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AP Macro test 1
| Term | Definition |
|---|---|
| resources/factors of production | labor, land, capital, entrepreneurship |
| opportunity cost | sacrifices, the real cost is what you have to give up |
| macroeconomics | whole economy overall, focuses on economic aggregates |
| microeconomics | individual parts of economy |
| business cycle | the alternation between economic downturns and upturns in macroeconomy |
| peak | when business activity reaches temporary maximum |
| recession | decline in total output, income, employment (6 months) |
| trough | bottom of recession period |
| recovery | output and employment expanding |
| inflation | rise in overall price level; food and gas not included |
| deflation | fall in overall price level |
| aggregate output | economy's total production of goods and services for given time periods |
| economic growth | expansion of the economy's production possibilities: the economy can produce more (curve moves up) |
| comparative advantage | producer can produce a good at a lower opportunity cost than your competitor (produce more efficiently) |
| absolute advantage | producer #1 can make more than producer #2 |
| demand | a schedule that shows how much of a product consumers are willing/able to buy at a series of possible prices |
| law of demand | higher the price, less demand; lower the price, higher demand |
| MERIT | market size, expectations, related prices, income, tastes |
| Substitute | can be easily replaced with another |
| complements | products which are bought and used together |
| supply is ___________ on the graph | positive |
| demand is _________on the graph | inverse |
| supply | show amount a producer is willing/able to produce |
| law of supply | as prices rise, quantity supplied rises, direct relationship between price and quantity supplied |
| only thing that moves for supply and demand is what? | price |
| TRICE | technology, related prices, input prices, competition, expectations |
| equilibrium | where quantity supply and demand cross; stable |
| surplus | more |
| shortage | less |
| calculate opportunity cost for PPC graph | x-axis=slope y axis=reciprocal |
| calculate opportunity cost for comparative advantage | output: (a)=b/a input:(a)=a/b |
Created by:
auweb921
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