Econ 110 Final All Vocab

Chapter 1: Ten Principles of Economics

Scarcity: The limited nature of society's resources.
Economics: The study of how society manages its scarce resources.
Efficiency: Maximizing the total benefits from scarce resources.
Equality: Distributing economic prosperity uniformly among society's members.
Opportunity Cost: The next best alternative foregone when making a decision.
Rational People: Individuals who systematically and purposefully do the best they can to achieve their objectives.
Marginal Change: A small, incremental adjustment to a plan of action.
Incentive: Something that induces a person to act.
Market Economy: An economic system where decisions are guided by prices and self-interest.
Property Rights: The ability to own and control scarce resources.
Market Failure: A situation where a market left on its own fails to allocate resources efficiently.
Externality: The impact of one person’s actions on the well-being of a bystander.
Market Power: The ability of a single economic actor to influence market prices.
Productivity: The amount of goods and services produced from each hour of a worker’s time.
Inflation: An increase in the overall level of prices in the economy.

Chapter 2: Thinking Like an Economist

Circular-Flow Diagram: A visual model of the economy that shows how money, goods, and services flow through markets among households and firms.
Production Possibilities Frontier (PPF): A graph showing the combinations of output that an economy can produce given available factors of production and technology.
Microeconomics: The study of how households and firms make decisions and interact in markets.
Macroeconomics: The study of economy-wide phenomena, such as inflation, unemployment, and economic growth.
Positive Statements: Claims that attempt to describe the world as it is.
Normative Statements: Claims that attempt to prescribe how the world should be.

Chapter 3: Interdependence and the Gains from Trade

Absolute Advantage: The ability to produce a good using fewer inputs than another producer.
Opportunity Cost: What must be given up to obtain something else.
Comparative Advantage: The ability to produce a good at a lower opportunity cost than another producer.
Imports: Goods produced abroad and sold domestically.
Exports: Goods produced domestically and sold abroad.

Chapter 4: The Market Forces of Supply and Demand

Market: A group of buyers and sellers of a particular good or service.
Competitive Market: A market with many buyers and sellers, where each has negligible influence on the price.
Quantity Demanded: The amount of a good that buyers are willing and able to purchase.
Law of Demand: The claim that, other things equal, the quantity demanded of a good falls when the price rises.
Demand Schedule: A table showing the relationship between price and quantity demanded.
Demand Curve: A graph showing the relationship between price and quantity demanded.
Normal Good: A good for which demand increases as income rises.
Inferior Good: A good for which demand decreases as income rises.
Substitutes: Goods for which an increase in the price of one increases demand for the other.
Complements: Goods for which an increase in the price of one decreases demand for the other.
Quantity Supplied: The amount of a good that sellers are willing and able to sell.
Law of Supply: The claim that, other things equal, the quantity supplied of a good rises when the price rises.
Supply Schedule: A table showing the relationship between price and quantity supplied.
Supply Curve: A graph showing the relationship between price and quantity supplied.
Equilibrium: The point where supply equals demand.
Equilibrium Price: The price at which supply equals demand.
Equilibrium Quantity: The quantity at which supply equals demand.
Surplus: A situation in which quantity supplied exceeds quantity demanded.
Shortage: A situation in which quantity demanded exceeds quantity supplied.
Law of Supply and Demand: The claim that the price of any good adjusts to bring supply and demand into balance.

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Chapter 5: Elasticity and Its Application

Elasticity: A measure of the responsiveness of quantity demanded or supplied to one of its determinants.
Price Elasticity of Demand: The responsiveness of quantity demanded to a change in price.
Total Revenue: The total amount paid by buyers and received by sellers, calculated as price multiplied by quantity.
Income Elasticity of Demand: The responsiveness of quantity demanded to a change in income.
Cross-Price Elasticity of Demand: The responsiveness of demand for one good to a change in the price of another good.
Price Elasticity of Supply: The responsiveness of quantity supplied to a change in price.

Chapter 6: Supply, Demand, and Government Policies

Price Ceiling: A legal maximum on the price of a good or service.
Price Floor: A legal minimum on the price of a good or service.
Tax Incidence: The manner in which the burden of a tax is shared among participants in a market.

Chapter 7: Consumers, Producers, and the Efficiency of Markets

Welfare Economics: The study of how the allocation of resources affects economic well-being.
Willingness to Pay: The maximum amount a buyer will pay for a good.
Consumer Surplus: The difference between willingness to pay and the amount actually paid.
Cost: The value of everything a seller must give up to produce a good.
Producer Surplus: The difference between the price received by sellers and their costs.
Efficiency: The property of resource allocation maximizing total surplus.
Equality: The property of distributing economic prosperity uniformly among members of society.

Chapter 8: Application: The Costs of Taxation

Deadweight Loss: The fall in total surplus that results from a market distortion, such as a tax.

Chapter 9: Application: International Trade

World Price: The price of a good that prevails in the world market.
Tariff: A tax on imported goods.

Chapter 10: Externalities

Externality: The impact of one person’s actions on the well-being of a bystander.
Internalizing the Externality: Altering incentives so that people take into account the external effects of their actions.
Corrective Taxes: Taxes designed to induce private decision-makers to take account of the social costs from a negative externality.
Coase Theorem: The proposition that private parties can solve the problem of externalities if they can bargain without cost.
Transaction Costs: The costs parties incur in the process of agreeing to and following through on a bargain.

Chapter 11: Public Goods and Common Resources

Excludability: The property of a good whereby a person can be prevented from using it.
Rivalry in Consumption: The property of a good whereby one person’s use diminishes others’ use.
Private Goods: Goods that are both excludable and rival in consumption.
Public Goods: Goods that are neither excludable nor rival in consumption.
Common Resources: Goods that are rival in consumption but not excludable.
Club Goods: Goods that are excludable but not rival in consumption.
Free Rider: A person who receives the benefit of a good but avoids paying for it.
Cost–Benefit Analysis: A study comparing the costs and benefits of providing a public good.
Tragedy of the Commons: A situation where common resources are overused and depleted.

Chapter 14: Firms in Competitive Markets

Total Revenue: The total amount received by a firm for its output, calculated as price times quantity.
Total Cost: The total value of the inputs a firm uses in production.
Profit: Total revenue minus total cost.
Explicit Costs: Costs that require a direct monetary outlay by the firm.
Implicit Costs: Costs that do not require a monetary outlay, representing opportunity costs.
Economic Profit: Total revenue minus total costs, including both explicit and implicit costs.
Accounting Profit: Total revenue minus explicit costs.
Production Function: The relationship between the quantity of inputs and the quantity of output produced.
Marginal Product: The increase in output from an additional unit of input.
Diminishing Marginal Product: The property whereby the marginal product of an input declines as the quantity of the input increases.
Fixed Costs: Costs that do not vary with the quantity of output produced.
Variable Costs: Costs that vary with the quantity of output produced.
Average Total Cost: Total cost divided by the quantity of output.
Average Fixed Cost: Fixed cost divided by the quantity of output.
Average Variable Cost: Variable cost divided by the quantity of output.
Marginal Cost: The increase in total cost from producing one more unit.
Efficient Scale: The quantity of output that minimizes average total cost.
Economies of Scale: The property whereby long-run average total cost decreases as output increases.
Diseconomies of Scale: The property whereby long-run average total cost increases as output increases.
Constant Returns to Scale: The property whereby long-run average total cost stays the same as output increases.

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Continuing with the remaining chapters:

Chapter 15: Monopoly

Monopoly: A firm that is the sole seller of a product without close substitutes.
Natural Monopoly: A monopoly that arises because a single firm can supply a good or service to the market at a lower cost than two or more firms.
Price Discrimination: The practice of selling the same good at different prices to different customers.

Chapter 16: Monopolistic Competition

Competitive Market: A market in which many buyers and sellers trade identical products.
Average Revenue: Total revenue divided by the quantity sold; equal to the price in competitive markets.
Marginal Revenue: The change in total revenue from selling one more unit.
Sunk Cost: A cost that has already been incurred and cannot be recovered.

Chapter 19: The Markets for the Factors of Production

Factors of Production: Inputs used to produce goods and services, such as labor, land, and capital.
Production Function: The relationship between the quantity of inputs used and the quantity of output produced.
Marginal Product of Labor: The increase in output from hiring one more unit of labor.
Diminishing Marginal Product: The property that as more of an input is used, the additional output from that input decreases.
Value of the Marginal Product: The marginal product of an input multiplied by the price of the output.
Capital: The equipment and structures used to produce goods and services.

Chapter 20: Income Inequality and Poverty

Compensating Differential: A difference in wages that arises to offset the non-monetary characteristics of different jobs.
Human Capital: The accumulation of investments in education, training, and health.
Monopsony: A labor market with only one buyer (employer).
Union: A worker association that bargains with employers over wages and working conditions.
Strike: The organized withdrawal of labor from a firm by a union.
Efficiency Wages: Wages set above the equilibrium level to increase worker productivity.
Discrimination: Offering different opportunities to similar individuals based on characteristics such as race, gender, or ethnicity.
Statistical Discrimination: Judging individuals based on group characteristics rather than personal attributes.

Chapter 21: The Theory of Consumer Choice

Poverty Rate: The percentage of the population whose income falls below the poverty line.
Poverty Line: The income level below which a family is classified as impoverished.
In-Kind Transfers: Assistance given in the form of goods and services rather than cash.
Life Cycle: The regular pattern of income variation over a person’s life.
Permanent Income: A person’s normal income over time, adjusted for temporary changes.
Utilitarianism: The political philosophy advocating maximizing total utility.
Utility: A measure of well-being or satisfaction.
Liberal Contractarianism: A political philosophy emphasizing justice and fairness in the distribution of goods and opportunities.
Maximin Criterion: The idea of maximizing the utility of the worst-off member of society.
Social Insurance: Government programs that protect individuals from adverse events.
Libertarianism: The political philosophy that emphasizes individual freedom and the minimal role of government.
Welfare: Government programs that provide financial aid to the poor.
Negative Income Tax: A tax system where low-income individuals receive payments rather than owe taxes.

Chapter 22: Frontiers of Microeconomics

Budget Constraint: The limit on consumption bundles a consumer can afford.
Indifference Curve: A curve showing consumption bundles that give the consumer the same level of satisfaction.
Marginal Rate of Substitution: The rate at which a consumer is willing to trade one good for another while remaining equally satisfied.
Perfect Substitutes: Goods for which a consumer is willing to trade one for another at a constant rate.
Perfect Complements: Goods that are always consumed together in fixed proportions.
Normal Good: A good for which demand increases as income rises.
Inferior Good: A good for which demand decreases as income rises.
Income Effect: The change in consumption that results from a change in a consumer’s income.
Substitution Effect: The change in consumption that results from a change in relative prices.
Giffen Good: A good for which an increase in price raises the quantity demanded due to its strong income effect.

Chapter 24: Measuring a Nation’s Income

Microeconomics: The study of how households and firms make decisions and interact in markets.
Macroeconomics: The study of economy-wide phenomena like inflation, unemployment, and economic growth.
Gross Domestic Product (GDP): The market value of all final goods and services produced within a country in a given period.
Consumption: Spending by households on goods and services.
Investment: Spending on capital equipment, inventories, and structures.
Government Purchases: Spending on goods and services by local, state, and federal governments.
Net Exports: Exports minus imports.
Nominal GDP: GDP measured in current prices, not adjusted for inflation.
Real GDP: GDP measured in constant prices, adjusted for inflation.
GDP Deflator: A measure of the price level, calculated as nominal GDP divided by real GDP, multiplied by 100.

Remaining Chapters

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Chapter 25: Measuring the Cost of Living

Consumer Price Index (CPI): A measure of the overall cost of goods and services bought by a typical consumer.
Inflation Rate: The percentage change in the price level from one period to another.
Core CPI: The CPI excluding food and energy prices, which are more volatile.
Producer Price Index: A measure of the cost of goods and services bought by firms.
Indexed: The automatic adjustment of a dollar amount for inflation by law or contract.
Nominal Interest Rate: The interest rate not corrected for inflation.
Real Interest Rate: The interest rate corrected for inflation.

Chapter 26: Production and Growth

Productivity: The quantity of goods and services produced from each unit of labor input.
Physical Capital: The stock of equipment and structures used to produce goods and services.
Human Capital: The knowledge and skills workers acquire through education, training, and experience.
Natural Resources: Inputs provided by nature that are used in production.
Technological Knowledge: Society’s understanding of how to produce goods and services.
Diminishing Returns: The property where the benefit from an extra unit of an input declines as the input quantity increases.
Catch-Up Effect: The tendency of poorer countries to grow faster than richer countries when starting from a lower base.

Chapter 27: The Basic Tools of Finance

Present Value: The amount of money today that would be needed to produce a given future amount of money using prevailing interest rates.
Future Value: The amount of money in the future that a given amount of money today will yield, given prevailing interest rates.
Discount Rate: The interest rate used to calculate present values of future cash flows.
Compounding: The accumulation of a sum of money where interest earned on the sum earns additional interest.
Risk Aversion: The dislike of uncertainty.
Diversification: The reduction of risk achieved by replacing a single risk with many smaller, unrelated risks.
Efficient Markets Hypothesis: The theory that asset prices reflect all publicly available information.

Chapter 29: Unemployment

Labor Force: The total number of workers, including the employed and unemployed.
Unemployment Rate: The percentage of the labor force that is unemployed.
Labor-Force Participation Rate: The percentage of the adult population in the labor force.
Natural Rate of Unemployment: The normal rate of unemployment around which the unemployment rate fluctuates.
Cyclical Unemployment: The deviation of unemployment from its natural rate.
Discouraged Workers: Individuals who would like to work but have given up looking for a job.
Frictional Unemployment: Unemployment resulting from the time it takes to match workers with jobs.
Structural Unemployment: Unemployment resulting from a mismatch of skills or geographic location.
Job Search: The process of matching workers with appropriate jobs.
Unemployment Insurance: A government program that partially protects workers’ incomes when they become unemployed.

Chapter 30: The Monetary System

Money: The set of assets in an economy used to buy goods and services.
Medium of Exchange: An item buyers give to sellers to purchase goods and services.
Unit of Account: A standard numerical unit of measurement for prices and debts.
Store of Value: An item people can use to transfer purchasing power to the future.
Liquidity: The ease with which an asset can be converted into the economy’s medium of exchange.
Commodity Money: Money that has intrinsic value, such as gold.
Fiat Money: Money without intrinsic value that is used as money by government decree.
Currency: Paper bills and coins in the hands of the public.
Demand Deposits: Balances in bank accounts accessible on demand by writing a check or using a debit card.
Federal Reserve: The central bank of the United States.
Money Supply: The quantity of money available in the economy.
Monetary Policy: Actions taken by a central bank to manage the money supply.
Reserves: Deposits that banks have received but not loaned out.
Fractional-Reserve Banking: A banking system where banks keep only a fraction of deposits as reserves.
Reserve Ratio: The fraction of deposits a bank holds as reserves.
Money Multiplier: The amount of money the banking system generates with each dollar of reserves.
Bank Capital: The resources a bank’s owners have put into the institution.
Leverage: The use of borrowed money to supplement existing funds for investment.
Capital Requirement: A government regulation specifying a minimum amount of capital a bank must hold.
Open-Market Operations: The purchase and sale of government bonds by the Federal Reserve.
Discount Rate: The interest rate the Federal Reserve charges banks for loans.
Reserve Requirements: Regulations on the minimum amount of reserves banks must hold.
Interest on Reserves: The interest rate paid by the Federal Reserve on reserves held by banks.
Federal Funds Rate: The interest rate at which banks lend reserves to each other overnight.

Chapter 31: Inflation

Quantity Theory of Money: The theory that the quantity of money determines the price level and the growth rate of money determines the inflation rate.
Nominal Variables: Variables measured in monetary units.
Real Variables: Variables measured in physical units.
Classical Dichotomy: The theoretical separation of nominal and real variables.
Monetary Neutrality: The proposition that changes in the money supply do not affect real variables.
Velocity of Money: The rate at which money changes hands.
Quantity Equation: An equation showing that money supply multiplied by velocity equals price level times real output (MV = PY).
Inflation Tax: The reduction in purchasing power caused by inflation.
Fisher Effect: The adjustment of the nominal interest rate to account for inflation.
Shoeleather Cost: The resources wasted when inflation causes people to reduce money holdings.
Menu Costs: The costs of changing prices.

Chapter 34: Aggregate Demand and Aggregate Supply

Recession: A period of declining real incomes and rising unemployment.
Depression: A severe recession.
Model of Aggregate Demand and Aggregate Supply: A model used to explain short-run economic fluctuations.
Aggregate-Demand Curve: A curve showing the quantity of goods and services demanded at each price level.
Aggregate-Supply Curve: A curve showing the quantity of goods and services firms produce at each price level.
Natural Level of Output: The production level achieved when unemployment is at its natural rate.
Stagflation: A period of falling output and rising prices.

Chapter 35: The Influence of Monetary and Fiscal Policy

Theory of Liquidity Preference: The idea that the interest rate adjusts to bring money supply and demand into balance.
Fiscal Policy: The use of government spending and taxation to influence the economy.
Multiplier Effect: The amplification of fiscal policy changes through increased spending.
Crowding-Out Effect: The reduction in private spending caused by an increase in government spending.
Automatic Stabilizers: Fiscal policies that automatically adjust with economic conditions.

Chapter 38: The Data of Econometrics

Data: Collected information used to test theories or inform decisions.
Econometrics: The application of statistical methods to economic data.
Randomized Controlled Trial: An experiment in which participants are randomly assigned to treatment or control groups.
Experimental Data: Data generated through controlled experiments.
Observational Data: Data collected without controlled experimentation.
Confounding Variable: A variable that affects both the independent and dependent variables, leading to misleading conclusions.
Reverse Causality: When the direction of cause and effect is unclear.
Cross-Sectional Data: Data collected at one point in time.
Time-Series Data: Data collected over time.
Panel Data: Data combining cross-sectional and time-series information.
Parameters: Numerical values summarizing the relationships between variables.
Linear Regression: A statistical method for modeling relationships between variables.
Ordinary Least Squares: A method for estimating the parameters of a linear regression model.
Standard Error: A measure of the precision of an estimate.
Multiple Regression: A statistical technique used to study the relationship between one dependent variable and multiple independent variables.
Natural Experiment: An observational study where external factors mimic experimental conditions.