Vocabulary for Economics
1. Economics: The description and analysis of the production, distribution, and consumption of goods and services.
2. Economy: The system of economic activity in a country, region, or community.
3. Microeconomics: The study of economics in terms of individual areas of activity (as a firm, household, or prices).
4. Macroeconomics: The study of economics in terms of whole systems with reference to general levels of output and income, and to the interrelations among sectors of the economy.
5. Scarcity: Deficient in quantity or number compared with the demand: not plentiful or abundant.
6. Trade-Off: To give up one thing in return for another.
7. Direct Cost: What you give in a trade-off.
8. Opportunity Cost: What you could have done with the direct cost.
9. Supply: The total amount of a specific good or service that is available to consumers.
10. Demand: What someone is willing and able to pay for a good or service at a specified price during a specified time.
11. Gross Domestic Product (GDP): The monetary value of all the finished goods and services produced within a country’s borders in a specific time period.
12. Gross National Product (GNP): A statistic that includes GDP, plus any income earned by residents from overseas investments, minus income earned within the domestic economy by overseas residents
13. Money: A commodity or asset, such as gold, an officially issued currency, coin or paper note, that can be legally exchanged for something equivalent, such as goods or services.
14. Interest: A charge for borrowed money, generally a percentage of the amount borrowed.
15. Market: The available supply of or potential demand for specified goods or services.
16. Capital: Financial resources available for use; the factories, machinery and equipment owned by a factory.
17. Output: The amount produced in a given time.
18. Pure Competition: An industry or market in which no one supplier can influence prices, barriers to entry and exit are small, all suppliers offer the same goods, there are a large number of suppliers and buyers, and information on pricing and process is readily available.
19. Differentiated Competition: There’s a perception of difference in products, whether real or imaginary, advertising is crucial, products are not standardized, and all firms rely on increasing market share to survive.
20. Consumption: The utilization of economic goods in the satisfaction of wants or in the process of production resulting chiefly in their destruction, deterioration, or transformation.
21. Elasticity: The degree to which individuals (consumers/producers) change their demand/amount supplied in response to price or income changes; anything that is addictive is inelastic.
22. Substitution Effect: If there is a substitute, then a product will tend to be elastic.
23. Law of Demand: As the price of a good or service increases, consumer demand for the good or service will decrease, and vice versa.
24. Demand Curve: Shows on a chart the quantity that consumers are willing to buy given a particular market price.
25. Supply Curve: Show on a chart the quantity that producers are willing to supply given a particular price.
26. Equilibrium: A state of balance between opposing forces or actions; the intersection of supply and demand curves on a chart.
27. Shortage: A deficiency in the quantity or amount needed or expected.
28. Surplus: The amount that remains when use or need is satisfied.
29. Monopoly: A commodity controlled by one party.
30. Oligopoly: A market situation in which each of a few producers affects, but does not control, the market.
31. Revenue: The gross income returned by an investment; the total income produced by a given source.
Economics starts with scarcity. Scarcity is valuable (all resources are finite, but demand is infinite).
Economics is based on trade-offs (you cannot have A without giving up B).
What you give in a trade-off is the direct cost, and what you could have done with the direct cost is the opportunity cost.
Every transaction has a trade-off and an opportunity cost.
Economics is a way of thinking and solving problems. You learn to ask what’s the opportunity cost and the trade-off for every transaction.
Supply follows price. The more the price is raised, the more supply is available. The lower the price, the lower the supply.
A recession is 2 consecutive quarters of a drop in the GDP.
A depression is 3 consecutive quarters with a drop in the GDP.
A GDP quarter lasts 6 months.