Ap Macro Ch.1&2

Front 1

Allocative efficiency

Back 1

The apportionment of resources among firms and industries to obtain the production of the products most wanted by society; the output of each product at which its marginal cost and price or marginal benefit are equal, and at which the sum of consumer surplus and producer surplus is maximized.

Front 2

capital

Back 2

human-made resources (buildings, machinery, and equipment) used to produce goods and services; goods that do not directly satisfy human wants; also called capital goods

Front 3

causation fallacy

Back 3

A relationship in which the occurrence of the of one or more events appears to bring about another event, but the original event does not actually cause the second

Front 4

ceteris paribus

Back 4

all other things held equal

Front 5

comparative advantage

Back 5

a situation in which a person or country can produce a specific product at a lower opportunity cost than some other person or country; the basis for specialization and trade

Front 6

economic good

Back 6

a commodity or service that can be utilized to satisfy human wants and has exchange value

Front 7

economic growth

Back 7

1) an outward shift in the production possibilities curve that results from an increase in resource supplies or an improvement in technology; 2) an increase of real output (Gross Domestic Product) or real output per capita

Front 8

entrepreneurship

Back 8

the human resource that combines the other resources to produce a product, makes non-routine decisions, innovates, and bears risks

Front 9

factors of production

Back 9

economic resources: land, capital, labor, and entrepreneurship

Front 10

fallacy of composition

Back 10

the false notion that what is true for the individual (or part) is necessarily true for the group (or whole)

Front 11

free good

Back 11

goods that can be utilized without any cost (implicit or explicit); do not exist

Front 12

full employment

Back 12

the use of all available resources to produce want-satisfying goods and services; the situation in which the unemployment rate is equal to the natural rate of unemployment (where frictional and structural unemployment exist, but not cyclical unemployment); GDPr = Potential output

Front 13

gains from trade

Back 13

the extra output that trading partners obtain through specialization of production and exchange of goods and services

Front 14

interest

Back 14

the payment made for the use of money (borrowed funds)

Front 15

labor

Back 15

people's physical and mental talents and efforts that are used to help produce goods and services

Front 16

land

Back 16

natural resources used to produce goods and services

Front 17

macroeconomics

Back 17

the part of economics concerned with the economy as a whole; with such major aggregates as the household, business, and government sectors; and with measures of the total economy

Front 18

marginal analysis

Back 18

the comparison of marginal benefits and marginal costs, usually for decision making

Front 19

marginal cost

Back 19

the extra cost of producing one more unit of output

Front 20

normative economics

Back 20

the part of economics involving value judgements about what the economy should be like; focused on which economic goals and policies should be implemented; policy economics

Front 21

microeconomics

Back 21

the part of economics concerned with decision making by individual units such as a household, a firm, or an industry and with individual markets, specific goods and services, and product and resource prices

Front 22

opportunity cost

Back 22

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

Front 23

positive economics

Back 23

the analysis of facts or data to establish scientific generalizations about economics behavior

Front 24

post hoc fallacy

Back 24

the false belief that when one event precedes another, the first event must have caused the second event

Front 25

private property

Back 25

the right of private persons and firms to obtain, own, control, employ, dispose of, and bequeath land, capital, and other property

Front 26

production possibilities curve

Back 26

a curve showing the different combinations of two goods or services that can be produced in a full-employment, full-production economy where the available supplies of resources and technology are fixed

Front 27

productive efficiency

Back 27

the production of a good in the least costly way

Front 28

profit

Back 28

the return to the resource entrepreneurship; total revenue minus total cost

Front 29

rent

Back 29

the return to the resource land

Front 30

scarcity

Back 30

the limited quantities of land, capital, labor, and entrepreneurship are never sufficient to satisfy people's virtually unlimited economic wants

Front 31

utility

Back 31

the want-satisfying power of a good or service; the satisfaction or pleasure a consumer obtains from the consumption of a good or service

Front 32

wages

Back 32

the return for the resource labor

Front 33

rational self-interest

Back 33

the means by which people choose the options that give them the greatest amount of satisfaction