Ap Econ Unit 1

Front 1

absolute advantage

Back 1

A situation in which a person/country can produce more of a particular product from a specific quantity of resources than another person/country

Ex: With X resources, Mary can produce 3 hats and Jane can produce 9 hats. Jane should produce hats.

Front 2

bowed out ppf

Back 2

Law of increasing opportunity costs causes this, because as more of one good is produced, the steeper the slope of the PPF as more other the other good is sacrificed

Ex:

Front 3

command economy

Back 3

A method of organizing an economy in which property resources are publicly owned and government directs the economy

Ex: Communism

Front 4

comparative advantage

Back 4

A situation in which a country/person can produce a specific product at a lower opportunity cost than another country/person, the basis for specialization/trade

Ex: Susy only has to give up 3 units of corn to produce 1 computer, while Mark has to give up 5 units of corn for 1 computer. Susy should produce the computers.

Front 5

constant cost

Back 5

constant opportunity cost--an opportunity cost that remains the same for each additional unit, resulting in a straight-line PPC

Ex:

Front 6

cost

Back 6

the expense incurred to consume a good, must include implict and explicit costs

Ex: Cost to start business= Costs to buy building, hire employees, etc + opportunity costs of entrepreneur NOT working at his old job

Front 7

economic efficiency

Back 7

The use of the minimum necessary resources to obtain socially optimal amounts of goods and services, on PPC

Ex: Productive and Allocative efficiency at the same time

Front 8

economic growth

Back 8

An outward shift in the PPC or increase of GDP due to an increase in resource supplies/quality or technology

Ex: Assembly line enabled economic growth in the automobile industry.

Front 9

increasing cost

Back 9

opportunity costs increase as more of a good is produced because resources must be shifted from more suitable uses to less suitable uses

Ex: Land can be used to make the inputs for pizza, but at some point, the opportunity costs of making pizza go up because the land would be better used growing corn.

Front 10

marginal cost

Back 10

The additional cost of producing 1 more unit of output, Total Cost/Change in Output

Ex: Produce one more pair of shoes--> add $5 to total cost

Front 11

market economy

Back 11

An economy in which the private decisions of consumers, resource suppliers, and firms determine how resources are allocated

Ex: Susy and her friends purchase all of Edwin's posters, so he buys more posters from his supplier, John, to keep up with demand.

Front 12

normative statements

Back 12

Value judgments about what the economy SHOULD be like

Ex: The Fed should lower interest rates to boost investment.

Front 13

opportunity cost

Back 13

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

Ex: Buy candy bar for $1, give up chance to buy gum with that $1

Front 14

positive statements

Back 14

Analysis of facts/data to make generalizations about economic behavior

Ex: Unemployment went down last quarter.

Front 15

production possibility frontier, PPM, PPC

Back 15

A model of production showing opportunity costs of producing different amounts of two goods, demonstrates law of increasing opportunity costs

Ex:

Front 16

Resources

Back 16

A natural, human, or manufactured item that helps produce goods and services

Ex: Labor

Front 17

Scarcity

Back 17

Limited goods and services, forcing opportunity costs as we make economic decisions

Ex: Only a limited number of diamond rings in the world.

Front 18

Terms of trade

Back 18

The rate at which units of one product can be exchanged for units of another product, price

Ex: I will sell 4 units of corn for your 20 units of squash.

Front 19

Unemployment

Back 19

The failure to use all available economic resources (in this case labor) to produce desired goods or services

Ex: If employed, Bob could produce 100 ice cream cones a day. Failure to employ Bob means the economy is absorbing a loss of 100 ice cream cones.

Front 20

Factors of production (FOPs)

Back 20

land, labor, capital, entrepreneurial ability

Ex: To produce corn syrup, I need all of the factors of production.
-A businessman to start the corn syrup company.
-Land and sunshine to grow corn.
-Machinery to transform corn into corn syrup.
-Labor to run the machinery.

Front 21

Technology

Back 21

The body of knowledge and techniques that can be used to combine economic resources to produce goods and services

Ex: Assembly line increased Henry Ford's car production efficiency

Front 22

Utility

Back 22

The satisfaction derived from consuming a good or service

Ex: I receive lots of utility when I eat cookie dough, and little utility when I eat spinach.