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Absolute advantage
The ability of an individual or group to carry out a particular economic activity more efficiently than another individual or group.
Capital (goods)
Goods that are used in the production of other goods, as opposed to being sold directly to consumers.
Ceteris paribus (other things equal)
A Latin phrase meaning 'all other things being equal,' used in economics to isolate the effect of one variable.
Command economy
An economic system in which the government makes all decisions regarding the production and distribution of goods and services.
Comparative advantage
The ability of an individual or group to carry out a particular economic activity at a lower opportunity cost than another.
Deflation
A decrease in the general price level of goods and services.
Depression
A prolonged period of economic downturn characterized by high unemployment and low consumer spending.
Economics
The study of how individuals and societies allocate scarce resources to satisfy unlimited wants.
Economy
The system of production, distribution, and consumption of goods and services in a society.
Efficient
A state in which resources are allocated in a way that maximizes the production of goods and services.
Entrepreneur
An individual who creates and/or invests in a business venture, taking on financial risks in the hope of profit.
Incentive
A factor that motivates individuals to perform an action or make a decision.
Inflation
An increase in the general price level of goods and services over time.
Labor
The human effort used in the production of goods and services.
Labor force
The total number of people who are able and willing to work.
Land
The natural resources used in the production of goods and services.
Marginal analysis
The examination of the additional benefits of an activity compared to the additional costs incurred by that same activity.
Macroeconomics
The branch of economics that studies the behavior and performance of an economy as a whole.
Market economy
An economic system in which decisions regarding investment, production, and distribution are based on supply and demand.
Microeconomics
The branch of economics that studies individual agents and their interactions in markets.
Model
A simplified representation of reality used to explain and predict economic phenomena.
Normative economics
The branch of economics that deals with what ought to be, involving value judgments.
Opportunity cost
The loss of potential gain from other alternatives when one alternative is chosen.
Output
The total amount of goods and services produced in a given time period.
Positive economics
The branch of economics that focuses on objective analysis and the description of economic phenomena.
Production possibilities curve
A graph that shows the maximum feasible amount of two goods that can be produced with available resources.
Property Rights
Legal rights to use and derive benefits from a resource.
Resource
A source or supply from which a benefit is produced.
Scarcity
The fundamental economic problem of having seemingly unlimited human wants in a world of limited resources.
Specialization
The process of focusing on a particular activity or area of expertise to increase efficiency.
Terms of trade
The ratio at which one good can be exchanged for another.
Trade-off
A situation in which, to gain something, one must give up something else.
Unemployment
The situation when individuals who are capable of working are unable to find a job.
Black market
An illegal traffic or trade in officially controlled or scarce commodities.
Change in demand
A shift in the demand curve, indicating a change in the quantity demanded at every price.
Change in supply
A shift in the supply curve, indicating a change in the quantity supplied at every price.
Competitive market
A market structure characterized by a large number of buyers and sellers, where no single buyer or seller can influence the market price.
Complement
A good whose demand increases when the price of another good decreases.
Demand curve
A graph showing the relationship between the price of a good and the quantity demanded.
Demand schedule
A table that shows the quantity demanded of a good at different price levels.
Equilibrium
The point at which the quantity demanded equals the quantity supplied.
Equilibrium (clearing) price
The price at which the quantity of a good demanded equals the quantity supplied.
Equilibrium quantity
The quantity of a good that is supplied and demanded at the equilibrium price.
Inferior good
A good whose demand decreases as consumer incomes rise.
Input
Any resource used in the production of goods and services.
Law of demand
The principle that, all else being equal, an increase in the price of a good will decrease the quantity demanded.
Law of supply
The principle that, all else being equal, an increase in the price of a good will increase the quantity supplied.
Market
Any structure that allows buyers and sellers to exchange any type of goods, services, and information.
Minimum wage
The lowest legal wage that can be paid to workers.
Normal good
A good whose demand increases as consumer incomes rise.
Price ceiling
A maximum price that can be legally charged for a good or service.
Price controls
Government-imposed limits on the prices that can be charged for goods and services.
Price floor
A minimum price that can be legally charged for a good or service.
Quantity demanded
The total amount of a good that consumers are willing and able to purchase at a given price.
Quantity supplied
The total amount of a good that producers are willing and able to sell at a given price.
Shortage
A situation in which the quantity demanded exceeds the quantity supplied.
Substitute
A good that can be used in place of another good.
Supply curve
A graph showing the relationship between the price of a good and the quantity supplied.
Supply schedule
A table that shows the quantity supplied of a good at different price levels.
Surplus
A situation in which the quantity supplied exceeds the quantity demanded.
