terms
Analytical or positive economics
A way of studying and understanding how the economy works using numbers, data, and math
An objective stream of economics that relies on facts or what is happening
Facts and value Economy attempted to explain human behavior and to help in decision by using facts and values
Bond
Issued by governments and corporations when they want to raise money
Business Cycle Model (e.g.recession/contraction)
Economic fluctuations between periods of expansion and contraction
Business Model (e.g. sole proprietorship)
Describes how your business works from an economic perspective
Chequing Account
Used to store daily spending money, designed for everyday transactions
Collectibles
An item worth a lot more than its original selling price
Common stock
Represents shares of ownership in a corporation and the type of stock in which most people invest
Compounding
A powerful investing concept that involves earning returns on both original investment and on returns that you received previously
Cost Benefit Analysis
A way to compare the costs and benefits of an intervention, where both are expressed in monetary units
Credit
Ability of an individual or organization to obtain goods or services before payment, through agreement to pay later
Economic questions:
How is it going to be produced? What are we going to produce? Who receives how much?
Economics – what is it?
How society uses and disturbs its scarce/limited resources. The social science that deals with the procustion, distribution, and consumption of goods and services.
Economy
A system of interrelated production and consumption activities that ultimately determine allocation of resources within a group
GDP equation and what each part of the equation means
GDP = C + G + I + (X - M)
(C) Consumption
Used up on what household spend on all goods and services that they consume ise food, clothing gas, car etc
(G) Government
The value of expenditures on goods and services by all levels of government i.e. wages to employees, office supplies, schools, highways, etc.
(I) Investment
Purchases by business of new capital goods used in the production process
X - M (Net Exports)
X = exports; M = imports.
Imports must be subtracted because they do not represent canadian production
GIC
A deposit investment product sold by Canadian banks and trust companies, considered to be a low risk investment and offering a guaranteed rate of return over a fixed period that can last a few months to several years
Interest
The price you pay to borrow money or the return earned on an investment
Mutual Fund
A company that pools money from many investors and invests the money in securities such as stocks, bonds, and short-term debt. The combined holdings of the mutual fund are known as its portfolio.
Needs and wants
Anything required for human survival are considered needs. Wants are things people would like to have or desire.
Normative or policy economics
Normative focuses on the value of economic fairness or what the economy should be or ought to be. Based on value judgements.
Opportunity cost
The value of the next highest valued alternative use of that resource. The cost of choosing one option over the other.
Rate of return or yield
A specific way of expressing the total return on an investment that shows the percentage increase over the initial investment cost. Yield shows how much income has been returned from an investment based on initial cost yet doesn’t include capital gains.
Real estate
Real property that includes land and anything permanently attached to it or built on it, whether natural or mann-made. Residential, commercial, industrial, raw land, and special use
RESP
A long-term savings plan to help people save for a child’s education after high school
Risk
Defined in financial terms as the chance that an outcome or investment’s actual gains will differ from an expected outcome or return
RRIF
An arrangement between you and a carrier (registered retirement income fund)
RRSP
Investing and retirement savings plans in Canada
Savings Account
A basic type of financial product allowing you to deposit your money and typically earn a modest amount of interest
Scarcity and scarce resources
Scarcity means the demand for a good or service is greater than the availability of the good or service, and scarce resources refer to resources who attain characteristics scarcity
Scarcity and Choice
All choices mean that one alternative is selected over another. Selecting among alternatives involves three ideas central to economics: scarcity, choice, and opportunity cost.
TFSA
Tax-free savings account, available in Canada that provides tax benefits for saving
Type of Economy ( e.g. command, pure market)
Utility
A term used to determine worth or value of a good or service, and specifically, the total satisfaction or benefit derived from consuming a good or service
Supply
The total amount of a specific good or service available to consumers
Demand
An economic concept relating to a consumers desire to purchase goods and services and willingness to pay a specific price for them
Quantity supplied
The number of goods or services that suppliers will produce and sell at a given market price. Quantity supplied differs from actual amount of supply (total supply) as price changes influence how much supply producers actually put on the market
Quantity demanded
Total amount of a good or service that consumers demand over a given period of time
Law of supply
Increase in the price of goods or services resulting in the increase in the quantity that suppliers make available to the market
Law of demand
At a higher price, consumers will demand a lower quantity of a good.
Market Demand
The sum/total of all consumer demands for a particular good / service. Add together the individual quantity demanded for all individual consumers for a particular good/ service
Law of diminishing marginal utility
The demand curve slopes downwards due to diminishing marginal utility. The more you have of something the less satisfaction you get
Lorenz curve
A graphical representation of the distribution of income or wealth in a society.
Gini coefficient/score
A statistical measure of economic inequality in a population
Income inequality
How unevenly income is distributed throughout a population
Poverty
Not having enough money to meet basic needs including food, clothing and shelter
Union
An agreement between two or more nations to allow goods, services, money and workers to move over borders freely
Unemployment
Occurs when someone is willing and able to work but does not have a paid job
Underemployment
A measure of employment and labor utilization in the economy that looks at how well the labor force is being used in terms of skills, experience, and availability to work
The market
Any structure that allows buyers and sellers to exchange any type of goods, services and information
Price
Amount of money that a buyer gives to a seller in exchange for a good or service
Buyers and Sellers
Create supply, while buyers generate demand
Other things being equal
Ceteris paribus, meaning all other things being equal. One economic variable has on another, provided all other variables remain constant.
Demand schedule
Shows the quantity demanded of a good or service at different price levels
Supply schedule
A graph showing you how many products are demanded from customers at a specific price based on the supply curve
Demand/supply curve
Shows the quantities of a particular good or service that buyers will be willing and able to purchase at each price during a specific period
Demand Factors
Price of related goods, price of substitutes, goods and income of a consumer
Changes in quantity demanded
Change in the quantity demanded due to a price change occurs along the demand curve
Substitute goods
A product or service that consumers see as essentially the same or similar enough to another product
Complementary goods
A good whose use is related to the use of an associated or paired goods
Profit
Money earned after taking explicit and implicit costs into account
Market supply
The total amount of an item producers are willing and able to sell at different prices over a given period of time
Market Equilibrium
The state in which market supply and demand balance each other, and as a result prices become stable
Equilibrium Price
The consumer cost assigned to some product or service such that supply and demand are equal, or close to equal
Shortage
A condition where the quantity demanded is greater than the quantity supplied at the market price
Surplus
The simple state of supply outweighing demand
Ceiling Prices
Mandated maximum amount a seller is allowed to charge for a product or service
Price Floor
The lowest legal price that can be paid in a market for goods and services, labor, or financial capital
Unions
An agreement between two or more nations to allow goods, services, money and workers to move over borders freely
Labour rights
Legal rights and human rights relating to labor relations between workers and employers
Arbitration
A mechanism for resolving disputes between investors and brokers, or between brokers
Collective bargaining
A voluntary process used to determine terms and conditions of work and regulate relations between employers, workers, and their organizations, leading to the conclusion of a collective agreement
Grievance
Argues that the least prosperous citizens in advanced industrialized economies provide the strongest support for authoritarian and populist values
Lockout
The tactics of withholding employment, typically used by employers to hinder union organization or to gain leverage in labor disputes
Right to work laws
Givers the workers the freedom to choose whether or not to join a labor union in the workplace
Strike
A collective refusal by employees to work under the conditions required by employers
Walkout
The act of leaving an official meeting as a group in order to show disapproval or of leaving place of work to start a strike
Unionization rate
A percentage of total employment defined as public and private employment, not including self-employment
Negotiations
A strategic discussion between two parties to resolve an issue in a way that both find acceptable
Minimum Wage
The minimum amount of remuneration that an employer is required to pay wage earners for the work performed during a given period of time
Precarious Workers
Non-standard or temporary employment that may be poorly paid, insecure, unprotected and unable to support a household
Vulnerable workers
Inadequate earnings low productivity , and difficult conditions of work that undermine workers fundamental rights
Temporary foreign workers
A transitory solution to maintain economic growth by filling excess labor demand in the presence of rather long delays for permanent immigration
Frictional unemployment
The result of workers searching for new employment or transitioning from their old jobs to new ones
Seasonal unemployment
When people who work in seasonal jobs become unemployed when demand for labor decreases
Structural unemployment
Long-lasting unemployment that comes about due to shifts in an economy
Cyclical unemployment
The result of businesses not having enough demand for labor to employ all those who are looking for work at that point within the business cycle
Regional unemployment
Occurs in certain areas of the country because of products or industries that exist there
Market structures
How different industries are classified and differentiated based on their degree and nature of competition for services and goods
Perfect competition
An imaginary market condition where all consumers have access to the same products and information
Monopoly
A market structure that consists of only one seller or producer
Oligopoly
Markets dominated by a small number of suppliers
Monopolistic competition
When many companies offer competing products or services that are similar, but not perfect, substitutes
Consumer protection
Guarding against unfair trade practices that harm buyers in the consumer marketplace
Competition
The process by which various sellers each try to offer better products, lower prices, and other advantages to choosing their wares over a rival’s
Competition act
To maintain and encourage competition in Canada in order to promote the efficiency and adaptability of the Canadian economy
Producers and consumers (economics)
Producers create, or produce, goods and provide services, and consumers buy those goods and services with money
Taxes
Mandatory contributions levied on individuals or corporations by a government entity
Income tax
A type of tax government impose on income generated by businesses and individuals within their jurisdiction
Sales tax
A consumption tax imposed by the government on the sale of goods and services
Excise tax
A legislated tax on specific goods or services at the time they are purchased
Customs duties
A tax collected on imports and some exports by a country’s customs authorities
Property tax
A levy based on the assessed value of property
Progressive tax
Where the average tax burden increases with income
Regressive tax
Where the average tax burden decreases with income
barriers to entry
Factors that can prevent or impede newcomers into a market or industry sector
Collusion
Non-competitive, secret, and sometimes illegal agreement between rivals which attempts to disrupt the market’s equilibrium
Price rigidity
A situation in which a nominal price is resistant to change
Bid-rigging
Occurs when businesses that would otherwise be expected to compete, secretly conspire to raise prices or lower the quality of goods or services for purchasers who wish to acquire products or services through a bidding process
Proportional tax
An income tax system that levies the same percentage to everyone regardless of income
Government intervention
Any action carried out by the government that affects the market with the objective of changing the free market equilibrium/outcome
Recession
A significant decline in economic activity spread across the economy lasting more than a few months, normally visible in production, employment, real income, and other indicators
Fiscal policy
The use of government spending and tax policies to influence economic conditions, especially macroeconomic conditions
Economic citizenship
A legal process allowing individuals to acquire citizenship status in a foreign country by making specified financial contributions or investments in that country’s economy
Immigration
The movement of people from their home country to a host country, of which they are not native, to settle and live
Economic rights
Rights related to the workplace, social security, and access to housing, food, water, health care, and education
Economic responsibilities
The practice of making financial decisions based on a commitment to doing good
The role of government
Provides the legal and social framework within which the economy operates
Stabilization policies
Means lowering interest rates, cutting taxes, and increasing deficit spending during economic downturns and raising interest rates, rising taxes, and reducing government deficit spending during better times
Aggregate demand
Measures the total amount of demand for all finished goods and services produced in an economy
Expansionary policy
A set of economic measures taken by a government or central bank to stimulate economic growth
Contractionary policy
A monetary measure to reduce government spending or the rate of monetary expansion by a central bank
Monetary policy
A set of actions to control a nation’s overall money supply and achieve economic growth
Bank of Canada
Canada’s central bank
Economic Sustainability
Practices designed to create the long term economic development of a company or nation while also managing the environmental, social, and cultural aspects of its activities
SWOT
Strategic planning tool that is used to assess the Strengths Weaknesses, Opportunities, and Threats involved in an organization, business or a project
Trade
The voluntary exchange of goods or services between economic actors
Global Economy
The sum of activities that take place both within a country and between different countries
Absolute advantage
When a producer can provide a good or service in greater quantity for the same cost, or the same quantity at a lower cost than its competitors
Comparative advantage
An economy’s ability to produce a particular good or service at a lower opportunity cost than its trading partners
Factors of production
The resources people use to produce goods and services
Imports
A good or service bought in one country that was produced in another (natural, human, & capital resources)
Exports
A product or service produced in one country but sold to a buyer abroad
Trade surplus
An economic measure of a positive balance of trade, where a country’s exports exceed its imports
Trade deficit
A trade deficit means more imports than exports
Free trade
Free trade means there are no additional taxes (called tariffs), or other trade restrictions placed on imports. Trade between countries happens without any additional barriers put into place by the government
Tariffs
Taxes imposed by one country on goods or services imported from another country
Expenditure Approach
Adds up the total amount that is spent on all final goods and services in a year (GDP)
Stages of Business Cycle
Boom, Recession, Slump / Depression, & Recovery
Boom
High levels of consumer spending, business confidence, profits and investment. Prices and costs also tend to rise faster. Unemployment tends to be low
Recession
Falling levels of consumer spending and confidence mean lower profits for businesses - which start to cut back on investment. Spare capacity increases + rising unemployment
Slump / depression
Very weak consumer spending and business investment; many business failures; rapidly rising unemployment; prices may start falling
Recovery
Things start to get better; consumers begin to increase spending; businesses feel a little more confident and start to invest again; but it takes time for unemployment to stop growing
Trough
A trough in the business cycle marks the low point in the economy
BITER
Buyers (# of): changes in the number of consumers
Income: changes in consumers income
Taste: if the preference of people change
Expectation: changes in what consumers expect to happen in the future
Related Goods: compliments and substitutes