AP Econ - Ch. 1, 2, 4 Flashcards
Scarcity
Limited goods and choices; all goods are privately or collectively owned by members of society, and all members bear the cost.
opportunity cost
To obtain more of one thing, society forgoes the opportunity of getting the next best thing.
utility
the pleasure or satisfaction obtained from consuming a good or service
economic decisions are __________
economic decisions are purposeful or rational, not random or chaotic
marginal analysis
comparison of marginal benefits and marginal costs (additional), benefit should always outweigh cost.
ceteris paribus
other-things-equal assumption-the assumption that factors other than those being considered did not change
microeconomics
decision making of individuals, workers, households, and business firms.
macroeconomics
examines the economy as a whole or its basic subdivisions or aggregates, such as the government, household, and business sectors. Seeks to obtain an overview.
positive economics
focuses on facts and cause-and-effect relationships. based on theory and theory testing. establishes scientific statements about economic behavior; “What is”
normative economics
incorporates value judgements about what the economy should be like or what particular policy actions should be recommended to achieve the desired goal; “What ought to be”
economizing problem
need to make choices because economic wants exceeds economic means.
income is _______
limited and finite
wants are ______
unlimited
budget line
schedule or curve that shows various combinations of two products a consumer can purchase with a specific income.
resource categories
land, labor, capital (manufactured goods), entrepreneurial ability.
production possibilities model
lists the different combinations of two products that can be produced with a specific set of resources, assuming full employment
production possibilities curve
maximum combinations of goods attainable with fixed resources, in a fully employed economy, and fixed technology.
law of increasing opportunity costs
As the production of a particular good increases, the opportunity cost of producing an additional unit rises.
Outward shifts in the production possibilities curve (to the right) are caused by ________
Economic growth (increase in the number of resources, better resources, Increase in resource supplies (population, education, etc), advances in technology, and international trade.
economics
social science concerned with making optimal choices under conditions of scarcity or uncertainty.
marginal analysis
Any decision made should weigh the marginal benefit and marginal costs and the benefit should always outweigh the cost.
Another name for economic resources
factors of production
“There is no free lunch”
Means that there is always a cost for a product, even if it is not evident. In economics, the cost is the loss of resources.
economics
the study of the efficient use of scarce productive resources
money
What is considered to be an economic resource (factor of production)?
Fallacy of Composition
The false notion that what is true for one individual or part of a whole is necessarily true for a group of individuals or the whole.
Post hoc fallacy
The false belief that when one event precedes another, the first event must have caused the second event.
Economic System
A particular set of institutional arrangements and a coordinating mechanism for solving the economizing problem; a method of organizing an economy, of which the market system and the command system are the two general types.
Command System
A method of organizing an economy in which property resources are publicly owned and government uses central economic planning to direct and coordinate economic activities; command economy; communism.
Market System
All the product and resource markets of a market economy and the relationships among them; a method that allows the prices determined in those markets to allocate the economy’s scarce resources and to communicate and coordinate the decisions made by consumers, firms, and resource suppliers.
Private Property
The right of private persons and firms to obtain, own, control, employ, dispose of, and bequeath land, capital, and other property.
