AP econ unit 1 vocab

 1. Absolute Advantage: exists if a producer can produce more of a good than all other producers.  2. Comparative Advantage: a producer has comparative advantage if he can produce a good at lower opportunity     cost than all other producers.  3. Economic Growth: occurs when an economy’s production possibilities increase.  4. Economics: the study of how people, firms, and societies use their scarce productive resources to best satisfy     their unlimited material wants.  5. Human capital: the amount of knowledge and skills that labor can apply to the work they do and the general level     of health that the labor force enjoys.  6. Inferior goods: a good for which high income decreases DEMAND  7. Law of Demand: There is an inverse or indirect relationship between the price of a product and the quantity of     that product that consumers are willing and able to buy.  8. Law of Supply: There is a direct or positive relationship between the price of a product and the quantity of the     product supplied by the producer.  9. Marginal Analysis: making decisions based up weighing the marginal benefits and costs of that action.

  1. Marginal Benefit (MB): the additional benefit received from the consumption of the next unit of a good or service.
  2. Marginal Cost (MC): the additional cost incurred from the consumption of the next unit of a good or service.
  3. Marginal: the next unit or increment of an action.
  4. Normal goods: a good for which higher income increases DEMAND
  5. Opportunity Cost: the value of the sacrifice made to pursue a course of action.
  6. Production Possibilities: different quantities of goods that an economy can produce with a given amount of     scarce resources.
  7. Productive Efficiency: production of maximum output for a given level of technology and resources. All points     on the PPF are productively efficient.
  8. Productivity: the quantity of output that can be produced per worker in a given amount of time.
  9. Resources: called factors of production, these are commonly grouped into the four categories of labor,     physical capital, land or natural resources, and entrepreneurial ability. (SUPPLY)
  10. Scarcity: the imbalance between limited productive resources and unlimited human wants. Because     economic resources are scarce, the goods and services a society can produce are also scarce.
  11. Specialization: when firms focus their resources on production of goods for which they have comparative     advantage, they are said to be specializing.
  12. Substitute goods: two goods are consumer substitutes if they provide essentially the same utility to the consumer.
  13. Substitution effect: the change in QDemanded resulting from a change in the price of one good relative to the     price of other goods.
  14. Technology: a nation’s knowledge of how to produce goods in the best possible way.
  15. Trade-offs: scarce resources imply that individuals, firms, and governments are constantly faced with     difficult choices that involve benefits and costs.
  16. Utility: The use or satisfaction that a good or service provides to a consumer.

\