Name:
AP Microeconomics Unit 1
Basic Economic Concepts
Terms
Use Pgs. 1-36 (Modules 1-4) to define the following terms…it will be due on Test Day!
1. Economics:
2. Individual Choice:
3. Economy:
4. Market Economy:
5. Command Economy
6. Incentives
7. Property Rights:
8. Marginal Analysis:
9. Resource:
10. Land:
11. Labor:
12. Capital:
13. Entrepreneurship:
14. Scarce:
15. Opportunity Cost:
16. Microeconomics:
17. Macroeconomics:
18. Economic Aggregates:
19. Positive Economics:
20. Normative Economics:
21. Business Cycle:
22. Depression
23. Recessions:
24. Expansions:
25. Employment:
26. Unemployment:
27. Labor Force:
28. Unemployment Rate:
29. Output:
30. Aggregate Output:
31. Inflation:
32. Deflation:
33. Price Stability:
34. Economic Growth:
35. Model:
36. Other things equal assumption (ceteris paribus)
37. Trade-Off:
38. Production Possibilities Curve:
39. Efficient:
40. Productive Efficiency:
41. Allocative Efficiency:
42. Technology:
43. Trade:
44. Gains from Trade:
45. Specialization:
46. Comparative Advantage:
47. Absolute Advantage:
Objectives
Review these before the test, to see what you know!
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Explain how scarcity and choice are central to the study of economics
Discuss the importance of opportunity cost in individual choice and decision making
Explain the difference between positive economics and normative economics
Identify areas of agreement and disagreement among economists
Distinguish between microeconomic concepts and macroeconomic concepts
Explain what a business cycle is and why policy makers seek to diminish the severity of
business cycles
Describe how employment and unemployment are measured and how they change over
the business cycle
Define aggregate output and explain how it changes over the business cycle
Define inflation and deflation and explain why price stability is preferred
Explain how economic growth determines a country’s standard of living
Summarize the crucial role of models—simplified representation of reality—in
economics
Explain the importance of tradeoffs in economic analysis
Describe what a production possibilities curve model tells us about efficiency,
opportunity cost, and economic growth
Explain why increases in the availability of resources and improvements in technology
are the two sources of economic growth
Explain how trade leads to gains for an individual or an economy
Explain the difference between absolute advantage and comparative advantage
Describe how comparative advantage leads to gains from trade in the global
marketplace