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AP Economics > Chapter 1: Limits, Alternatives, and Choices > Flashcards

Chapter 1: Limits, Alternatives, and Choices Flashcards

1
Q

What is economics?

A

the social science concerned with how individuals, institutions, and societies maximize their satisfaction for needs and wants under conditions of scarcity

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2
Q

What is the definition of economics?

A

the social science concerned with how individuals, institutions, and society make optimal (best) choices under conditions of scarcity

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3
Q

What is marginal analysis?

A

comparisons of marginal costs (MC) and marginal benefits (MB)

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4
Q

What is the economic perspective?

A

the economic way of thinking: how economists view things from a unique perspective

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5
Q

What is scarcity?

A

the limited supply of economic resources needed to make goods and services.

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6
Q

What does scarcity restrict?

A

options and demand choices

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7
Q

What is opportunity cost?

A

to obtain more of one thing, society forgoes the opportunity of getting the next best thing.

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8
Q

What does economics assume?

A

that human behavior reflects “rational self-interest”

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9
Q

What is utility?

A

the pleasure, happiness, or satisfaction obtained from consuming a good or service

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10
Q

What do consumers allocate to maximize their satisfaction

A

their time, energy, and money

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11
Q

What is purposeful behavior?

A

the idea that people make decisions with some desired outcome in mind

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12
Q

Is rational self interest the same thing as selfishness?

A

no

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13
Q

What does marginal mean?

A

extra, additional, or a change in

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14
Q

What is always present whenever a choice is made?

A

an opportunity cost

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15
Q

What does economics rely on?

A

the scientific method

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16
Q

What is the first step of the scientific method?

A

observing real-world behavior and outcomes

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17
Q

What is the second step of the scientific method?

A

formulating a possible explanation of cause and effect (hypothesis)

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18
Q

What is the third step of the scientific method?

A

testing the hypothesis by comparing outcomes of specific events to the outcome predicted by the hypothesis

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19
Q

What is the final step of the scientific method?

A

to continue to test the hypothesis against the facts

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20
Q

What is the steps to an economic principle

A

hypothesis —–> theory ——–> economic principle

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21
Q

What is an economic principle?

A

a statement about economic behavior or the economy that enables prediction of the probable effects of certain actions

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22
Q

What are theories, principles, and models?

A

purposeful simplifications

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23
Q

What are economic principles?

A

generalizations

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24
Q

What is other-things-equal in latin?

A

ceteris paribus

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25
Q

What is the other things equal assumption

A

the assumption that factors other than those being considered do not change

26
Q

What is microeconomics?

A

the part of economics concerned with decision making by individual customers, workers, households, and business firms

27
Q

What does macroeconomics examine?

A

the performance and behavior of the economy as a whole

28
Q

What is an aggregate?

A

a collection of specific economic units treated as if they were one unit

29
Q

What does positive economics focus on?

A

the facts and cause-and-effect relationships

30
Q

What does normative economics incorporate?

A

value judgement about what the economy should be like or what particular policy actions should be recommended to achieve a desirable goal.

31
Q

What is the relationship between positive and normative economics, summarized?

A

positive economics concerns what is; normative economics concerns what ought to be

32
Q

What is the economizing problem?

A

the need to make choices because economic wants exceed economics needs

33
Q

What does everyone have a finite amount of?

A

income

34
Q

What do most people have?

A

virtually unlimited wants

35
Q

What does it mean to economize?

A

to pick and chose goods and services that maximize our satisfaction value given the limitations we face

36
Q

What is a budget line?

A

a schedule or curve that shows various combinations of two products a consumer can purchase with a specific money income

37
Q

What does the budget line show?

A

a maximization of utility

38
Q

T/F: Society also faces an economizing problem

A

True

39
Q

What are economic resources?

A

natural, human, and manufactured resources that go into production of goods and services

40
Q

What are land resources?

A

all natural resources used in the production process

41
Q

What are labor resources?

A

physical actions and mental activities that people contribute to the production of goods and services

42
Q

What are capital resources?

A

all manufactured aids used in producing consumer goods and services

43
Q

What is investment?

A

spending that pays for the production and accumulation of capital goods

44
Q

How do capital goods satisfy the consumer goods indirectly?

A

by aiding the production of consumer goods

45
Q

What four things does an entrepreneur do?

A

takes the initiative in combining resources of land, labor, and capital to produce a good or a service, makes the strategic business decisions that set the course of an enterprise, innovates, and bears risks

46
Q

What are land, labor, capital, and entrepreneurship ability called?

A

factors of production, or “inputs”

47
Q

What four things are assumed when drawing a PPC curve?

A

full employment, fixed resources, fixed technology, and two goods

48
Q

What are consumer goods?

A

products that satisfy our wants directly

49
Q

What are capital goods?

A

products that satisfy our wants indirectly

50
Q

What is the generalization of the PPC?

A

at some point, a fully employed economy must sacrifice some of one good to obtain more of another good

51
Q

What does the production possibilities curve display?

A

the different combinations of goods and services that society can produce in a fully employed economy, assuming a fixed availability of supplies of resources and fixed technology

52
Q

What is displayed on the y-axis of a PPC?

A

Capital goods

53
Q

What is displayed on the x-axis of a PPC?

A

consumer goods

54
Q

What s the law of increasing opportunity costs

A

the opportunity cost of each additional unit is greater than the cost of the previous one

55
Q

How is the law of increasing opportunity costs reflected in a PPC?

A

The shape of the curve

56
Q

What is the economic rationale behind the law of increasing opportunity costs?

A

Economic resources are not completely adaptable to alternative uses, so as production increases, it becomes less effective

57
Q

Where does the optimal amount of activity occur?

A

where MB = MC

58
Q

What is the net result of increased supplies of factors of production?

A

the ability to produce more of consumer goods and capital goods

59
Q

What 3 things are the economic growth a result of?

A

increases in supplies of resources, improvements in resource quality, and technological advances

60
Q

What helps determine the future location of the PPC curve?

A

an economy’s current choice of positions on its PPC

61
Q
A

AP Economics (7 decks)

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