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AP Macroeconomics > Unit 1 > Flashcards

Unit 1 Flashcards

1
Q

What’s the overarching idea of Scarcity?

A

Individuals and societies are forced to make choices because resources are scarce.

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2
Q

Define Economics

A

Behavior science/social science concerned with how scarce resources are allocated among unlimited wants, needs, and desires. (Resources

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3
Q

To be scarce means to be _____ and _____; the opposite of scarcity is _____.

A

Limited-Wanted-Abundance

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4
Q

Define Scarcity

A

Fundamental concept of economics; leads to trade-offs (choices).

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5
Q

Resources- _____- _____

A

FOP-CELL

Factors of Production: Physical Capital- Entrepreneur- Land (Raw Materials/Natural Resources)-Labor (Human Capital).

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6
Q

Define Physical Capital

A

Buildings- Equipment (for example whiteboards and textbooks).

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7
Q

Define Economic Perspective

A

A viewpoint that envisions individuals and institutions making rational decisions by comparing the marginal benefits and marginal costs associated with their actions.

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8
Q

Define Opportunity Costs

A

The amount of other products that must be gone or sacrificed to produce a unit of a product.

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9
Q

Define Utility

A

The want-satisfying power of a good or service; the satisfaction or pleasure a consumer obtains from the consumption of a good or service (or from the consumption of a collection of goods and services).

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10
Q

Define Purposeful Behavior

A

People make decisions with some desired outcome in mind.

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11
Q

What’s the purpose of Self-Interested Behavior?

A

Increase potential self-satisfaction, however it may be derived.

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12
Q

Define Marginal Analysis

A

The comparison of marginal (extra or additional) benefits and marginal costs, usually for decision making.

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13
Q

_____ is always present when a choice is made.

A

Opportunity-Cost

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14
Q

Define Scientific Method

A

The procedure for the systematic pursuit of knowledge involving the observation of facts and the formulation and testing of hypotheses to obtain theories, principles, and laws.

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15
Q

Define Economic Principle

A

A widely accepted generalization about the economic behavior of individuals or institutions.

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16
Q

What are some things to know about economic principles?

A

Generalizations- Other-thing-equal assumption- Graphical Expression GOG

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17
Q

Define Generalizations

A

Economic principles are generalizations relating to economic behavior or to the economy itself.

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18
Q

Define Other-Things-Equal Assumption

A

The assumption that other factors than those being considered are held constant; ceteris paribus assumption.

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19
Q

What two levels of economics are there?

A

Microeconomics-Macroeconomics

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20
Q

Define Microeconomics

A

The part of economics considered with decision making by individual units such as a household, a firm, or an industry and individual markets, specific goods, and services and product and resource prices.

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21
Q

Define Macroeconomics

A

The part of economics concerned with the performance and behavior of the economy as a whole. Focuses on economic growth, the business cycle, interest rates, inflation, and the behavior of major economic aggregates such as the household, business, and government sectors.

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22
Q

Define Aggregate

A

A collection of specific economic units treated as if they were one unit. Examples: the prices of all individual goods and services are combined into the price level, and all units of output are aggregated into gross domestic products.

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23
Q

Define Positive Economics

A

The analysis of facts or data to establish scientific generalizations about economic behavior.

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24
Q

Define Normative Economics

A

The part of economics involving value judgements about what the economy should be like; focused on which economic goals and policies should be implemented; policy economics.

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25
Q

Positive economics concerns _____, whereas normative economics embodies subjective feelings of _____.

A

What is- What ought to be

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26
Q

Define Economizing Problem

A

The choices necessitated because society’s economic wants for goods and services are unlimited but the resources available to satisfy these wants are limited (scarce).

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27
Q

Define Budget Line

A

A line that shows the different combinations of two products a consumer can purchase with specific money income, given the prodcuts’ prices.

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28
Q

What things to the Budget Line reveal?

A

Attainable and Unattainable Combinations-Trade-Offs and Opportunity Costs-Choices-Income Changes

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29
Q

For the movie and book combination example, an increase in money income shifts the budget line to the _____ and a decrease in money income shifts the budget line to the _____.

A

Right-Left

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30
Q

Define Economic Resources

A

The land, labor, capital, and entrepreneurial ability that are used to produce goods and services; the factors of production. LLCE

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31
Q

Define Land

A

In addition to the part of the earth’s surface not covered by water, this term refers to any and all natural resources that are used to produce goods and services. Thus, it includes the oceans, sunshine, coal deposits, forests, the electromagnetic spectrum, and fisheries.

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32
Q

Define Labor

A

Any mental or physical exertion on the part of a human being that is used in the production of a good or service.

33
Q

Define Capital

A

Human-made resources used to produce goods and services; goods that do not directly satisfy human wants; also called capital wants.

34
Q

Define Investment

A

In economics, spending for the production and accumulation of capital and additions to inventories.

35
Q

Define Entrepreneurial Ability

A

The human resource that combines the other economic resources of land, labor, and capital to produce new products or make innovations in the productions of existing products; provided by entrepreneurs.

36
Q

Define Entrepreneurs

A

Individuals who provide entrepreneurial ability to firms by setting strategy, advancing innovations, and bearing the financial risk if their firms do poorly.

37
Q

Define Factors of Production

A

The four economic resources: land, labor, capital, and entrepreneurial ability.

38
Q

Define Full Employment

A

The economy is employing all of its available resources.

39
Q

Define Fixed Resources

A

The quantity and quality of the factors of production are fixed.

40
Q

Define Fixed Technology

A

The state of technology (the methods used to produce output) is constant.

41
Q

Define Two Goods

A

The economy is only producing two goods.

42
Q

Define Consumer Goods

A

Products and services that satisfy human wants directly.

43
Q

Define Production Possibilities Curve

A

A curve showing the different combinations of two goods or services that can be produced in a full-employment, full-production economy where the supplies of resources and technology are fixed.

44
Q

Define Law of Increasing Opportunity Costs

A

The principle that as the production of a good increases, the opportunity cost of producing an additional unit increases.

45
Q

Where does the optimal amount of activity occur?

A

When MB (Marginal Benefit)=MC (Marginal Cost)

46
Q

Define Economic Growth

A

An outward shift in the production possibilities curve that results from an increase in resource supplies or quality or an improvement in technology; an increase of real output (gross domestic product) or real output per capita.

47
Q

Define the Invisible Hand of Capitalism

A

The concept that society’s goals will be met as individuals seek their own self-interest.

48
Q

Define Mixed Economies

A

A system with free markets but also some government intervention.

49
Q

Countries that produce more _____ will have more growth in the future.

A

Capital Goods

50
Q

Define Absolute Advantage

A

The producer can produce the most output or requires the least amount of inputs (resources).

51
Q

Define Comparative Advantage

A

The producer with the lowest opportunity cost.

52
Q

When should countries trade?

A

When they have a relatively lower opportunity cost.

53
Q

How do you calculate comparative advantage?

A

You have to calculate per-unit opportunity cost.

54
Q

Define Terms of Trade

A

Both countries can benefit from trade if they each have relatively lower opportunity costs; the agreed upon conditions that would benefit both countries.

55
Q

Define Demand

A

Different quantities of goods that consumers are willing and able to buy at different prices.

56
Q

Define Law of Demand

A

There is an INVERSE relationship between price and quantity demanded

57
Q

What are the shifters of Demand?

A

Taste and Preferences- Number of Consumers- Price of Related Goods- Income-Future Expectations D-TN-PIE

58
Q

Define Supply

A

The different quantities of a good that sellers are willing and able to sell (produce) at different prices.

59
Q

Define the Law of Supply

A

There is a DIRECT relationship between price and quantity supplied.

60
Q

What are the shifters of Supply?

A

Prices/Availability of inputs (resources)- Number of Sellers- Technology- Government Action: Taxes & Subsidies & Regulation- Expectation of a Future Profit. S-PN-TGE

61
Q

Why are the topics of Supply and Demand put together?

A

In order to determine equilibrium price and equilibrium quantity.

62
Q

Define the Double Shift Rule

A

If two curves shift at the same time, either price or quantity will be indeterminate (ambiguous).

63
Q

Define Price Ceiling

A

Maximum legal price a seller can charge for a product.

64
Q

Define Price Floor

A

Minimum legal price a seller can sell a product.

65
Q

What is the goal of a price ceiling?

A

Make affordable by keeping price from reaching equilibrium.

66
Q

What is the goal of a price floor?

A

Keep price high by keeping price from falling to to equilibrium.

67
Q

Define Trade Deficit

A

When imports exceed exports. DIE

68
Q

Define Trade Surplus

A

When exports exceed imports.

69
Q

Define Land-Intensive Goods

A

Products requiring relatively large amounts of land to produce.

70
Q

Define Labor-Intensive Goods

A

Products requiring relatively large amounts of labor to produce.

71
Q

Define Capital-Intensive Goods

A

Products requiring relatively large amounts of capital to produce.

72
Q

Give some examples of land-intensive goods.

A

Beef, wool, and meat. BWM

73
Q

Give some examples of capital intensive goods.

A

Airplanes-Automobiles-Machinery AAM

74
Q

Give some example of labor-intensive goods.

A

Textiles-Electronics-Toys TET

75
Q

What are the types of tax?

A

CIT (Corporate Income Tax) and Excise Tax.

76
Q

Define Excise Tax

A

Tax on Manufacturing

77
Q

Define Subsidies

A

Reverse Tax.

78
Q

What causes a movement on the demand graph?

A

Change in price; it indicates change in the quantity demanded, not demand.

79
Q

What causes a movement on the supply graph?

A

Change in price; it indicates change in the quantity supplied, not supply.

AP Macroeconomics (5 decks)

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