Macroeconomics

Scarcity

The fundamental economic problem of having seemingly unlimited human wants in a world of limited resources.

Incentives

Factors that motivate individuals to make certain choices or decisions.

Division of Labor

The separation of tasks in a production process to improve efficiency and productivity.

Specialization

Focusing on a specific task or product to increase efficiency and output.

Supply Chains

Networks between a company and its suppliers to produce and distribute a specific product.

Economics

The study of choices made in the face of scarcity.

Economic Goods

Goods that are scarce and have a price greater than zero.

Free Goods

Goods that are abundant and have a price of zero.

Opportunity Cost

The benefit foregone from not choosing the next best alternative.

Production Possibility Curves (PPC)

A model showing the maximum combinations of two goods that can be produced with given resources.

Microeconomics

The study of individual decision-making by households, firms, and markets.

Macroeconomics

The study of aggregate economic variables and the economy as a whole.

Positive Analysis

Descriptive and factual statements about the economy, focusing on "what is."

Normative Analysis

Prescriptive statements about the economy, focusing on "what ought to be."

Ceteris Paribus

A Latin phrase meaning "all other things being equal," used in economic modeling.

Comparative Advantage

The ability of a party to produce a good at a lower opportunity cost than another party.

Absolute Advantage

The ability of a party to produce more of a good with the same resources than another party.

Terms of Trade

The rate at which one good can be exchanged for another between trading parties.

Demand Curve

A model that shows the quantity of a good that consumers are willing to purchase at different prices.

Supply Curve

A model that shows the quantity of a good that producers are willing to sell at different prices.

Law of Demand

The principle that there is an inverse relationship between the price of a good and the quantity demanded.

Law of Supply

The principle that there is a direct relationship between the price of a good and the quantity supplied.

Market Equilibrium

The point where the supply and demand curves intersect, determining the market price and quantity.

Consumer Sovereignty

The idea that consumer preferences dictate the production of goods and services in a market economy.

Market Failure

A situation where markets do not allocate resources efficiently, leading to a loss of economic welfare.

Externalities

Costs or benefits that affect third parties not directly involved in a transaction.

Public Goods

Goods that are non-rival and non-excludable, leading to the free-rider problem.

Macroeconomic Goals

Objectives such as stable GDP growth, high employment, and stable prices that guide economic policy.

Fiscal Policy

Government policy regarding taxation and spending to influence the economy.

Monetary Policy

Central bank policy that manages the money supply and interest rates to influence economic activity.