Supply and Demand, Unusual Markets, and International Trade

Vocabulary flashcards covering topics from the lecture: intertemporal and geographic speculation, unusual markets, the mercantile system, and foundational concepts of international trade.

Speculator

An economic actor who buys goods in markets or periods of abundance when prices are low and stores or transports them to sell in markets or periods of scarcity when prices are high, earning a profit while moving goods to where they are most needed.

Law of one price

An economic tendency where the actions of speculators or arbitrageurs buying in lower-priced markets and selling in higher-priced markets integrate the markets and equalize price differences across space or time.

Unusual markets

Markets identified by economists—such as those for transplantable kidneys, parental adoption rights, and adult sexual services—where transactions are legally permissible as free gifts or donations, but financial buying and selling are prohibited.

Price ceiling of zero

A legal mandate imposed by the government on unusual markets that allows goods or services to be given away or received as donations but outlaws any sale at a positive price.

The Wealth of Nations (1776)

Adam Smith's foundational 1776 economic book which presented a vigorous attack upon the mercantile system and defended speculation as a vital, highly valuable, yet unappreciated economic activity.

Mercantilism

An economic doctrine (termed the 'mercantile system' by Adam Smith) holding that money is wealth, total global wealth is fixed, exports enrich a nation, imports impoverish it, and trade should be strictly regulated.

Zero-sum

The condition where the total amount of available wealth is fixed, meaning that any trade that makes one trading partner or country wealthier must inescapably leave another party or country poorer.

Export

A good or service produced within the home country and sold to a buyer in another country, resulting in money flowing into the home country.

Import

A good or service produced in a foreign country and purchased for sale or use in the home country, causing domestic money to flow abroad.

Tariff

A tax levied specifically on imported goods to make foreign products more expensive and reduce the volume of imports coming into the country.

Free trade

A commercial trade policy under which the government does not regulate or restrict commerce based on the nationalities of the people with whom its citizens trade.

Beggar-thy-neighbor

A mercantilist objective of aggressively maximizing domestic exports and suppressing imports to extract as much fixed global wealth as possible, deliberately leaving neighboring nations poor.

Protectionism

The modern term for mercantilist policies that use government interventions, primarily tariffs, to restrict foreign imports and protect the domestic economy and industry from foreign competition.