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AP Economics Unit 1
AP Macro Unit 1 vocab list
55
Economics
12th Grade
09/12/2011

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Term
Economics
Definition
the study of how societies deal with the issue of Scarcity
Term
Scarcity
Definition
economic reality that the Factors of Production are limited
Term
Factors of Production
Definition
things (land labor and capital) that must be combined to provide goods/services
Term
Land
Definition
natural resources and raw material
Term
Labor
Definition
physical and mental work needed to make a good/service
Term
Capital
Definition
tools and machines (technology etc?)
Term
Finance Capital
Definition
money used to purchase tools and machines
Term
Capital Goods vs. Consumer Goods
Definition
Capital Goods make Consumer Goods
Term
Entrepreneurial Ability
Definition
skills of the business owner or the ability to take risk and the management skills needed to combine the factors of production
Term
Traditional Economy
Definition
when basic economic questions are answered based on custom and ritual
Term
Command Economy
Definition
when basic economic questions are answered by a central
Term
Market Economy
Definition
when basic economic questions are answered based on Supply and Demand (where the interests of producers and consumers intersect)
Term
Mixed Economy
Definition
mix of free of enterprise and government
Term
Opportunity Costs
Definition
the value of the next best alternative when an economic decision is made
Term
Production Possibilities Frontier (PPF)
Definition
illustrates the combination of 2 products that can be produced within existing resources.
Term
Efficiency
Definition
utilizing all resources
Term
Constant Opportunity Costs
Definition
when the PPF is a straight-diagonal line
Term
Increasing Opportunity Costs
Definition
when the PPF is ?bowed?
Term
Principle of Increasing Opp. Costs
Definition
as production shifts from one product to another there reaches a point where less of the second product is produced while you are giving up (opportunity cost) more and more of the first product.
Term
Productivity
Definition
Changes in the amount of products produced by one worker
Term
Specialization
Definition
nations should only produce those products they produce better than other countries
Term
Absolute Advantage
Definition
The ability of a country to produce more of a product than another country using the same amount of resources or the ability of a country to produce the same amount of a product as another country using fewer resources
Term
Comparative Advantage
Definition
occurs when a nation produces a product least inefficiently when compared to another nation
Term
Output vs. Input
Definition
output: number of products being produced input: amount of labor needed to make a product
Term
Demand
Definition
the amount of a product consumers are willing to purchase at all possible prices
Term
Law of Demand
Definition
consumers are willing to purchase more of a product a lower prices than they are at higher prices
Term
Demand Schedule
Definition
listing or a chart which shows the amount of a product consumers are willing to purchase at all possible prices
Term
Demand Curve
Definition
a downward sloping illustration of a demand schedule
Term
Real Income
Definition
refers to changes in income adjusted for the effects of inflation
Term
Transfer Payment
Definition
government spending for which it receives no goods or services in return
Term
Elasticity
Definition
the degree to which the demand for a product will change due to a change in the price of that product
Term
Elastic
Definition
refers to products whose demand is very sensitive to price changes. Large changes in demand due to changes in price
Term
Inelastic
Definition
refers to products whose demand is not very price sensitive. Little or no change in demand due to a change in price
Term
Supply
Definition
the amount of goods/services businesses are willing to produce/provide to a market at all possible prices
Term
Law of Supply
Definition
businesses are will to provide more of a product at higher prices than they are at lower prices
Term
Supply Schedule
Definition
listing or a chart of the amount of a product that will be supplied at all possible prices
Term
Supply Curve
Definition
an upward sloping illustration of a Supply Schedule
Term
Cost vs. Price
Definition
costs are what businesses pay to produce a product price is what the consumer pays
Term
Productivity
Definition
the amount of products produced by one worker
Term
Deregulation
Definition
reducing government regulation on the economy and businesses
Term
Equilibrium Price
Definition
price at which Demand equals Supply
Term
Surplus
Definition
supply is greater than demand/demand is less than supply
Term
Shortage
Definition
demand is greater than supply/supply is less than demand
Term
Price Ceiling
Definition
a legal maximum on what can be charged for certain products
Term
?Rent Control?
Definition
an example of a price ceiling tends to cause an artificial shortage
Term
Price Floor
Definition
legal minimum that can be charged for certain products
Term
?Price Supports?
Definition
an example of a price floor tends to cause an artificial surplus
Term
Commodity money
Definition
money that has other uses other than its use as money
Term
Flat Money
Definition
Money that has no other use other than its use as money
Term
Gold Standard
Definition
occurs when a nation?s money is valued as being worth a certain amount of gold and can be exchanged for gold
Term
Inconvertible Flat Standard
Definition
Money is not backed by anything tangible
Term
Floating Exchange Rate
Definition
occurs when a nation?s money is valued as being worth a certain amount of other nations? money as determined on international money markets
Term
Inflation
Definition
relative prices between nations
Term
National Income
Definition
relative changes in GDP growth
Term
Securities
Definition
the demand for a nation?s Financial Assets
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