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Economics
The study of the use of scarce resources to satisfy unlimited human wants.
Factors of Production
Resources used to produce goods and services; includes land, labor, and capital.
Scarcity
The limited availability of resources relative to human wants, necessitating choice.
Opportunity Cost
The value of the next best alternative that is forgone when making a choice.
Production
The act of making goods and services.
Consumption
The act of using goods and services.
Budget Line
A graphical representation of the choices available with a limited budget.
Production Possibilities Boundary (PPB)
A model that illustrates the trade-offs in production between two goods or services.
Microeconomics
The study of individual consumers and firms, and how they allocate resources.
Macroeconomics
The study of economic aggregates such as total output, employment, and growth.
Self-Organizing Market Economy
An economy where individual consumers and producers act independently to pursue their own self-interests.
Incentives
Factors that motivate individuals to take action or make decisions.
Circular Flow of Income and Expenditure
A model that illustrates the interactions between consumers and producers in the economy.
Specialization of Labour
The practice of individuals focusing on specific tasks or roles to improve efficiency.
Globalization
The increasing importance of international trade in the global economy.
Traditional Economic System
An economic system based on customs, history, and time-honored beliefs.
Command Economic System
An economy where the government makes all economic decisions.
Free-Market Economic System
An economy where prices are determined by unrestricted competition between privately owned businesses.
Positive Statements
Statements that can be tested and validated, describing facts.
Normative Statements
Statements that express value judgments about what ought to be.
Economic Theory
A framework for understanding and predicting economic behavior.
Correlation
A measure of the relationship between two variables.
Regression
A statistical method for predicting the value of one variable based on the value of another.
Consumer Price Index (CPI)
An index measuring the average change over time in the prices paid by consumers for goods and services.
Cross-Sectional Data
Data collected at a single point in time from multiple subjects.
Time Series Data
Data collected over several time periods for the same subjects.
Panel Data
A combination of cross-sectional and time series data.
Elasticity of Demand
A measure of how much the quantity demanded of a good responds to a change in its price.
Total Expenditure
The total money spent on purchasing goods and services.
Marginal Utility
The additional satisfaction gained from consuming one more unit of a good.
Indifference Curve
A curve representing the combinations of two goods that provide the consumer with equal satisfaction.
Budget Constraint
The limit on the consumption choices of individuals due to limited income.
Law of Diminishing Marginal Utility
As a person consumes more units of a good, the added satisfaction gained from each additional unit decreases.
Producer Surplus
The difference between what producers are willing to accept for a good versus what they actually receive.
Consumer Surplus
The difference between what consumers are willing to pay for a good versus what they actually pay.
Deadweight Loss
The loss of economic efficiency that occurs when the equilibrium for a good or service is not achieved.
Price Floor
A minimum price set by the government that must be paid for a good or service.
Price Ceiling
A maximum price set by the government that can be charged for a good or service.
Short Run
A period during which at least one factor of production is fixed.
Long Run
A period in which all factors of production can be varied.
Economies of Scale
Cost advantages that firms experience as their output increases.
Perfect Competition
A market structure characterized by a large number of buyers and sellers, homogeneous products, and no barriers to entry.
Monopoly
A market structure where a single seller controls the entire market for a good or service.
Price Discrimination
The practice of charging different prices to different consumers for the same good or service.
Externalities
Costs or benefits incurred by a third party who did not choose to incur those costs or benefits.
Public Goods
Goods that are non-rivalrous and non-excludable, meaning they can be consumed by anyone without depleting the supply.
Private Goods
Goods that are both excludable and rivalrous in consumption.
Government Intervention
Actions taken by the government to affect economic outcomes.
Tariffs
Taxes imposed on imported goods to raise their price and protect domestic industries.
Free Trade
International trade free of government interference.
Protectionism
An economic policy of restricting imports to protect domestic industries.
Import Quota
A limit on the amount of a specific good that can be imported into a country.
Absolute Advantage
The ability of a country to produce a good more efficiently than another country.
Comparative Advantage
The ability of a country to produce a good at a lower opportunity cost than another country.
Non-Tariff Barriers (NTBs)
Trade barriers that restrict imports without using direct taxes or tariffs.
Substitutes
Goods that can be used in place of one another.
Complements
Goods that are typically consumed together.
Hicks Substitution Effect
The adjustment in consumption when the price of a good changes, keeping utility constant.
Moral Hazard
A situation in which one party takes risks because they do not have to bear the consequences of those risks.
Adverse Selection
A situation where one party takes advantage of knowing more than the other party during a transaction.
Common-Property Resources
Resources that are available to all, and can be overused or depleted.
Club Goods
Goods that are excludable but non-rivalrous, such as membership-based services.
Free Rider Problem
A situation where individuals benefit from a public good without contributing to its cost.
Inflation
A general increase in prices and fall in the purchasing value of money.
Opportunity Cost of University Degree
The out-of-pocket expenses plus the income foregone by attending university.
Market Power
The ability of a firm to influence the price of a good or service in the market.
Game Theory
A theoretical framework for conceiving social situations among competing players.
Consumer Sovereignty
The theory that consumer preferences dictate the production of goods and services.
Banking Crisis
A situation where banks suffer significant losses, often causing them to fail.
Liquidity
The availability of liquid assets to a market or company.
Marginal Rate of Substitution (MRS)
The rate at which a consumer can give up one good in exchange for another good while maintaining the same level of utility.
Total Revenue (TR)
The total income generated from the sale of goods or services.
Equilibrium Price
The price at which the quantity of goods supplied is equal to the quantity of goods demanded.
Producer Price Index (PPI)
An index that measures the average change over time in the selling prices received by domestic producers for their output.
Consumer Intentions
The motivations and preferences of consumers in making purchase decisions.
Excess Supply
A situation where the quantity supplied exceeds the quantity demanded.
Excess Demand
A situation where the quantity demanded exceeds the quantity supplied.
Market Failure
A situation in which the allocation of goods and services is not efficient.
Sustained Growth
Continuous increase in GDP over a long period of time.
Economic Aggregates
The total output, employment, and national income levels in an economy.
Market Structure
The organizational and other characteristics of a market.
Inefficiency
A situation in which resources are not being allocated in the most efficient manner.
Financial Capital
Funds used to produce goods and services.
Explicit Costs
Direct, easily identifiable costs associated with the production of goods.
Implicit Costs
Indirect costs that are not always accounted for in financial statements.
Long Run Average Cost Curve (LRAC)
A curve that shows the lowest cost at which a firm can produce any given level of output in the long run.
Marginal Return
The additional output generated by adding an additional factor of production.
Stock Market Crash
A sudden dramatic decline of stock prices across a significant cross-section of a stock market.
Tax Incidence
The analysis of the effect of a tax on the distribution of economic welfare.
Elastic Supply
A situation where quantity supplied is responsive to price changes.
Inelastic Supply
A situation where quantity supplied is not responsive to price changes.
Short Run Supply Curve
A representation of the relationship between price and quantity supplied in the short run.
Technology as a Determinant of Supply
Advancements that can lead to increased production efficiency and a shift of the supply curve.
Market Economy
An economic system where prices are determined by unrestricted competition between privately owned businesses.
Price Mechanism
The manner in which prices influence the allocation of resources.
Economic Welfare
The overall financial well-being of individuals and businesses.
Utility Maximization
The process of obtaining the highest possible satisfaction from consumption.
Socially Optimal Output
The level of output that maximizes social welfare.
Indifference Curve Analysis
A method to analyze consumer preferences between different goods.
Consumer Equilibrium
A situation where a consumer maximizes their utility given their budget constraint.
