Key Economic and Financial Concepts

A collection of vocabulary flashcards covering key economic and financial concepts.

Total Cost

The complete cost of production, including fixed and variable costs.

Overhead Cost

Indirect costs associated with production (e.g., rent, utilities, administrative salaries).

Sunk Cost

Past costs that cannot be recovered and should not affect current decisions.

Opportunity Cost

Value of the next best alternative foregone.

Elastic Demand

Demand that changes significantly with price changes.

Perfect Competition

Market structure with many sellers offering identical products.

Compound Interest

Interest is earned on both the principal and previously earned interest.

Rate of Return

Profit or loss on an investment as a percentage of its cost.

Minimum Attractive Rate of Return (MARR)

Also known as hurdle rate, it is a policy issue resolved by top management.

Ordinary Annuity

A type of annuity where the payments are made at the end of each period.

Perpetuity

A type of annuity in which the periodic payments continue indefinitely.

Working Capital

Funds used to support day-to-day operations.

Fixed Cost

Costs that remain constant regardless of production level.

Variable Cost

Costs that vary with the level of output.

Direct Cost

Costs directly traceable to a specific product or service.