Economics - Glossary

Absolute Advantage
when an individual or entity can produce more of a good than another individual or entity
man made resources that are used to produce goods
Ceteris Paribus
all things being equal
Comparative Advantage
when an individual or entity can produce a good at lower relative production costs
Consumer Price Index
CPI - a measure of the price of a fixed basket of goods relative to a base year; used to measure inflation
a decrease in prices over a period of time
the want of a product backed by an ability to pay for it
Dominant Strategy
in game theory, the strategy that results in the best payoff no matter what the other play chooses
Economic Growth
an increase in real GDP per capita
the amount of people working in the economy
Fiscal Policy
government taxation and spending; how the government affects the money supply
Fixed Costs
costs faced by a firm that are independent of output; e.g. rent, machinery, a building, etc.
Game Theory
analysis of competitive situations to determine the possible, probable, and optimal outcomes
Gross Domestic Product
GDP - the total income earned domestically in an economy including income earned by foreigners within the economy; also the total expenditure on goods produced in an economy; basically the total output within the geographical boundaries of an economy; GDP=consumption + investment + government spending + net exports
Gross National Product
GNP - the total income earned by members of a nation, not including foreiners but including members abroad; also the total expenditures on goods produced by members of a nation
Human Capital
capital in the form of individuals, including any skills they may have developed
an increase in prices over a period of time
the production of new capital
Invisible Hand
when an individual pursues his own interest and in the process unintentionally makes society better off
Law of Demand, First
as price increases demand decreases
Law of Demand, Second
as time increases demand decreases, ceteris paribus; largely due to the ability to find viable substitutes given time
Long Run competitive Equilibrium
price = MIN average total cost = marginal cost; there is no entry or exit in the industry
Marginal Cost
the cost of the last unit produced; MC = Change in TC / Change in Q
Monetary Policy
how the Federal Reserve (the Fed) affects the money supply; changes in the reserve ratio, federal funds rate, and the purchase and sale of bonds
Nash Equilibrium
in game theory, any outcome where there is no unilateral profitable deviation
National Debt
the sum of the debt a government owes
National Deficit
government revenue less government spending in a given time period
Opportunity Cost
the next best alternative; e.g. the opportunity cost of a decision is what was missed out on by foregoing the next best decision
Pareto Optimal
when economic welfare cannot be made better without making at least one individual worse
Perfect Competition
an industry made up of a large (infinite) number of identical, price taking firms selling identical products
Physical Capital
capital in the form of tools or buildings; e.g. factories, machines, hammers, etc
Price Taker
a firm whose output does not affect the price
Production Possibilities Frontier
the boundary between possible production mixes of relevant goods and production mixes that are impossible
the available inputs in an economy including labor, capital, natural resources, and technology
a limited amount of something; the inability to meet everyone's wants
Sunk Cost
historical cost - a cost that is not relevant when comparing decisions because it has already been payed
Trade Deficit
exports less imports (when exports < imports)
Trade Surplus
exports less imports (when exports > imports)
the amount of people in the economy that are looking for work but have not found work
Economics Articles
Economic Data
Economics Glossary
Economic Indicators
Fiscal Policy
Comparative Advantage
The Supply Curve
Price Elasticity
Fixed & Variable Cost
ATC & Marginal Cost
Marginal Revenue
Output Decision
Price Floor
Price Ceiling
Negative Externalities
Positive Externalities
Price Gouging
Sunk Costs
Game Theory
Game Theory Introduction
Nash Equilibrium
Extensive Form
The Sherman Act
The Clayton Act
Bootstrap Method
The CAPM Model
Euro Creation and Crisis
FX and Inflation in Pakistan
Poverty and Crime
General Finance
Mergers / Acquisitions
Money Market
Real Estate
Other Personal Finance
Opinions / Essays


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