AP Macroeconomics - Core Concepts & Definitions

Front

What is Scarcity?

Back

Scarcity is the fundamental economic problem that human wants exceed the limited resources available to satisfy them. It forces individuals and societies to make choices about how to allocate resources efficiently.

Front

What is Opportunity Cost?

Back

Opportunity cost is the value of the next-best alternative that is foregone when a choice is made. It is not the sum of all alternatives, but strictly the value of the single best option not chosen.

Front

What does the Production Possibilities Curve (PPC) model represent?

Back

The PPC is a graph that shows the maximum combinations of two goods an economy can produce given fixed resources and technology. It illustrates scarcity, trade-offs, opportunity costs, and efficiency.

Front

Define Absolute Advantage.

Back

A country has an absolute advantage in production if it can produce more of a good or service than another country using the same amount of resources, or the same amount using fewer resources.

Front

Define Comparative Advantage.

Back

A country has a comparative advantage in producing a good if it can produce it at a lower opportunity cost than another country. This is the basis for mutually beneficial trade.