Ap Macro Module 1-9

Input

Anything used to produce a good or service

aggregate output

Economies total production of goods and services for a given time period

Guns is opportunity cost of

Butter

Supply five factors

Change in input prices, Price of related goods or services, Technology, Expectations, number of producers

5 factors that shift demand curve

Change in price of related goods, change in income, change in preferences, expectations, number of consumers

Law of supply

The price and quantity supplied of a good are positively related

Normal good

When a rise in income increases demand for a good

Ceiling

Below equilibrium. Lead to wasted resources or shortage

Change in demand

changes quantity at any given price

Market economy

decisions made by firms and individuals

command economy

government makes all decisions

Economics down turns

recessions

Opportunity cost

the true cost of what u give up to get something

fall in price for input=

more supply

True or false: An increase in the amount of resources available to Tom for use in producing coconuts and fish does not change his production possibilities curve

False it will go quicker makes ppf go out

Marginal Benefit

Gain from doing something one more time

Trade Off

Give something up in order to have something else

Butter is opportunity cost of

Guns

Efficient in allocation

How well the economy allocates its resources

Absolute advantage

If a person can produce more of a good or service with a given amount of time and resources.

Comparative Advantage

If opportunity cost of a good or service is lower for that person than other people

Comparative advantage is basis for

Mutual Gain

Slope of straight line PPC =

Opportunity cost

Gains from trade

People get more of what they want than they could themselves

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Price ?

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Quantity ?

The curve is a straight line when

Resources are interchangeable

Substitutes

Rise in price in one good leads to increase in demand for other

Production Possibilities Curve

Shows the maximum quantity of one good that can be produced for each possible quantity of the other good produced

quantity supplied

The amount of good or service producers are willing to sell at a specific price

Technology

The technical means for producing goods and services

Positive economics

The way the economy actually works

Dead weight loss

Transactions that don't occur due to market intervention

Complements

a rise in the price of one good leads to a decrease in the demand for other good.

effective ceiling is

below equilibrium

Marginal benefit should

exceed marginal cost

Ceteris paribus

keep all things constant and only change one thing

Market price always

moves towards equilibrium

Shortage

not enough for the amount people want to buy

Economic Growth

original ppc to farther out ppc

Demand price

price at which consumers will demand that quantity

Supply price

price at which consumers will supply that quantity

As more of a good is produced the opportunity cost

rises

Labor force

sum of employed and unemployed

Quantity Demanded

the actually amount of a good or service consumers are willing and able to buy at a specific price

Surplus

too much then people want to buy

True or False: A technology change changes production curve

true

equilibrium

where quantity demanded and sold match

If on line it is

efficient

Floor

maximum price. surplus ,

ceilings cause

shortages

floors create a

surplus

Law of demand

A higher price for a good or service, leads people to demand a smaller quantity of that good or service

Inferior good

A rise in income decreases the demand for a good

Specialization

A situation in which different people each engage in a different task

Normative economics

About the way the economy should work. Judgements

Preference has a big effect on

Demand

The three important aspects of economy

Efficiency, Opportunity cost, Economic growth

Economic up turns

Expansions

four categories of production

Land, labor, capital, entrepreneurship

Price controls

Legal restrictions on how high or low a market price may go

floors

above equilibrium. prevent price from coming down.

quantity control

an upper limit on the quantity of a good that can be bought or sold

Shift in curve

d1 to d2