QZ on chp.1-17 Ap ECON

scarcity

unlimited wants limited resources

opportunity cost

what you gave up to make a discision

4 factors of production

1.Land resources
2.Labor/work force
3.Capital
4.Entreprenuership

demand

how many people want an item

supply

how many people produce the item

quantity demand

the actual amount of a good or service consumers are willing to buy at a specific price

quantity supplied

the actual amount of a good or service producers are willing to sell at some specific pice

equilibrium

an economic situation in which no individual would be better off doing something else

price ceiling

the maximum price sellers are allowed to charge for a good or service

price floor

the minimum price buys are required to pay for a good or service

surplus

the excess of a good or service that occurs when the quantity supplies exceeds the quantity demanded; occurs when it's above equilibrium

shortage

the insufficiency of a good or service that occurs when the quantity demand exceeds the quantity supplied; occurs when it's below equilibrium

substitues

decreases the demand for the other good

compliments

increases the demand for the other good

inelastic demand

Price goes ^ total revenue goes ^ Price Goes down total revenue goes down

elastic demand

price goes ^ total revenue goes down Price goes down total revenue goes ^

normal good

a good in which a rise in income increases the demand for that good- the "normal" case; increased income= more vacations, going out to dinner, ect.

inferior good

a good for which a rise in income decreases the demand for the good

law of demand

the principal that a higher price for a good or service, other things equal, leads people to demand a smaller quantity of that good or service (As income goes up, quantity demand goes down)

price and quantity demand

...

an increase in demand is represented by

a rightward shift of a demand curve

seasonally unemployed

jobs that are affected by weather; gage, construction worker, etc.

structurally unemployed

they don't have the right skills for the jobs that are around them

clyclically unemployed

when the overall demand for goods and services in an economy cannot support full employment.

frictionally unemployed

the time period between jobs when a worker is searching for, or transitioning from one job to another.

inflation

a rise in the overall price level

deflation

decrease in the average level of prices

hyperinflation

monetary inflation at a high rate

when inflation rises quickly

lenders will be hurt and borrowers will benefit

unanticipated inflation

unexpected inflation benefits borrowers and hurts lenders

excess supply (surplus)

the price is above the equilibrium price

Marginal propensity to consume and draw the corresponding graph (MPC)

The increase in consumer spending when disposable income rises by $1:
MPC: ^consumer spending
________________________
^ Disposable income

Marginal propensity to save and draw the corresponding graph (MPS)

The fraction of an additional dollar of disposable income that's saved:
MPS= 1-MPC

Multiplier

Ratio of the total change in real GDP
^y = 1
_____ ______
^AAS (1-MPC)

LRAS

(Long Run Aggregate Supply) when price level goes up, the actual amount produced is not going to increase

4 components of GDP

consumption, investment, expediters, and net exports

law of supply

other things being equal, the price and quantity supplied of a good are positively related

wealth effect

when the price level goes up and theres inflation the value of peoples assets decrease/ when the price level goes down their money goes further so they go buy more stuff

4 phases of the change in output/GDP on AD and AS

Aggregate demand increase=PL ^ and Q (GDP) ^
Aggregate demand decrease= PL ~dec~ and Q (GDP) ~Dec~
Aggregate supply increase= PL ~dec~ and Q (GDP) ^
Aggregate supply decrease= PL ^ and Q (GDP)~dec~

negative demand shock

decrease in consumer wealth/spending

Interest rate effect

if the price level goes up comes high interest rates = investment will decrease

production possibility curve

shows the different combination on 2 goods that can be produced using full employment of resources