Glossary: Economics

New terms will be added as they become relevant to coursework or previous classes in order to keep these pages convenient for study.

A

 * Absolute advantage - a condition where a country can produce an equal amount of a good with less resources than another
 * Aggregate demand - the total quantity of goods and services demanded in a country at a given price level and time period
 * Aggregate supply - the total quantity produced of goods and services produced in a country at a given price level and time period
 * Allocative efficiency - the use of resources that returns the highest possible value; pareto efficiency
 * Asymmetric information - a situation where one party has more information than the other
 * Automatic stabilizer - a policy mechanism that serves to offset some effects of current economic trends without government intervention
 * Average fixed costs - total fixed costs divided by the number of units produced

B

 * Bankruptcy - a financial state where a business is unable to meet its debts
 * Barriers to entry - factors which inhibit the introduction of competitive entities in a market
 * Barter - a system where goods and services are exchanged for other goods and services of roughly similar value
 * Birth rate - the number of births per thousand people in a country
 * Black market - hidden economic activity due to its illegal nature
 * Budget - allocation of funds
 * Budget surplus/deficit - the difference between government revenue and expenditure. If revenue exceeds expenditure, the government is running a surplus. If expenditure exceeds revenue, the government is running a deficit
 * Business cycle - the periodic fluctuations in economic activity measured by changes in the GDP and other macroeconomic variables

C

 * Capital - any factor of production that is manmade
 * Capitalism - an economic system where factors of production are privately controlled by individuals
 * Cartel - a collusive entity between producers to limit supply in order to artificially raise prices
 * Central bank - the head financial institution of a country responsible for deciding and executing monetary policy and the supervision of commercial banks
 * Ceteris paribus - the assumption in economic theory that all other factors are held constant
 * Collective bargaining - the ability of workers in a union to request better treatment as a group
 * Command economy - an economic system where the factors of production (the commanding heights) and makes decisions about their allocation and the management of other macroeconomic concepts
 * Comparative advantage - a condition where a country has a lower opportunity cost of producing a particular good over another country
 * Competition policy - laws which forbid anti-competitive practices; also known as antitrust laws
 * Complement - a product which works in tandem with another and thus is affected by changes in the other's price
 * Composite index - a measurement consisting of multiple economic indicators
 * Consumption - the process of using up goods and services
 * Cost-push inflation - inflation that stems from the prices of the factors of production increasing
 * Crowding in - the tendency for expansionary fiscal policy to increase investment
 * Crowding out - the tendency for government purchases to raise interest rates, ironically deterring investment

D

 * Deflation - a sustained decrease in the average price level
 * Demand - the relationship between the quantity demanded of a good and its price
 * Demand-pull inflation - inflation that stems from an increase in demand outpacing producers' ability to supply
 * Deregulation - the easening of government restrictions

E

 * Economic good - any good that is scarce
 * Economic growth - an increase in an economy's real level of output over time
 * Economic development - an improvement in the quality of life in a country
 * Economic profit - the difference between total revenues and costs
 * Economic system - the methods by which the questions of production are solved
 * Economics - the science of satisfying unlimited wants with limited resources
 * Economies of scale - the concept that increasing the output of a factory decreases the individual cost of production
 * Elasticity - the measure of the responsiveness of one variable to a change in another
 * Equilibrium - the point where the supply curve and demand curve intersect
 * Exports - goods and services sold to another country
 * Externality - an effect whose benefits and/or costs are borne by an unexpectant third party

F

 * Factor market - the market for the factors of production
 * Factors of production - the inputs of production; land, labour, capital, entrepreneurship
 * Firm - an entity that purchases factors of production for the purpose of making a profit
 * Free enterprise - a system where private firms are able to obtain resources and do with them what they please
 * Free market - a market completely controlled by supply and demand
 * Frictional unemployment - temporary unemployment caused by people in between jobs and new entrants to the job market

G

 * GDP - the sum of the value of all goods and services produced in a country's borders; gross domestic product
 * GNI - the sum of the value of all goods and services produced anywhere in the world by a domestic entity; gross national income

I

 * Income effect - the positive correlation between demand and income
 * Inferior good - a good whose demand is inversely related to the income of a consumer
 * Inflation - an average increase in the price level
 * Injections - expenditures not originating in the household sector; includes government expenditure, foreign investment, and exports
 * Interest - the cost of a loan
 * Investment - expenditure intended to generate returns

K

 * Keynesian - a person who regards the economy as inherently unstable and requiring constant oversight from the government
 * Leakages - the opposite of injections; parts of national income not used for consumption such as taxes, imports, and savings
 * LDC - a less developed country

M

 * Macroeconomics - the study of broad economies and how to manage issues such as unemployment, monetary policy, and growth
 * Microeconomics - the study of the economic behaviour of individual people, firms, and markets and how prices are determined
 * Monetary policy - decisions affecting the money supply designed to influence the interest rate
 * Money - a medium of exchange
 * Monopoly - a market where there is only one producer

N

 * Natural rate of unemployment - the unemployment rate when the country has achieved full employment.
 * Natural resources - factors of production which are not manmade
 * Non-price competition - differentiation of products based on factors other than price
 * Normal good - a good whose demand is proportional to income

O

 * Oligopoly - a market characterized by few suppliers
 * Opportunity cost - the value of the next best alternative forgone

P

 * Perfectly elastic demand - a demand curve with an elasticity of infinity; Qd becomes zero if there is any change in price
 * Perfectly elastic supply - a supply curve with an elasticity of infinity; Qs becomes zero if there is any change in price
 * Perfectly inelastic demand - a demand curve with an elasticity of zero; Qd does not change at all with price
 * Perfectly inelastic supply - a supply curve with an elasticity of zero; Qs does not change at all with price
 * Phillips curve - the inverse relationship between unemployment and inflation
 * Price control - government regulation on prices
 * Price elasticity of demand - the responsiveness of quantity demanded to price
 * Price elasticity of supply - the responsivenes of quantity supplied to price
 * Production - the conversion of raw materials into goods and services
 * Production possibility frontier (PPF) - the curve detailing all possible scenarios given full employment of LLCE
 * Progressive income tax - income tax where higher earners pay proportionally more
 * Purchasing power parity (PPP) - the situation where money has equal value across countries

Q

 * Quantity demanded - the amount of a good or service that consumers are willing and able to purchase at a given price
 * Quantity supplied - the amount of a good or service that producers are willing and able to sell at a given price
 * Quota - a restriction on the quantity of a good a firm is allowed to sell

R

 * Recession - a decline in the GDP for two consecutive quarters
 * Regressive income tax - income tax where lower earners pay proportionally more
 * Rent - the cost of using land

S

 * Seasonal unemployment - unemployment based on seasonal changes; e.g. snow plow drivers being unemployed in the summer
 * Stagflation - a situation where both unemployment and inflation are high
 * Subsidy - a payment per unit produced to producers from the government
 * Substitutes - a good or service that can replace another
 * Supply - the relationship between quantity supplied and price at all prices
 * Sustainable growth/development - economic growth that meets the needs of the present generation without compromising the needs of the future

U

 * Unemployment - the number of adult workers without jobs while actively seeking one
 * Utility - satisfaction derived from the use of a product