AP Econ Unit 1

production of possibilities curve

a model that shows alternative ways an economy can use its scarce resources

marginal

additional

land

all natural resources used to make a product

trade-offs

all the alternatives we give up when we make a choice

enterprenurship

ambitious leader that combine other factors of production to create goods and services, skills to start and run a business

Utility

amount of satisfaction or pleasure

cost

amount seller pays to produce a good

price

amount that buyer (consumer) pays

negative statements

an economic statement that includes value judgment (what aught to be)

law of increasing opportunity cost

as you produce more of any one good the opportunity cost will increase

capital goods

business will buy to make consumer goods with, man made goods

consumer goods

buy for own pleasure/ satisfaction

free market system

capitalism, very little government involvement in the economy (laissez faire) individuals own all resources and answer three economic questions

centrally planned economy

communism/ command government owns all resources, answers all three economic questions. problem because no competition and shortages. poor quality goods, shortages and unhappy citizens.

positive statement

economic statement based on facts (what is)

labor

human resources, any physical and mental effort a person puts in a job

marginal analysis

making decisions based on incraments

capital

man made products that are used to create other goods and services to sell

economic system

method used by a society to produce and distribute goos and services

investment

money spent by businesses to increase their production

total economic cost

out of pocket cost + opportunity cost

profit

price-cost

allocative efficency

producing products desired by society (cannot tell by looking at a PPC)

productive effecency

producing products in least costly way on PPC

constant opportunity cost

resources that are very interchangeable for producing either good

microeconomics

study of small economic UNITS (individuals, firms, governments)

Macroeconomics

study of the large economy as a WHOLE or economic aggregates

opportunity cost

the most desirable (best) alternative use of your resources or second best use of your resources. Value of what you are giving up

economics

the study of scarcity, efficiently use of scarce resources

allocate

to distribute

4 factors of production

Land, Labor, Capital, Entrepreneurship