfy human wants directly

Capital goods

Goods that do not directly satisfy human wants

Production possibilities curve (PPC)

Curve showing the combinations of 2 goods or services

Oppertunity cost

What you must give up in order to get a product or choice

Scarcity

Resources are in shot supply; Unlimited wants with limited resources

Law of increasing opportunity cost

As the production of good increases the opportunity cost of producing an additional unit rises (vs. Constant)

Economic growth

An outward shift in the PPC from an increase in quantity or quality or resources, or technological improvement; increase in GDP

Pure capitalism

An economic system in which property resources are privately owned; markets and prices direct and coordinate economic activity

Command economy

An economic system in which property resource are publicly owned; the government uses central ecnomic planning to direct economic atvites

Mixed economy

An economic system in which has elements of a free market (private property) and command (govt. control)

Market

Any institution or mechanism that brings together buyers (demanders) and sellers (suppliers) of a particular good or service

Demand

Amount consumers are willing to buy

Demand schedule

A chart showing the amounts of goods or services buyers wish to purchase at various prices during a time period

Law of demand

The principle that an increase in a products price will reduce the quantity

Demand curve

Line showing amount consumers desire of a certain good

Diminishing marginal utility

In short term, people will derive less and less satisfaction for each additional unit of a good purchased

Income effect

A change in the price of a consumer good changes a consumer’s purchasing power thus the quantity of the good purchased

Substitution effect

A change in the price of a similar good changes the relative expensiveness of the good

Determinants of demand

Factors other than price that indicate consumer choice

Subsititue good

Products or services that can be used in place of each other; when the price of one falls so does the demand for the other

Complimentary good

Products or services that can be used together; when the price of one falls the demand for the other increases (and vice versa)

Supply

Amount producers are willing to sell

Law of supply

Principal which states that an increase in the price of a product will increase the quantity of it supplied (or the opposite)

Determinants of supply

Factors other than supply which determine the quantities supplied

Surplus

The amount by which the quantity supplied exceeds the quantity demanded at a specific- above equilibrium - price

Market equilibrium

An economic situation in which no individual would be better off doing something different; supply equal to demand

Incentive

Something that motivates a person or group to act: reward

Absolute advantage

When one can produce more with the same resources

Comparative advantage

When one can produce more with a lower opportunity cost

Specialization

When one concentrates on the activity one is better at doing

Business cycle

The short-run alteration between economic downturns, known as rescissions, economic upturns, known as expansions