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Basic Terms Used in Economics
  1. Supply: The quantity of a good or service that producers are willing and able to offer for sale at different prices.
  2. Demand: The quantity of a good or service that consumers are willing and able to buy at different prices.
  3. Market: A place or mechanism where buyers and sellers come together to exchange goods or services.
  4. Price: The amount of money exchanged for a good or service, determined by the interaction of supply and demand.
  5. Competition: Rivalry among sellers trying to achieve goals such as increasing profits or market share.
  6. Monopoly: A market structure where there is only one seller with significant control over the supply of a good or service.
  7. Oligopoly: A market structure characterized by a small number of large firms dominating the market.
  8. Monopolistic competition: A market structure with many firms selling similar but not identical products, allowing for some degree of market power.
  9. Perfect competition: A market structure with many buyers and sellers, homogeneous products, and free entry and exit.
  10. Elasticity: The responsiveness of quantity demanded or supplied to changes in price or other factors.
  11. Elastic demand: Demand that is sensitive to changes in price.
  12. Inelastic demand: Demand that is not very sensitive to changes in price.
  13. Elastic supply: Supply that is responsive to changes in price.
  14. Inelastic supply: Supply that is not very responsive to changes in price.
  15. Equilibrium: The point at which quantity demanded equals quantity supplied, resulting in no shortage or surplus.
  16. Surplus: A situation where the quantity supplied of a good exceeds the quantity demanded at a given price.
  17. Shortage: A situation where the quantity demanded of a good exceeds the quantity supplied at a given price.
  18. Consumer surplus: The difference between what consumers are willing to pay and what they actually pay for a good or service.
  19. Producer surplus: The difference between the price at which producers are willing to sell a good or service and the price they actually receive.
  20. Utility: The satisfaction or pleasure derived from consuming a good or service.
  21. Marginal utility: The additional satisfaction gained from consuming one more unit of a good or service.
  22. Diminishing marginal utility: The principle that as a person consumes more of a good or service, the additional satisfaction from each additional unit decreases.
  23. Opportunity cost: The value of the next best alternative forgone when a decision is made.
  24. Trade-off: Giving up one thing in order to gain something else.
  25. Comparative advantage: The ability of a country or individual to produce a good or service at a lower opportunity cost than another country or individual.
  26. Absolute advantage: The ability of a country or individual to produce more of a good or service than another country or individual using the same amount of resources.
  27. Production possibilities frontier: A graph that shows the maximum combinations of goods and services that can be produced given available resources and technology.
  28. Marginal cost: The additional cost incurred by producing one more unit of a good or service.
  29. Marginal revenue: The additional revenue generated by selling one more unit of a good or service.
  30. Average cost: The total cost divided by the quantity produced.
  31. Average revenue: The total revenue divided by the quantity sold.
  32. Economies of scale: The cost advantages that firms gain from increased production.
  33. Diseconomies of scale: The cost disadvantages that firms experience as they increase production beyond a certain level.
  34. Law of diminishing returns: The principle that as more of a variable input is added to a fixed input, the additional output produced eventually decreases.
  35. Factors of production: The resources used to produce goods and services: land, labor, capital, and entrepreneurship.
  36. Land: Natural resources used in the production process.
  37. Labor: Human effort applied to the production of goods and services.
  38. Capital: Physical and human-made resources used in the production process.
  39. Entrepreneurship: The ability to organize and manage resources to create and run a business.
  40. Gross domestic product (GDP): The total value of all goods and services produced within a country's borders in a specific time period.
  41. Gross national product (GNP): The total value of all goods and services produced by a country's residents, regardless of where they are located, in a specific time period.
  42. Consumer price index (CPI): A measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
  43. Inflation: A sustained increase in the general price level of goods and services in an economy over a period of time.
  44. Deflation: A sustained decrease in the general price level of goods and services in an economy over a period of time.
  45. Unemployment: The state of being without a job but actively seeking work.
  46. Frictional unemployment: Unemployment that occurs when people are between jobs or transitioning into the workforce.
  47. Structural unemployment: Unemployment that occurs due to a mismatch between the skills of workers and the requirements of available jobs.
  48. Cyclical unemployment: Unemployment that occurs due to fluctuations in the business cycle.
  49. Fiscal policy: The use of government spending and taxation to influence the economy.
  50. Monetary policy: The use of monetary tools, such as interest rates and the money supply, to influence the economy.
  51. Federal Reserve System (Fed): The central banking system of the United States.
  52. Central bank: A government institution responsible for regulating a country's monetary policy and currency supply.
  53. Interest rate: The cost of borrowing money or the return on saving money.
  54. Open market operations: The buying and selling of government securities by a central bank to control the money supply and interest rates.
  55. Reserve requirement: The percentage of deposits that banks are required to hold as reserves.
  56. Money supply: The total amount of money in circulation in an economy.
  57. Money multiplier: The ratio of the money supply to the monetary base.
  58. Aggregate demand: The total demand for goods and services in an economy at a given price level and in a given time period.
  59. Aggregate supply: The total amount of goods and services that firms are willing and able to produce at a given price level and in a given time period.
  60. Business cycle: The recurring pattern of expansion and contraction in an economy.
  61. Recession: A significant decline in economic activity spread across the economy, lasting for a sustained period of time.
  62. Expansion: A period of economic growth characterized by an increase in production, employment, and income.
  63. Peak: The highest point of economic activity in a business cycle before a recession begins.
  64. Trough: The lowest point of economic activity in a business cycle, marking the end of a recession.
  65. National debt: The total amount of money that a government owes to its creditors.
  66. Budget deficit: The amount by which government spending exceeds government revenue in a given time period.
  67. Budget surplus: The amount by which government revenue exceeds government spending in a given time period.
  68. Crowding out: The phenomenon where increased government spending leads to a decrease in private investment.
  69. Tax: A compulsory financial charge imposed by a government on individuals or businesses to fund public expenditures.
  70. Progressive tax: A tax system where the tax rate increases as income increases.
  71. Regressive tax: A tax system where the tax rate decreases as income increases.
  72. Proportional tax: A tax system where the tax rate remains constant regardless of income.
  73. Tariff: A tax imposed on imported goods and services.
  74. Quota: A restriction on the quantity of a good that can be imported into a country.
  75. Subsidy: Financial assistance provided by the government to support certain industries or activities.
  76. Price ceiling: A government-imposed maximum price that sellers can charge for a good or service.
  77. Price floor: A government-imposed minimum price that buyers must pay for a good or service.
  78. Rent control: Government regulations that limit the amount of rent landlords can charge for housing.
  79. Black market: An illegal market where goods or services are bought and sold in violation of government regulations.
  80. Externalities: The unintended side effects or consequences of an economic activity that affect third parties.
  81. Positive externality: An externality that results in benefits to third parties.
  82. Negative externality: An externality that results in costs to third parties.
  83. Public goods: Goods that are non-excludable and non-rivalrous in consumption.
  84. Private goods: Goods that are both excludable and rivalrous in consumption.
  85. Free rider problem: The tendency for individuals to benefit from a public good without contributing to its production.
  86. Tragedy of the commons: The depletion or degradation of a shared resource due to individual self-interest.
  87. Market failure: A situation where the allocation of goods and services by a free market is not efficient.
  88. Perfect information: A situation where all market participants have complete and accurate information about prices, products, and transactions.
  89. Asymmetric information: A situation where one party has more or better information than another party in a transaction.
  90. Moral hazard: The tendency for individuals or institutions to take greater risks when they are protected from the consequences of their actions.
  91. Principal-agent problem: The conflict of interest that arises when one party (the principal) delegates decision-making authority to another party (the agent).
  92. Game theory: The study of strategic decision-making in situations where the outcome of one party's decision depends on the decisions of others.
  93. Nash equilibrium: A situation in game theory where each player's strategy is optimal given the strategies chosen by other players.
  94. Prisoner's dilemma: A classic example in game theory where two rational individuals might not cooperate, even though it would be in their best interest to do so.
  95. Invisible hand: The metaphorical concept introduced by Adam Smith to describe how self-interested individuals unintentionally promote the social good when they pursue their own interests.
  96. Laissez-faire: An economic philosophy advocating minimal government intervention in the economy.
  97. Command economy: An economic system where the government controls the production, distribution, and allocation of goods and services.
  98. Market economy: An economic system where decisions regarding production, consumption, and investment are made by individuals and firms acting in their own self-interest.
  99. Mixed economy: An economic system that combines elements of both market and command economies.
  100. Economic system: The structure and mechanisms that societies use to allocate resources and distribute goods and services.