Economics Ap Ch 1-3 Vocab

Front 1

ten principles of economics

Back 1

people face trade offs; opportunity cost; rational people think at the margin; people respond to incentives; trade can be good; markets are usually good; gov't can sometimes be good; standard of living depends on efficiency; inflation occurs when too much $; short run trade off btwn inflation & unemploymnt

Front 2

economics

Back 2

study of allocation of scarce resources

Front 3

efficiency

Back 3

property of society getting the most it can from its scarce resources; entire pie

Front 4

equality

Back 4

property of distributing economic prosperity uniformly among people

Front 5

opportunity cost

Back 5

whatever must be given up to obtain something

Front 6

rational people

Back 6

people who systematically & purposefully do the best they can to achieve objectives

Front 7

marginal changes

Back 7

additional plus one; small incremental adjustments to a plan of action

Front 8

market economy

Back 8

an economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services

Front 9

property rights

Back 9

the ability of an individual to exercise and own control over scarce resources

Front 10

market failure

Back 10

a situation in which a market left on its own fails to allocate resources efficiently either because of an externality or market power

Front 11

externality

Back 11

impact of one person's actions on the well being of a bystander

Front 12

market power

Back 12

ability of a single economic factor to have a substantial influence on market prices

Front 13

business cycle

Back 13

fluctuations in economic activity, such as employment and production

Front 14

circular flow diagram

Back 14

visual model of the economy that shows how dollars flow through markets among households and firms

Front 15

production possibilities frontier

Back 15

graph that shows the combo of output that the economy can possibly produce given the available factors of production and the available production technology

Front 16

microeconomics

Back 16

study of how households and firms make decisions and how they interact in markets

Front 17

macroeconomics

Back 17

study of economy wide phenomena including inflation, unemployment and economic growth

Front 18

positive statements

Back 18

claims that attempt to describe the world as it is

Front 19

normative statements

Back 19

claims that attempt to prescribe how the world should be

Front 20

absolute advantage

Back 20

ability to produce a good using fewer inputs than another producer

Front 21

comparative advantage

Back 21

ability to produce a good at a lower opportunity cost than another producer