Political economy Gildas

Key terms and Definitions from Gisldas's class

Economics by Paul Samuelson

The study of how people and society choose, with or without the use of money to employ scarce productive resources which could have alternative uses, to produce various commodities overtime and distribute them for consumption now and in the future among various people and groups of society.

Scarcity

Fundamental phenomenon that creates a need for the science of economics: there isn’t enough time or stuff to satisfy all desires, so people must make choices about what to produce and consume so that if they can’t have everything, they at least have the best that was possible under the cirsconstances.

Opportunity cost

economic term that refers to the value of what you have to give up to choose something else. In short, it is the value of the road not taken. Example: I give up on working to pursue my education.

The Invisible Hand

Refers to the self-regulating nature of the market, where individuals pursuing their own self interest unintentionally contribute to the overall economic well-being of society

Natural price of a commodity

Refers to the sum of all costs (materials, production..)

Growth rates

Refers to the percentage of change of a specific variable within a specific period (example: €306 in 2025 and €202 in 2024)

AAGR

Average Annual Growth Rate: Compound annual growth rate, shows an average value for the annual rate of change.

Year on Year

Comparison of a value at two dates, generally a year apart

Year to Date

Term covering the period between the beginning of the year and the present. It can apply to either physical years or calendar.

GPD

Gross domestic product: is the total value of all the goods and services produced in a country in one year. Its like adding up the price of everything a country produces to show how big its economy is. Itcan be seen from the production side. It measures the value added created when companies and workers produce goods and services within a country during a certain period

Value added

The extra value created at each stage of production (e.g. a shirt factory adds value by turning fabric into shirts).

Consumption

Using goods and services to satisfy needs or desires. It is mainly done by consumers (households) but also companies (ex: buy software, supplies, electricity)

Purchasing power

It is calculated as the difference between changes in household income and changes in taxes and prices.

If income rises faster than prices, purchasing power goes up; otherwise it goes down.

Purchasing power is based on disposable income = earnings + social benefits - taxes and inflation

Price Elasticity

Is a measure of the relationship between a change in the price of a particular good and its quantity demanded.

Price elasticity of demand (PED) is a term used in economics when discussing price sensitivity.

The formula for calculating price elasticity of demand is:

Price elasticity of demand = % change in quantity demanded / % Change in Price

If a change in price leads to a large change in quantity demanded, the product is said to be elastic (or responsive to price changes).

On the other hand, a product is inelastic if a change in price leads to a small amount of change in quantity demanded.

Micro-economics

The study of how households and companies make decisions

Macro-economics

Large-scale issues, resulting from the decisions of millions of individuals + economic policies

Supply

Seller offering several goods/ services to the consumers which are buyers

Productivity

Total amount of production, divided by the number of hours of number of ppl (labour)

Inflation

the lost of purchasing power that result in a general and permanent increase in the prices.

The loss of value of money is a phenomenon that affects the national economy (households, business, etc…)

CPI

Consumer Price Index: is used to measure inflation. This is a partial measure, as inflation covers a wilder field than just household consumption (B to B consumption)

European Central Bank

ECB, bank responsible for the single European currency, the euro. Located in Frankfurt, the ECB is the Federal Institution in the European Union. Independent of the other European institutions and the member states, the ECB is at the center of the Euro system, the monetary authority of the euro zone.

Credit Crunch

Situation corresponds to a restriction of credit offered by banks, following a banking crisis.

Bubble

Price increases at a certain pace, at the end it doesn’t correspond to the actual value of a product