Macroeconomics unit 1 study guide basic economic concepts

Capital - all manufactured aids to production tools, machinery, equipment, and factory, storage, transportation, and distribution facilities used in producing goods and services. Labor - physical and mental talents of individuals available and usable in producing goods and services.

Scarcity is the basic problem in economics in which society does not have enough resources to produce whatever everyone needs and wants. Basically, it is unlimited wants and needs vs. Scarcity is faced by all societies and economic systems. Since we are faced with scarcity , we must make choices about how to allocate and use scarce resources. Economics is the study of how individuals, firms, and governments deal with scarcity.

Macroeconomics unit 1 study guide basic economic concepts

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For example, moving from A to B on the graph above has an opportunity cost of 10 units of sugar. Saylor Direct Credit. Equitable distribution of income - try to minimize gap between rich and poor 7.

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All Subjects. AP Macroeconomics. Unit 1 — Basic Economic Concepts. Unit 1 Overview: Basic Economic concepts. To start your study of Economics it is important to understand what the Economic system is about. In this course, Economics is understood as the systematic study of choice. Economics studies the allocation of those based on individual choices. Why do people and countries trade with one another? What determines the market price for a good service?

Macroeconomics unit 1 study guide basic economic concepts

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It shows us all of the possible production combinations of goods, given a fixed amount of resources. Here is one other way this concept is tested on the AP Microeconomics exam. This is represented by a point on the production possibilities curve that meets the desires and needs of a particular society. In economics, we look at the decision making process through a lens of comparing the benefits we receive from consuming a product or making a decision to the additional costs marginal cost involved in that decision. The curve bows outwards because of the Law of Increasing Opportunity Cost, which states that the amount of a good which has to be sacrificed for each additional unit of another good is more than was sacrificed for the previous unit. Stay Connected We'd love your feedback. Course Introduction. Print this chapter. Society's material wants, that is, the material wants of its citizens and institutions, are virtually unlimited and insatiable. Some examples of command economies are North Korea and Cuba. Course Catalog.

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Comparative Advantage — the ability to produce a good at the lowest opportunity cost. Economic resources - the means of producing goods and services-are limited or scarce. Economic efficiency - achieve the maximum production using available resources 4. If Sylvia took 5 hours off from her job to attend the sporting event, what was her opportunity cost of attending the concert? The choices we make are known as trade-offs. If you choose to have pizza, then the cheeseburger and chicken sandwich are your trade-offs. Macroeconomics Microeconomics is the study of how individuals, households, and firms make decisions and allocate resources. A mixed economy is one in which there are characteristics of both the market economy and the command economy present. This is represented by a point on the production possibilities curve that meets the desires and needs of a particular society. The graph on the left shows how an improvement in the quality of resources impacts the graph. At this point, you do not have the needed amounts of resources to produce the number of goods shown. Course Syllabus. E money spent on clothing expenses. Here are some scenarios that illustrate these shifters:. This is shown in the graph above by showing how, given a fixed set of resources, we can produce either combination A, B, C, D, or E.