Economic Basic Vocab
Terms
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- supply
- the amount of a material availible for use
- demand
- the quantity that the consumers would purchase at a selected price
- GDP
- Gross Domestic Product
- interest
- the amount paid to a lender for a loan
- opportunity cost
- what is lost when you choose one option over another
- Aggregate demand
- the total amount demanded of the economy
- consumption expenditure
- the amount of money spend by household consumers
- investment expenditure
- money spent on firms to invest in new technology, ect.
- government expenditure
- amount spent by government that comes from treasury
- Aggregate supply
- total amount produced at given prices
- microeconomics
-
The decisions made by an individual consumer or company.
Ex. Midwest Airlines, Jiffy Lube - Macroeconomics
-
the overall economy, decisions made by a whole industry.
Ex. Airlines, Car Repair/Maintenence - scarcity
- at any one time, an economy has a limited power over resources, limited output
- oppurtunity cost
- there is a limited amount of resources so when decisions are made towards one thing, the ability to make another is gone
- optimization
- people try to reach a goal or become optimized naturally
- implicit market
- individuals work together for mutual benefit
- stable preferences
- humans have certain goals and preferences that they have the urge to satisfy
- utility function
- self, or description of what is important to a person
- bounded rationality
- try not to optimize but to satisfy
- market
- economy where forces of supply and demand determine goods and prices
- command
- economy where central planning committee decide goods and prices
- mixed economy
- mix of command and market economy
- land
- any none produced item. any item not manmade used in production
- input
- the items put into production
- capital
- any previously processed item used in production
- output
- consumer goods and services produced
- law of increasing relative cost
- more of something produced, more it costs to produce it
- trade off
- give up some of one thing to get more of another
- elasticity of demand
- measure quanity demanded as the price changes
- barter system
- producer finds someone whose needs and supplies are the opposite. Person 1 has A and needs B. Person 2 has B and needs A.
- demand curve
- negative slope because relationship is inverse
- supply curve
- positive slope because of direct relationship
- equilibrium
- the amount of product produced equals amount demanded.
- shortage
- when demand is greater than amount produced
- surplus
- when amount produced is greater than demand
- substitute goods
- a similiar good bought when the original is priced too high
- complementary
-
when something goes down in price and something that goes with it increase in price.
Ex. Price of tennis racket decreases but price of tennis balls increase - law of demand
- the amount demand will change with a change in price
- elastic change in demand
- when the change in amount demanded is greater than the change in price
- inelastic change in demand
- when the change in price is greater than change in demand
- unitaryelastic change in demand
- change in price equals change in demand
- monopoly
- only one seller with a unique product
- monopolistic competition
- many producers and sellers, but with slightly different products
- oligopoly
- few producers and sellers with differen or same products
- total revenue
- price x quantity
- marginal revenue
- additional revenue for each additional unit sold
- GNP
- Gross National Product. all goods and services produced in a year
- value added approach of finding GNP
- makes products=price-cost of product needed to produce them
- depreciation
- allowance for replacing worn out capital
- macroeconomics theory
- why economy expands and contracts
- aggregate demand curve
- inverse relationship between price and planned expenditures
- aggregate supply curve
- inverse relationship between price and real output
- recession
- when output drops below potential
- stable prices
- prices and wages remain the same
- net interest
- all interest paid. Total interest