5/5/2016 Krugman'sEconomicsforAPSection1BasicEconomicConceptsflashcards|Quizlet

Krugman's Economics for AP Section 1 -

Basic Economic Concepts 45 terms by olive875

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Economics The study of scarcity and choice

Individual Choice Decisions made by individuals about

what to do, which necessarily involve
decisions about what not to do

Economy A system for coordinating a society's

productive and consumptive activities

Market Economy An economy where the decisions of

individual producers and consumers
largely determine what, how and for
whom to produce, with little
government involvement in the
decisions

Command Economy An economy where industry is publicly

owned and a central authority makes
production and consumption decisions

Incentives Rewards or punishments that motivate

particular choices

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Property Rights Establish ownership and grant

individuals the right to trade goods and
services to each other

Marginal Analysis The study of the costs and benefits of

doing a little bit more of an activity
versus a little bit less

Resource Anything that can be used to produce

something else

Land Refers to all resources that come from

nature, such as minerals, timber and
petroleum

Labor The effort of workers

Capital Refers to manufactured goods used to

make other goods and services

Entrepreneurship describes the efforts of entrepreneurs

in organizing resources for production,
taking risks to create new enterprises,
and innovating to develop new
products and production processes

Scarce a resource that is not available in

sufficient quantities to satisfy all the
various ways a society wants to use it

Opportunity Cost the value of what you must give up in

order to gain something

Microeconomics the study of how people make

decisions and how those decisions
interact

Macroeconomics the study of the overall ups and downs

of the economy

Economic Aggregates economic measures that summarize

data across many different markets

Positive Economics the branch of economic analysis that

describes how the economy actually
works

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Normative Economics makes prescriptions about the way the

economy should work

Business Cycle the short-run alteration between

economic downturns, known as
recessions, and economic upturns,
known as expansions

Depression a very deep and prolonged downturn

Recession periods of economic downturns when

output and employment are falling

Expansions (Recoveries) periods of economic upturns when out

put and employment are rising

Employment the number of people currently

employed in the economy

Unemployment the number of people who are actively

looking for work but aren't currently
employed

Labor Force the sum of employment and

unemployment

Unemployment Rate the percentage of the labor force that is

unemployed

Output the quantity of goods and services

produced

Aggregate Output the economy's total production of good

and services for a given time period

Inflation a rising overall price level

Deflation a falling overall price level

Price Stability when the aggregate price level is

changing slowly

Economic Growth an increase in the maximum amount of

goods and services an economy can
produce

Model a simplified representation used to

better understand a real-life situation

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Other Things Equal Assumption (Ceteris all other relevant factors remain
Paribus) unchanged

Trade-off When you give up something in order

to have something else

Production Possibilities Curve Illustrates the trade-offs facing an

economy that produces only two
goods. It shows the maximum quantity
of one good that can be produced for
each possible quantity of the other
good produced

Efficiency If there is no way to make anyone

better off without making at least one
person worse off

Technology The technical means for producing

goods and services

Trade In a market economy, individuals

engage in this: they provide goods and
services to others and receive goods
and services in return

Gains from trade People can get more of what they want
through trade than they could if they
tried to be self-sufficient.

Specialization An increase in output when each

person specializes in the task that he or
she is good at performing

Comparative Advantage The opportunity cost of producing the

good or service is lower for that
individual than for other people

Absolute Advantage When one can make more of

something with a given amount of time
and resources

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