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Economics
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Microeconomics is the study of how individual economic units (consumers, firms, etc.) make decisions to allocate limited resources.
Macroeconomics is the study of the behavior of the overall economy, including economic growth, inflation, unemployment, and monetary and fiscal policies.
The law of demand states that, all else being equal, as the price of a good rises, the quantity demanded of that good falls. Conversely, as price falls, quantity demanded rises.
The law of supply states that, all else being equal, as the price of a good rises, the quantity supplied rises. Conversely, as price falls, quantity supplied falls.
Market equilibrium is the point where the quantity demanded is equal to the quantity supplied, resulting in no shortage or surplus.
Price elasticity of demand measures how responsive quantity demanded is to a change in price. It is calculated as the percentage change in quantity demanded divided by the percentage change in price.
Economic growth refers to an increase in the production of economic goods and services over a period of time, typically measured by the rate of change in real GDP.
Inflation is a sustained increase in the general price level of goods and services in an economy over a period of time.
The business cycle refers to the fluctuations in economic activity, consisting of periods of expansion, peak, contraction, and trough.
Fiscal policy refers to the use of government spending and tax policies to influence economic conditions.
Monetary policy refers to the actions taken by a country's central bank to influence the amount of money and credit in the economy to achieve economic goals.
The production possibilities frontier represents the maximum combined output of two goods an economy can produce with its limited resources and current technology.
Comparative advantage refers to the ability of an economic actor to produce a good or service at a lower opportunity cost than another actor.
A monopoly is a market structure characterized by a single seller of a unique product with no close substitutes and high barriers to entry.
Perfect competition is a market structure where there are many buyers and sellers, identical products, perfect information, and easy market entry and exit.
GDP (Gross Domestic Product) is the total monetary value of all finished goods and services produced within a country's borders over a specific time period.
Unemployment refers to the number or proportion of people in the labor force who are able and willing to work but are unable to find employment.
The circular flow model illustrates the continuous movement of resources, goods/services, and money between households and businesses in an economy.
The multiplier effect refers to the increase in final income arising from any new injections of spending, showing how an initial amount of spending can lead to even greater increases in national income.
An oligopoly is a market structure characterized by a small number of large firms that together control most or all of the market for a particular product or service.
The marginal propensity to consume (MPC) is the fraction of additional income that is spent on consumption rather than saved.
The law of diminishing returns states that as additional units of a variable input are added to fixed inputs, the marginal product of the variable input will eventually decline.
Adverse selection refers to a situation where asymmetric information leads to an imbalance in the risks accepted by parties in a transaction.
Moral hazard refers to a situation where one party takes more risks because the potential costs or burden of those risks are borne, in whole or in part, by others.
Economic efficiency refers to the optimal allocation of resources to maximize the production of goods and services with the least amount of inputs or costs.
Microeconomics studies the economic behavior of individual units (consumers, firms), while macroeconomics studies the behavior of the overall economy at the aggregate level.
Positive economics deals with how the economy actually works through facts and analysis, while normative economics deals with value judgments about economic policies or decisions.
Public goods are non-excludable and non-rivalrous, while private goods are excludable and rivalrous.
Consumer surplus is the difference between the maximum amount a consumer is willing to pay for a good or service and the amount they actually pay.
Producer surplus is the difference between the price a producer actually receives for a good or service and the minimum price they would have been willing to accept.
Pareto efficiency is a situation where it is impossible to make someone better off without making someone else worse off, given the available resources and technology.
Externalities are the costs or benefits of an economic activity that accrue to third parties not directly involved in the transaction.
Opportunity cost is the value of the next-best alternative that must be forgone when making a choice or decision.
A recession is a temporary economic decline, typically defined as two consecutive quarters of negative GDP growth. A depression is a prolonged and severe economic downturn.
A budget deficit occurs when government spending exceeds revenue, while a budget surplus occurs when revenue exceeds spending.
National debt is the total amount of money owed by a government to its creditors, including individuals, businesses, and other governments.
The central bank's main roles are to conduct monetary policy, maintain financial stability, issue currency, and serve as a lender of last resort.
Classical economics emphasizes free markets and limited government intervention, while Keynesian economics supports active government policies to achieve full employment and economic growth.
Price discrimination is the practice of selling the same product or service at different prices to different consumers based on their willingness to pay.
Nominal values are stated in current dollars, while real values are adjusted for inflation and reflect the purchasing power of money.
Productivity is the measure of output per unit of input, reflecting the efficiency of production processes.
Market failure occurs when the free market fails to allocate resources efficiently, necessitating government intervention.
Economies of scale refer to the cost advantages that firms can exploit by expanding their scale of production or operation.
Creative destruction refers to the process of new innovations and technologies replacing older ones, leading to the demise of some firms and the creation of new ones.
Factor markets are markets where the services of factors of production (labor, capital, land, and entrepreneurship) are bought and sold.
Economic rent is the payment to a factor of production in excess of what is required to keep that factor in its current use.
Game theory is the study of strategic decision-making, analyzing how rational players make choices based on the expected behavior of others.
Long-run average cost is the minimum cost per unit of output that a firm can achieve by adjusting all of its inputs optimally in the long run.
Economic growth models are theoretical frameworks that aim to explain the factors that influence the long-run growth of an economy.
Market structure refers to the characteristics of a particular market, including the number of firms, the degree of product differentiation, and the ease of entry and exit.