AP Microeconomics Chapter 1-3

Inability to satisfy all of peoples' wants

The social science that studies the choices that individuals, businesses, governments, and entire societies make as they cope with scarcity and incentives

Study of peoples' choices

What to produce?
How to produce?
For whom to produce?

Objects and actions that people value and produce to satisfy human wants;

Things people buy and sell

Choices that are best for the individual who makes them

Choices that are best for society as a whole

A choice that uses the available resources to best achieve the person's objective

Best choice considering...

The best thing you must give up to get something

A previously incurred and irreversible cost

The gain or pleasure that something brings

Comparing all relevant alternatives systematically and incrementally

The opportunity cost that arises from a one-unit increase in an activity

The benefit of a one-unit increase in an activity

A reward or a penalty

The study of the choices that individuals and businesses make and the way these choices interact and are influenced by governments

"The Tree"

The study of the aggregate (or total) effects on the national economy and the global economy of the choices that individuals, businesses, and governments make

"The Forest"

"What is"

Facts, observations

"What ought to be"

"other things being equal"

A tendency for the values of two variable to move together in a predictable and related way

A trend

Items bought by individuals, used to provide personal enjoyment and contribute to a person's quality of life

Consumer products

Goods bought by businesses to increase their productive resources

Enterprise products

Items bought by governments

A model that shows the flow of goods and services and the interaction among households, businesses, and banks

creation of a good or service

use of a product

swapping goods or services for money

Putting away money for future use

Putting away money for future growth

Natural resources that we use to produce goods and services

The work time and effort that people devote to producing goods and services

The knowledge and skill that people obtain from education, on-the-job training, and work experience

The tools, instruments, machines, buildings, and other items that have been produced in the past and that businesses now use to produce goods and services

NOT MONEY

The human resource that organizes land, labor, and capital

Income paid for use of land

Income paid for labor

Income paid for the use of capital

Income earned by an entrepreneur for running a business

The distribution of income among the factors of production

The distribution of income among households

individuals or groups of people living together

the institutions that organize the production of goods and services

any arrangement that brings buyers and seller together and enables them to get information and do business with each other

Markets in which goods and services are bought and sold

Markets in which factors of production are bought and sold

Goods and services
Social security and welfare
Transfers to state and local governments

Personal income taxes
Corporate income taxes
Social security taxes
(Also, make money through bonds)

Goods and services
Welfare benefits

Sales taxes
Property taxes
State income taxes

The total amount that the federal government has borrowed to make expenditures that exceed tax revenue

Deficit

Boundary between the combinations of goods and services that can be produced and the combinations that cannot be produced, given the available factors of production (LLC & Entrepreneurship) and the state of technology

Curve showing how to use resources/tradeoffs

Attainable and unattainable combinations
Production efficiency (full employment of all resources)
Tradeoffs and "Free Lunches"

Measures opportunity cost (usually increasing)

Occurs when the quantities of goods and services produce are those that people value most highly

Producing the things that sell

The benefit that a person receives from consuming one more unit of a good or service (=what a person is willing to give up)

Decreases as quantity increases

Opportunity cost of producing one more unit of a good or service

Increases as quantity increases

The sustained expansion of production possibilities

Decrease in PPC

Performing the activity at a lower opportunity cost than someone else

Being more productive than someone else in several or even all activities

Total revenue minus total explicit cost

Money generated by selling goods and services

Price x Quantity

A cost that involves spending money (tangible cost)

total revenue minus total cost, including both explicit and implicit costs

A nonmonetary opportunity cost

Value of resources that could be used elsewhere (not out of pocket $)