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economics

answer

study of how human beings coordinate their wants and desires, given their decision-making mechanisms, social customs, and political realities of the the society

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scarcity

answer

not enough goods to satisfy an individuals desires

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coercion

answer

limiting people's wants and increasing the amount of work individuals are willing to do to satisfy those wants

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mircoeconomics

answer

study of individual choice, and how choice is influenced by economic forces; small scale economics; personal based economics; bottom-up theory economics

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macroeconomics

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study of the economy as a whole; top down theory economics

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marginal (margin)

answer

additional, or incremental

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marginal cost

answer

additional cost to you over and above the costs you have already incurred, not counting sunk costs

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sunk costs

answer

costs that have already been incurred and cannot be recovered (EX: death of soldiers in war)

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marginal benefit

answer

additional benefit above what you have already derived

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opportunity cost

answer

benefit you may have gained from choosing the next-best alternative

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economic forces

answer

necessary reactions to scarcity

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opportunity cost

answer

value of the forgone next-best alternative

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economics

answer

study of choices we make given scarcity of resources

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monetized

answer

assigned a monetary value

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marginal (margin)

answer

additional, next, incremental

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sunk cost

answer

a cost that has already incurred and cannot be recovered; are irrelevant to decision making

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thinking at the margin

answer

thinking ahead to see and predict marginal costs and marginal benefits

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marginal cost

answer

cost of the next step

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marginal benefit

answer

benefit of the next step

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market force

answer

economic force that is given relatively free rein by society yo work through the market

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invisible hand

answer

price mechanism; the rise and fall of prices that guides our actions in a market; tries to maintain equilibrium between supply and demand resources

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Price Mechanism

answer

manner in which prices of commodities effect supply and demand of goods and services

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economic model

answer

a framework that places the generalized insights of the theory in a more specific contextual setting

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economic principal

answer

a commonly held economic insight stated as a law or principal

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experimental economics

answer

branch of economics that studies the economy through controlled laboratory experiments

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natural experiments

answer

naturally occurring events that approximate a controlled experiment where something has changed in one place but not changed somewhere else

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theorems

answer

propositions that are logically true based on assumptions in a model

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precepts

answer

policy rules that conclude that a particular course of action is preferable

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efficiency

answer

achieving a goal as cheaply as possible

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invisible hand theorem

answer

a market economy, through the price mechanism, will tend to allocate resources efficiently

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price mechanism

answer

change in a price due to change in supply and demand

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economic policies

answer

action (or inactions) taken by the government to influence economic actions

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objective analysis

answer

separates personal subjective views and judgements from analysis

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subjective analysis

answer

analysis reflecting personal views

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positive economics

answer

study of what is, and how the economy works; pure economics with data for support; empirical facts creating theorems; economics in present day reality

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normative economics

answer

study of what the goals of the economy should be; economics in a perfect world

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political economics (art of economics)

answer

application of knowledge learned in positive economics to achieve the goals one has determined in normative economics

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perverse incentives

answer

incentives that "turn off" other incentives; incentive that turns someone way from doing something promoted in another incentive

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scarcity

answer

the goods available are too few to satisfy individuals' desires

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opportunity cost

answer

the value of the forgone next-best alternative

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resources

answer

materials available to make goods or accomplish a task

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economizing behavior

answer

behavior/actions of individuals' choices when faced with scarce resources

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mixed economy

answer

economy that allows operation of private and public businesses

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market economy

answer

economic system based on private property, allowing the individual to decide how, what, and for whom to produce goods

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production possibility model

answer

model conveying trade-offs society faces, and why people specialize in what they do and why they trade for what they need

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production possibility table

answer

table that lists the trade-offs between two choices

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production possibility curve (PPC)

answer

curve measuring the maximum combination of outputs that can be obtained by a given number of inputs

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trade-off

answer

losing one quality/aspect of something or losing a good in return for gaining another quality/aspect or good

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comparative advantage

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(some resources are) better suited to the production of one good than to the production of another good, causing prices for production to increase because it is harder to make a good on a resources not specialized (not better suited) for the good

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production possibility curve (shape)

answer

PPC is downward sloping. Most are outward bowed because as the cost of producing a good increases as more of the good is produced. If the OC does not change, the PPC is a straight line

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production possibility curve (shifts)

answer

increases in inputs or increases in the productivity of inputs shift the PPC out. Decreases have the opposite effect; the PPC shifts along the axis whose input is changing

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production possibility curve (points in, out, and on)

answer

points inside the PPC are points of inefficiency; points on the PPC are points of efficiency; points outside the PPC are points that do not exist and are currently unobtainable

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productive efficiency

answer

achieving as much output as possible from a given amount of inputs or resources

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inefficiency

answer

getting less output from inputs that, if devoted in some other activity, would produce more output

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efficiency

answer

achieving a goal using as few inputs as possible

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distribution

answer

who gets what and how much do they get

question

decision tree

answer

visual description of sequential choices

question

productive efficiency

answer

increasing total output

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market economy

answer

ab economic system based on private property and the market in which, in principle, individuals decide how, what, and for whom to produce (USA's economy)

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private property rights

answer

the control a private individual or firm has over an asset

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market

answer

social creation societies use to coordinate individuals' actions

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socialism

answer

an economic system based on individuals' goodwill towards others, not on their own self-interests, and in which, in principle, society decides what, how, and for whom to produce

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capitalism

answer

an economic system based on the market in which the ownership of the means of production resides with a small group of individuals called capitalists

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factor market

answer

market where laborers from households are paid for their work and the laborers then spend their money on other businesses

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goods market

answer

market where businesses sell goods to households and the government

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feudalism

answer

an economic system with no coordinated government, no law or defense, in which the lord of manor owns the land and tradition rules over the society

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mercantilism

answer

an economic system in which the king's government plays an active role in economic decision making and funds what is needed; power is resided with the king

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welfare capitalism

answer

an economic system stemming off capitalism in which the government plays a bigger role by creating programs and policies for individuals and a fairness in the market, the government plays a larger role, yet the individual still rules the economic market

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Explicit Opportunity Cost

answer

actual payment/transactions involved; payment/transaction involved in the big picture

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Implicit Opportunity Cost

answer

no payment or transaction involved; personal satisfaction/feelings

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Absolute Advantage

answer

production of a greater output with a given input (time, resources, etc)

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Globalization

answer

the increasing integration of economics, cultures, and institutions across the world

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Law of One Price

answer

the wages of workers in one country will not differ significantly from the wages of (equal) workers in another institutionally similar country

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trade deficits

answer

importing more than you export

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Production Possibilities Frontier

answer

the point at which an economy is most efficiently producing its goods and services by getting the greatest number of outputs from the smallest number of inputs

question

trade-off

answer

lossing one good in return for gaining another

question

constant cost

answer

flat rate, never changing costs associated with a good LOOK AT HANDOUT IN BINDER

question

increasing costs

answer

costs that are raising in value LOOK AT HANDOUT IN BINDER

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capital goods

answer

tangible assets (such as machinery and equipment) that businesses use to create goods

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consumer goods

answer

goods created by capital goods

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shortage

answer

lack of goods determined by the people, man-made, caused by humans

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scarcity

answer

lack of resources determined by nature and cannot be changed

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business

answer

private producing units in our society

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entrepreneurship

answer

the ability to organize and get something done

question

distribution

answer

getting goods where you want them, when you want them

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consumer sovereignty

answer

consumer's wishes (votes and wants) determine what goods are produced

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profit

answer

what is left over from total revenues after all appropriate costs have been subtracted

question

sole proprietorships

answer

businesses that have only 1 owner; are the easiest to start and have the fewest government hassles

question

partnerships

answer

businesses with 2 or more owners; create possibility of a sharing burden; create unlimited liability for each partner

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corporations

answer

businesses that are treated as a person, and are legally owned by their stockholders, who are not liable for the action of the corporate "person"; are the largest form of business when measured in number of receipts (number of sales/profits)

question

Flexible-Purpose Corporations/Benefit Corporations (B Corporations)

answer

corporations that explicitly take social mission in addition to profit into consideration when making decisions

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L3C

answer

corporations that blend social and private goals

question

Non-for-profit corporations

answer

corporations that do not work for profit, but for an explicit goal (usually for the better of society)

question

For-profit corporations

answer

corporations that work solely on the basis of making a profit

question

Financial Assets

answer

assets that require value from an obligation of someone else to pay (EX: stocks and bonds)

question

households

answer

groups of individuals living together and making joint decisions

question

externality

answer

the effect of a decision on a third party not taken into account by the decision maker

question

macroeconomic externalities

answer

externalities, by one individual's decision, that affect the society (levels of unemployment, inflation, or growth in the economy) as a whole

question

public good

answer

a good that if supplied to one person must be supplied to all and whose consumption by one individual does not prevent its consumption by another individual (EX: public defense)

question

private good

answer

a good, that when consumed by one individual, cannot be consumed by another individual (EX: an apple)

question

demerit goods or activities

answer

goods or activities that the government believes are bad for people even though the individual chose to use the goods or engage in the activity (EX: drugs)

question

merit goods or activities

answer

goods or activities that the government believes are good for people even though the individual may chose not to use the good or engage in the activity (EX: donating to charity)

question

market failures

answer

situations in which the market does not lead to a desired result

question

government failures

answer

situations in which the government intervenes and makes things worse

question

resources

answer

land, labor (human capital), capital, entrepreneurship ability

question

Comparative Advantage

answer

OC in producing one good lower than OC in producing another good

question

allocative efficiency

answer

producing the most outputs with the same inputs; only one point on the PPC because it is the best way to allocate resources; can change based on society's desires

question

generalized growth

answer

growth by same amount by both resources

question

specialization

answer

concentration of individuals and resources in certain aspects of production; increases comparative advantage

question

outsourcing

answer

transferring portions of production to outside producers, with a greater comparative advantage, in order to reduce costs and increase outputs

question

free trade

answer

unrestricted purchase and sale of goods and services between countries without constraints such as tariffs; allows for a greater comparative advantage

question

gains of trade

answer

the benefits that arise from a trade

AP Economics Unit 1 Vocab – Flashcards

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