question

Economics

answer

It is the social science concerned w/ the efficient use of scarce resources and achieve the maximum satisfaction of material wants. It is not primarily a how-to-make-money area of study; rather, it ultimately examines problems and decisions from a social, rather than a personal, point of view. It isn't a static change of goods, its' a human exchange of labor.

question

Opportunity Costs

answer

To get more of one thing, you forgo the opportunity of getting something else so that the cost of that which you get is the value of that which is sacrificed to obtain it.

question

Rational Self-interest

answer

Individuals pursue actions taht will enable them to achieve greater satisfaction. Also means individuals will make different choices.

question

Rational Behavior

answer

Individuals will make different choices under different circumstances.

question

Marginal Analysis

answer

Comparisons of marginal benefits and marginal costs.

question

At the Margin

answer

The place where we consider the very last units of each.

question

Theoretical Economics

answer

The process of deriving theories and principles. The role of economic theroizing is to systematically arrange facts, interpret the, and generalize from them.

question

Principles

answer

Statements about economic behavior of the economy that enable prediction of the probable effects of certain actions.

question

Analytical Economics

answer

The ascertaining of cause and effect, of action and outcome, within the economic system.

question

Law of Demand

answer

The relationship between the price of the product and the amount of it purchased.

question

Circular Flow Model

answer

A complex, interrelated web of decision making and economic activity involving businesses and households. They are both buyers and sellers. •Clockwise-money flow of income and consumption expenditures. •Counterclockwise-real flow of economic resources and finished goods and services.

question

Other-Things-Equal Assumption

answer

Used to construct generalizations. All other variables expect those under immediate consideration are held constant for a particualr analysis.

question

Abstractions

answer

Simplifications that omit irrelevant facts and circumstances.

question

Policy Economics

answer

Theories and data can be used to formulate policies- courses of action based on economic problem or further an economic goal.

question

Economic Policy

answer

The creation of policies to achieve specific goals: •State the goal •Determine the policy options •Implement and evaluate the policy that was selected

question

Economic Growth

answer

Produce more and better goods and services, or, more simply, develop a higher standards of living.

question

Full Employment

answer

Provide jobs for all citizens who are willing and able to work.

question

Economic Efficiency

answer

Achieve the max fillment of wants using the available productive resources.

question

Price-level Stability

answer

Aviod larger upswings and downswings in the general price level (aviod inflation/ deflation)

question

Economic Freedom

answer

Guarantee that buisnesses/ workers/ consumers have a high degree of freedom in economic activity.

question

Equitable Distribution of Income

answer

Ensure no group of citizens faces poverty while others enjoy abundance.

question

Economic Security

answer

Provide for those who are ill/disabled/ laid off/aged/unable to earn minimal levels of income.

question

Balance of Trade

answer

Seek a reasonable overall balance w/ the rest of the world in international trade and financial transactions.

question

Trade Off

answer

In order to reach one goal, we must sacrifice another.

question

Macroeconomics

answer

Examines either the economy as a whole or its basic subdivision or aggregates, such as government, household, and buisness sectors. It contains elements of positive and normative economics.

question

Aggregate

answer

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

question

Microeconomics

answer

Looks at specific economic units. It contains elements of positive and normative economics.

question

Positive Economics

answer

Focuses on facts and cause-and-effect relationships. It includes description, theory development, and theory testing.

question

Normative Economics

answer

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

question

Scarcity

answer

Limited resources.

question

Marginal Benefits vs. Marginal Costs

answer

Costs must not exceed benefits. There can be too much of a good thing.

question

Fallacy of Composition

answer

A statement that is valid for an individual or part is not necessarily valid for the larger group or whole.

question

Post Hoc Fallacy

answer

"After this, therefore because of this".

question

Correlation

answer

2 events or sets of data that indicate only that they are associated in some systemic and dependable way.

question

Ceteris Paribus

answer

Things are equal.

question

Economizing Problem

answer

1) Socity's economic wants-the economic wants of its citizens and institutions- are virtually unlimited and insatiable. 2) Economic resources-the means of producing goods and services- are limited or scarce.

question

Utility

answer

Pleasure or satisfaction. These ranges from necessities (food, shelter, clothing) to luxuries (rich things).

question

Insatiable/Unlimited

answer

Our desires for goods and services cannot be completely satisfied. Only a particular good or service can be satisfied.

question

Economic Resources

answer

All natural, human, and manufactured resources that go into the productions of goods and services.

question

Land

answer

Includes all natural resources that are used in the production process (arable land, forests, mineral and oil deposits, and water resources).

question

Capital (Goods or Investment Goods)

answer

All manufactured aids used in producing consumer goods and services (tools, machinery, equipment, factory, storage, transportation, and distribution facilities).

question

Investment

answer

Producing and purchasing capital goods.

question

Consumer Goods

answer

Goods that satisfy directly

question

Capital Goods

answer

Goods that satisfy indirectly by aiding the production of consumer goods.

question

Labor

answer

All physical and mental talents of individual available and usable in producing goods and services.

question

Entrepreneurial Abilities

answer

•The entrepreneur takes the initiative in combing the resources of land, capital, and labor to produce a good or a service. •The entrepreneur makes basic business-policy decisions. •The entrepreneur is an innovator (the one who commercializes new products, new production techniques, or even new froms of business organization. •The entrepreneur is a risk bearer.

question

Factors of Production

answer

Land, Capital, Labor, and Entrepreneurial Ability

question

Full Employment

answer

No workers should be out of work if they are willing and able to work.

question

Full Production

answer

All employed resources should be used so that they provide the maximum possible satisfaction of our material wants.

question

Underemployed

answer

Fail to realize full production.

question

Production Efficiency

answer

The production of that particular mix of goods and services in the least costly way.

question

Allocative Efficiency

answer

The production of that particular mix of goods and services most wanted by society.

question

Production Possibilites Model

answer

The necessity and consequences of those choices can best be understood.

question

Full-Employment and Productive Efficiency

answer

The economy is employing all available resources (full employment) and is producing goods at least cost (productive efficiency).

question

Fixed Technology

answer

The state of technology does not change during our analysis.

question

Two Goods

answer

The economy is producing only 2 products (consumer and capital goods).

question

Production Possibilities Table

answer

The different combinations of two products that can be produced w/ a specific set of resources.

question

Production Possibilities Curve

answer

Each point on the PPC represents some maximum output of the two products. The curve is a production frontier because it shows the limit of attainable outputs. Points inside the curve show inefficiency. A point outside the curve would represent a greater output than the output at any point on the curve and unattainable.

question

Law of Increasing Opportunity Costs

answer

The more of a product that is produced, the greater is its opportunity cost.

question

Economic Rationale

answer

Economic resources are not completely adaptable to alternative uses.

question

Economic Growth

answer

The ability to produce a larger total output. 1) Increases in supplies of resources 2) Improvements in resources quality 3) Technological advances

question

International Trade

answer

The exchange of these goods for goods produced abroad.

question

Economic System

answer

A particular set of institutional arrangements and a coordinating mechanism. 1) Who owns the factors of production 2) The method used to coordinate and direct economic activity

question

Market System

answer

The private ownership of resources and the use of markets and prices (capitalism). Each participant acts in his/her own self-interest; each business seeks to maximize its satisfaction or profit through its own decisions regarding consumption or production. Allows for private ownership of capital, communicates through prices, and coordinates through markets.

question

Pure Capitalism/ Laissez-faire

answer

Government's role would be limited to protecting private property and establishing an environment appropriate to the operation of the market system.

question

Command System

answer

Government owns most property resources and economic decision making occurs through a central economic plan (socialism or communism).

question

Pure Command

answer

Economy would rely exclusively on a central plan to allocate the government owned property resources. However, even the preeminent command economy tolerated some private ownership an incorporated some markets before the USSR's demise in 1992.

question

Resource Market

answer

The place where resources or the services of resources suppliers are bought and sold.

question

Product Market

answer

The place where goods and services produced by businesses are bought and sold.

question

Demand

answer

A schedule or a curve that show the various amounts of a product that consumers are willing and able to purchase at each of a series of possible prices during a specified period of time. Other things are equal.

question

Law of Demand

answer

As price falls, the quantity demanded rises, and as price rises, the quantity demanded falls.

question

Diminishing Marginal Utility

answer

In any specified time period, each buyer of a product will derive less satisfaction from each successive unit of the product consumed.

question

Income Effect

answer

A lower price increases the purchasing power of a buyer's income, enabling the buyer to purchase more of the product that he/she could buy before.

question

Substitution Effect

answer

Suggests that at a lower price buyers have the incentive to substitute what is now a less expensive product for similar products that are now relatively more expensive.

question

Determinants of Demand

answer

Factors that affect purchases: 1) Consumer's tastes 2) The number of consumers in the market 3) Consumer's incomes 4) The price of related goods 5) Consumer expectation about future prices and incomes

question

Change in Demand

answer

A shift in the demand: •Increase in demand: A shift right •Decrease in demand: Consumers buy less product at each possible price that indicated and curve shifts left

question

Normal Goods

answer

Products whose demand varies directly with more income.

question

Inferior Goods

answer

Goods whose demand varies inversely w/ money income.

question

Substitute Good

answer

One that can be used in place of another good. When two products are substitutes, the price of one and the demand for the other move in same direction. Substitutes in consumption occurs when the price of one good rises relative to the price of a simliar good.

question

Complementary Good

answer

One that is used together w/ another good. When two products are complements, the price of one good and the demand for the other good move in opposite directions.

question

Unrelated Goods

answer

Goods that aren't related to one another.

question

Change in Demand

answer

A shift to the right or to the left.

question

Change in Quantity Demanded

answer

A movement from one point to another on a fixed demand schedule or demand curve.

question

Supply

answer

A schedule or curve showing the amounts of a product that produces are willing and able to make available for sale at each of a series of possible prices during a specific period.

question

Law of Supply

answer

As price rises, the quantity supplied rises; as price falls, the quantity supplied falls.

question

Supply Curve

answer

Horizontally adding the supply curves of the individual producers.

question

Determinants of Supply

answer

1) Resource prices 2) Technology 3) Taxes and subsides 4) Prices of other goods 5) Price expectations 6) The number of sellers in the market. •A shift to the right signifies an increase supply. A shift to the left signifies a decrease in supply.

question

Change in Supply

answer

A change in the entire schedule and a shift of an entire curve.

question

Change in Quantity Supplied

answer

A movement from one point to another on a fixed supply curve. •Supply is the full schedule of prices and quantities shown, and this schedule does not change when price changes.

question

Surplus

answer

An excess supply.

question

Shortage

answer

Excess demand.

question

Equilibrium Price

answer

No shortage or surplus so there is no reason for the price to change.

question

Equilibrium Quantity

answer

Quantity supplied and quantity demanded are in balance. •Graphically, the intersection of the supply curve and the demand curve for a product indicates the market equilibrium.

question

Rationing Function of Prices

answer

The ability of the competitive forces of supply and demanded to establish a price at which selling and buying decisions are consistent.

question

Supply Increase; Demand Decrease

answer

Both changes decrease price, so the next result is a price drop greater than that resulting from either change alone.

question

Supply Decrease; Demand Increase

answer

Both increase price, their combined effect is an increase in equilibrium price greater than that caused by either change separately.

question

Supply Increase; Demand Increase

answer

A supply increase drop equilibrium price, while a demand increase boots it. If the increase in supply is greater than the increase in demand, the equilibrium price will fall. If the opposite holds, the equilibrium price will rise.

question

Supply Decrease; Demand Decrease

answer

If the decrease in supply is greater than the decrease in demand, the equilibrium price will fall. Because decreases in supply and in demand each reduce equilibrium quantity, we can be sure that equilibrium quantity will fall.

question

What Increases Demand

answer

•Rising income •Population increase •Preferences (consumer taste) •Rising price of substitute •Reduction in complement

question

What Effects Supply

answer

•Availability •Regulations/ taxes

question

Competition

answer

Independently- acting buyers and sellers in each market.

AP Economics Terms – Flashcards

Unlock all answers in this set

Haven't found what you were looking for?

Search for samples, answers to your questions and flashcards