unit 1 ap-macroeconomics

Scarcity

Resources are limited but wants and needs are unlimited

Rational

Logically consistent and aimed at maximizing their benefit

Marginal cost

Extra cost involved in producing one extra unit

Marginal benefit

Extra benefit gained from producing that one extra unit

Capital goods

Goods that help to produce more goods in the future

Consumer goods

Goods that satisfy economic wants immediately

PPC

Graph that shows maximum possible combinations of two goods

Specialization

Concentration by an individual, firm or region on the products of one good or service to increase income

Increasing marginal opportunity cost

To obtain more of something every increasing quantities of something else

Economic growth

Expansion or outward shift in the ppc graph

productive efficiency

Production is achieved at the lowest possible cost and resources are used more efficiently

Allocative efficiency

Resources are distributed that maximizes net benefit

Mixed economy

Markets and the government determine what to produce and how much to produce

Market economy

Existence of markets, unrestricted consumer choice, competition among sellers of products and freedom of sellers to enter and exit the market. Idea by Adam smith

Planned economy

Government ownership of the factors of production, answered by government, directions and plans. Idea from Karl Marx

Command economy

Market prices are determined by a central plan designed by the government

Traditional economic system

Decisions are based on customers, beliefs and traditions. Goods and services produced are distributed according to practices passed down through generations

Market economic system

Economic structure where the production of goods and services are guided by the forces of supply and demand rather than government control

Invisible hand

Self-interested actions of individuals in a free market can unintentionally benefit society as a whole. Idea by Adam smith

Economic system

How society decides how to produce and distribute consumer goods and services

Pure market

All economic decisions are made by individuals and businesses with no government involvement.

Mixed market

Economic system that combines both pure market and pue command marker

Private property

Individuals and businesses have the right to own and control resources land and goods

State owned resources

Land,businesses and other economic resources that are owned and controlled by government rather than individuals

Incentives

Rewards or penalties that encourage people and businesses to make certain choices

Self interest

People and businesses make decisions the benefit themselves

Collective interest

Decisions are made to benefit the immunity or society as a whole

Terms of trades

Refers to the exchange alle of one good to another

Tarifs

Taxes government put on imports from other countries

Comparative advantage

One individual, firm or country can produce something at a lower marginal opportunity cost than another entity

Specialization

Concentration on the production of one good or service in order to be able to increase income

Self sufficiency

Occurs when you can produce everything that it needs

Quota

Physical limit on how much a product can be brought into a country

Absolute advantage

Hen a business is absolutely better at producing one good than another with the same amount of resources

Law of demand

When the price of a good or service increases, the quantity demand decrease Vice versa

Law of supply

When the price of a good or service increases the quantity supplied also increase

Market equilibrium

Point where quantity demanded equals the quantity supplied for a pod or service. Market is stable and there is no shortage or surplus

Price mechanism

Price adjusts in response to changes n demand and supply in a market which Elon’s allocate resources efficiently without government control

Inferior good

Demand falls as income rises

Shortage

Quantity demanded is greater than quantity supplied

Supply

Amount that producer is wiling and able to sell at a certain price over a certain time

Equilibrium

Concept where posing dynamic forces cancel each other out so no excess supply or demand

Demand

Amount consumer is willing and able to buy at a certain price over a certain time

Normal good

A good whose demand increases as income rises

Supply curve

Minimum price that a producer requires for an additional units of output

Surplus

When quantity supplied is greater than quantity demanded

Demand curve

Maximum pice that a consumer will pay for an additional unit of good

Income effect

Price fall the purchasing power of consumer increases which means demanded buys more

Substitution effect

Pice of goods fall which means it’s cheaper and then the demanders buy more

Change in quantity demanded

Change in pice

Decrease in demand

Demanders buy small quantities at every pice

Increase in demand

Demanders buy larger quantities at every pice

Change in quantity

Caused by price

Increase in supply

Suppliers sell larger quantities at every pice