AP Economics Review – Flashcards
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Producers
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A person, group, or business that makes goods or provides services to satisfy consumers' needs and wants.
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Goods
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Objects or materials that can be purchased to satisfy human wants or needs.
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Services
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Any actions or activities that are performed for a fee.
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Resources
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Anything used to produce goods or services.
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Factor of Production
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A resource used to produce goods & services.
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Natural Resource
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In economics, any material provided by nature that can be used to produce goods or provide services.
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Capital Resources
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Items that are used in the production of other goods & services.
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Entrepreneur
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Someone who undertakes and develops s new business enterprise or develops a new product, risking failure or loss for the possibility of financial gain.
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Scarcity
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Fundamental condition of economics that results from the combination of limited resources and unlimited wants.
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Allocate
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Distribute scarce resources - such as money, land, equipment, or labor - in order to satisfy the greatest number of needs and wants.
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Productivity
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The level of output that results from a given level of input.
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Division of Labor
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Division of a complex procedure into small tasks, enabling workers to increase output through specialization.
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Specialization
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The focus of a worker on only one or a few aspects of production in order to improve efficiency.
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Trade-off
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The sacrifice of one good in order to purchase or produce another.
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Opportunity Cost
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Value lost by rejecting one use of resources in favor of another. In other words, an action's opportunity cost is the value of the next-best alternative action that is not taken.
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Exchange
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Process by which producers & consumers agree to provide one type of item in return for another.
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Barter
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The direct exchange of goods & services without use of money.
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Money
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Any item, typically currency, which is commonly accepted in exchange for goods, services, or the settling of debts.
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Credit
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Form of exchange that allows consumers to use items with a promise of repayment over a specified time.
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Utility
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The usefulness of a good or service that contributes to its value.
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traditional economy
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This is an economy that is based on a society's values- its customs and traditions. The people answer the the three basic economic questions by looking in the past.
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command economy
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This type of economy relies on government officials to answer the three basic economic questions.
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market economy
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In this type of economy, individuals answer the three basic economic questions. The government has no say in what, how, and for whom goods are produced, and the factors of production are owned by individuals.
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market
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The free exchange of goods and services is referred to as this. This provides the only form of control over what goods and services are bought and sold.
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self-interest
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This is the impulse that encourages people to fulfill their needs and wants.
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incentive
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This is something that encourages a person to behave in a particular way.
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mixed economy
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This is an economy that combines elements of traditional, market, and command economic models to answer the three basic economic questions. The three main categories of this type of economy are authoritarian socialism, capitalism, and democratic socialism.
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authoritarian socialism
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This is also known as communism, and when this occurs, the government owns or controls nearly all the factors of production.
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communism
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This is also known as authoritarian socialism, and is said to be practice by mixed economies that are closest to the pure command model.
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capitalism
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In a mixed economy that is based on this, individuals own the factors and answer the basic economic questions.
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democratic socialism
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In this third and final type of mixed economy, it falls between authoritarian socialism and capitalism. The government owns some of the factors of production in this, but individuals are able to influence economic planning through the election of government officials.
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free enterprise
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This is a system under which business can be conducted freely with little government intervention. The U.S. system of this also includes such benefits for individuals as investment opportunities and prices that respond to competition.
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contracts
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Individuals have the right to enter into agreements with one another to buy and sell goods and services- these agreements are called this.
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competition
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This is the economic rivalry that exists among businesses selling the same or similar products.
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income
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The money paid to households by business firms and the government in exchange for the households' resources is called this.
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supply
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the amount of goods available
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law of supply
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tendency of suppliers to offer more of a good at a higher price
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supply schedule
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a chart that lists how much of a good a supplier will offer at different prices
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supply curve
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a graph of the quantity supplied of a good at different prices
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elasticity of supply
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a measure of the way quantity supplied reacts to a change in price
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increasing marginal returns
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a level of production in which the marginal product of labor increases as the number of workers increases
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diminishing marginal returns
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a level of production in which the marginal product of labor decreases as the number of workers increases
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fixed cost
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a cost that does not change, no matter how much of a good is produced
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variable cost
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a cost that rises or falls depending on how much is produced
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marginal cost
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the cost of producing one more unit of a good
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marginal revenue
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the additional income from selling one more unit of a good; sometimes equal to price
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subsidy
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a government payment that supports a business or market
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market supply schedule
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a chart that lists how much of a good all suppliers will offer at different prices
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Corporation
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A company legally separate from stockholders who own it and the managers.
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Entrepreneur
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A person who organizes, operates, and assumes the risk for a business venture.
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Partnership
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A company owned and managed by two or more people who share its profits or losses. A partnership is not separate from its owners, who are liable for the company's debts.
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Private corporation
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A corporation that doesn't sell shares to the public. You can't buy shares of a private company in the stock market.
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Public corporation
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The stock of a public company is owned and traded by individual and institutional investors. In contrast, the stock is held by company founders, employees, and sometimes venture capitalists.
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Sole-proprietorship
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A company owned and run by one individual who receives its profits or bears its losses. A proprietorship is not separate from its owner, who is liable for the company debts.
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Common Stock
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Shares of a company that do not guarantee a dividend and have more risk and volatility than preferred shares. Common stock holders have the benefit of providing shareholders with the right to vote for the board of directors as well as on issues that come before the board at the annual meeting of shareholders.
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Dividend
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Part of a company's profits (earnings) that it pays as money to stockholders.
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Earnings
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The amount of money that remains after subtracting the company's expenses from its revenue.
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Investor
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Someone who risks funds by purchasing financial products with the hope the investments will increase in value over time.
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IPO
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Initial Public Offering
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Initial Public Offering
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the initial sale of stock to the public by investment bankers.
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Preferred Stock
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Shares of ownership of of a company in which the share holder is guaranteed a dividend if one is declared and whose shares are usually not as volatile as common stock.
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Private Company
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A company that is owed by a person, family, or small group of investors that does not sell shares of stock in the company to the public.
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Public Company
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A company that is owned by investors who buy shares of stock, partial ownership of the assets of a business, in the corporation usually through one of the stock exchanges.
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Risk
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The chance of losing all or part of an investment.
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Stock
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A type of security that signifies ownership in a corporation and represents a claim to a part of the company's profits or losses.
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Share
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A share is a unit of ownership in a corporation or mutual fund.
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Speculative
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Stocks that are highly unpredictable. For example, many dot/com stocks are highly speculative, with incredible highs and devastating lows. (High Risk)
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Diversification
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An investment strategy in which you spread your investment dollars among industry sectors.
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Portfolio
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A collection of investments owned by one individual or organization.
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Bonds
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An IOU that a company or government sells when it borrows money. Bonds are called fixed-income investments because they pay a fixed amount of interest to the bondholder for the use of his/her money.
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Mutual Funds
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An investment instrument developed and managed by a company that pools members' money -- often millions of dollars -- to invest in a variety of stocks and bonds. Investment professionals who research companies and buy or sell stocks actively manage the funds based on what they think is best for the fund's shareholders.
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Maturity
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The date when the principal amount of a security is payable.
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Rate of Return
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Your annual income on an investment.
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Stock Split
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Replacing each share of stock with a larger number of lower-priced shares but keeping the total value of one's investment unchanged.
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Yield
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The rate of return on an investment paid in dividends or interest and expressed as a percent.
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