AP Econ Ch. 1 "Basic Concepts"

  1. Economics
    The study of how to allocate scarce resources among competing ends.
  2. Scarcity
    This occurs because our unlimited desire for goods and services exceeds our limited ability to produce them due to constraints on time and resources.
  3. Positive Economics
    This type of economics describes the way things are.
  4. Normative Economics
    This type of economics addresses the way things should be.
  5. Factors of Production/Inputs
    • The resources used in the production process, including:
    • Labor
    • Human Capital
    • Entrepreneurship
    • Natural Resources/Land
    • Capital
  6. Labor
    The physical and mental effort of people.
  7. Human Capital
    Knowledge and skills acquired through training and experience.
  8. Physical Capital
    Manufactured goods that can be used in the production process, including tools, equipment, buildings, and machinery.
  9. Entrepreneurship
    The ability to identify opportunities and organize production, and the willingness to accept risk in the pursuit of rewards.
  10. Natural Resources/Land
    Any productive resource existing in nature, including wild plants, mineral deposits, wind, and water.
  11. Opportunity Cost
    The value of the best alternative sacraficed as compared to what actually takes place.
  12. Trade-Offs
    The cost of making one product (chair) over another (birdcage).
  13. Production Possibilities Frontier
    An illustration showing the choices an economy faces and the opportunity cost of making one good rather than another.
  14. Efficiency
    This occurs when an economy is using all of its resources productively.
  15. Slope
    The "rise over run" of a line.
  16. Absolute Value
    The value after removing the negative sign.
Card Set
AP Econ Ch. 1 "Basic Concepts"
AP Macroeconomics Chapter 1: Basic Concepts