Scarcity - AP Macroeconomics
- What is absolute advantage?
- Ability to produce more of a good with the same resources. Superior productivity in producing a specific good or service.
- What is the role of incentives in economics?
- Incentives motivate behavior and decision-making. Rewards and penalties guide economic choices and actions.
- What is the difference between microeconomics and macroeconomics?
- Micro focuses on individuals; macro on whole economies. Different scales of economic analysis and decision-making.
- What does a point outside the PPC indicate?
- Currently unattainable production. Production level exceeds current resource capabilities.
- Identify the term: The use of resources in such a way as to maximize the output of goods and services.
- Efficiency. Getting maximum output from available resources.
- Why do economists use models?
- To simplify reality and analyze economic issues. Models eliminate complexity to focus on key relationships.
- Identify an example of a non-renewable resource.
- Oil. Finite fossil fuel that cannot be naturally replaced quickly.
- What is the difference between needs and wants?
- Needs are essential; wants are desired extras. Needs are necessary for survival; wants improve quality of life.
- What is a mixed economy?
- Combines elements of market and planned economies. Government and markets share control over economic decisions.
- What is the opportunity cost?
- The next best alternative forgone. The value of what you give up when making a choice.
- What does a point on the PPC indicate?
- Efficient use of resources. All resources are being used to maximum capacity.
- Which concept explains the need for trade-offs in economics?
- Scarcity. Limited resources force choices between alternatives.
- What is a renewable resource?
- A resource that can be replenished naturally. Nature can restore these resources over time.
- What is a market economy?
- Decisions are driven by supply and demand. Private ownership and price signals guide resource allocation.
- What is meant by 'economic efficiency'?
- Maximizing output from given resources. Producing the maximum possible output from given inputs.
- What are economic resources?
- Land, labor, capital, and entrepreneurship. The four factors of production used to create goods and services.
- Which factor increases economic growth?
- Technological advancements. Innovation improves productivity and expands production possibilities.
- What is comparative advantage?
- Ability to produce a good at a lower opportunity cost. The basis for mutually beneficial trade between parties.
- Which economic principle states that people face trade-offs?
- Scarcity. Limited resources force choices between competing alternatives.
- What is a trade-off?
- A compromise between two choices due to scarcity. Giving up one option to obtain another due to limited resources.
- What causes the PPC to shift inward?
- Decrease in resources or technology. Loss of resources or technology reduces production capacity.
- What does 'ceteris paribus' mean in economic analysis?
- All other things being equal. Assumes other variables remain constant during analysis.
- Identify one cause of economic inefficiency.
- Misallocation of resources. Poor resource allocation reduces overall economic output.
- What does the term 'utility' refer to in economics?
- Satisfaction or benefit from consuming a good. Measures the happiness or value gained from consumption.
- What is specialization?
- Focusing on a narrow range of products. Concentrating on specific tasks increases overall efficiency.
- What does a point inside the PPC indicate?
- Inefficient use of resources. Resources are not being used to their full potential.
- Which economic system relies on customs and traditions?
- Traditional economy. Economic decisions follow established cultural practices.
- What is a command economy?
- Government makes all economic decisions. Central planning replaces market forces in resource allocation.
- What is the definition of scarcity in economics?
- Scarcity is the limited nature of society's resources. This fundamental concept drives all economic decision-making.
- What is marginal analysis?
- Examination of additional benefits vs. costs. Compares additional benefits to additional costs of decisions.
- Which concept is illustrated by a downward-sloping PPC?
- Trade-offs and opportunity costs. The slope shows what must be given up for more of another good.
- What is the difference between positive and normative economics?
- Positive is fact-based; normative is opinion-based. Positive describes what is; normative prescribes what should be.
- State the law of increasing opportunity costs.
- As production increases, opportunity cost increases. Resources become less adaptable as production shifts.
- What does a production possibilities curve (PPC) illustrate?
- Trade-offs and opportunity costs. Shows maximum possible production combinations given resources.
- What shifts the PPC outward?
- Economic growth, increased resources or technology. More resources or better technology expand production possibilities.
- Identify the opportunity cost when choosing between two goods.
- The value of the next best alternative. What you sacrifice when choosing one good over another.
- What is the purpose of economic models?
- To analyze behavior and predict outcomes. Simplified frameworks help understand complex economic relationships.
- What is the 'invisible hand' as described by Adam Smith?
- Self-regulating nature of the marketplace. Market forces coordinate individual actions without central planning.
- What is the function of the factors of production?
- To produce goods and services. Resources transform into useful goods and services for society.
- Identify the basic economic problem highlighted by scarcity.
- Unlimited wants vs. limited resources. The core dilemma forcing choices in all economic systems.