Economics and Psychology: Key Concepts and Cognitive Biases

Cognitive Bias

A subconscious error in thinking that leads to irrational decision-making

Confirmation Bias

The tendency to search for information that supports our perceptions and to ignore or distort contradictory evidence

FOMO

The tendency to feel anxiety/fear that an exciting/interesting event may be currently happening elsewhere (typically social media)

Herd Mentality

The tendency to conform to the behaviors and beliefs of the people around you

Opportunity Costs

The value or potential return of the best alternative that was not chosen when a decision was made

Inflation

The persistent rise in the costs of goods and services over time

Macroeconomics

The science, or study, of the whole economy, or big picture economics

Microeconomics

The science, or study, of the behavior of people, individual businesses, or markets

Deflation

The general reduction of prices in an economy over time

Economic Interdependence

How companies and countries around the world depend upon each other

GDP(Gross Domestic Product)

The total market value of all finished goods and services produced in a country in a given period of time

Standard of Living

The level of wealth, comfort, material goals, and necessities available to a group of people

Export

Resources, materials, and goods that a country produces and sells to another country

Import

Resources, materials, and goods that a country buys from another country

Subsidies

Payment from the government to producers to lower their cost to produce/increase the quantity produced

Protectionism

Governmental actions that restrict trade with the intent to protect local businesses from foreign competition

Tariffs

A tax imposed on goods and services from another country

Embargo

A government order that restricts or prohibits trade

Factors of Production

The basic resources: Land, Labor, Capital, and Entrepreneurship, that are used to produce all goods and services in an economy

Scarcity

Limited resources and an unlimited demand by a population