AP Macroeconomics Vocabulary Terms with Definitions
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Course
AP Macroeconomics
Institution
AP Macroeconomics
AP Macroeconomics Vocabulary Terms
with Definitions
Economics - Answer-the study of how people, firms and societies use their scarce productive
resources to best satisfy their unlimited material wants
Resources - Answer-called factors of production, these are commonly grouped into the 4 categor...
Market Economy (Capitalism) - Answer✔✔-An economic system based upon the fundamentals of private
property, freedom, self-interest, and prices
Law of Demand - Answer✔✔-Holding all else equal, when the price of a good rises, consumers decrease
their quantity demanded for that good.
All Else Equal - Answer✔✔-to predict how a change in one variable affects a second, we hold all other
variables constant. This is also referred to as the ceteris ceteris paribus assumption
Absolute (Money) Prices - Answer✔✔-The price of a good measured in units of currency
Relative Prices - Answer✔✔-the number of units of any other good Y that must be sacrificed to acquire
the first good X. Only relative prices matter
Substitution Effect - Answer✔✔-the change in quantity demanded because of a change in the price of
one good relative to the price of other goods.
Income Effect - Answer✔✔-the change in quantity demanded that results from a change in the
consumer's purchasing power (or real income)
Demand Schedule - Answer✔✔-a graphical depiction of the demand schedule. The demand curve
downward sloping, reflecting the law of the demand.
Determinants of Demand - Answer✔✔-Consumer Income
Price of Substitutes
Price of Complements
Consumer Tastes and Preferences
Consumer Expectations and Preferences
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