Essential Economics Glossary: Key Terms and Definitions

Fundamental Economic Concepts

• Consumers: People who buy goods and services.
• Trade-off: The act of giving up one goal to achieve another.
• Balance of Trade: A nation that exports more than it imports.
• Interest: A signal of upcoming changes in the economy.
• Price Index: A comparison of the general price level.
• Civilian Labor Force: All people aged 16 and older.
• Demand Schedule: A table showing the amount of a good or service demanded.
• Demand: The amount of a good or service consumers are willing to buy.
• Cartel: A group that acts together to control a market.
• Business Cycles: Fluctuations in economic activity, excluding depressions.
• Principle of Diminishing Utility: As consumers acquire more, satisfaction decreases.
• Product Differentiation: When a business firm attempts to distinguish its product.
• Microeconomics: The study of individual economic activity.
• Capital Goods: Goods used to manufacture other products.
• Labor Productivity: The amount of goods a worker produces.
• Economic System: The way a nation organizes its economy.
• Pure Monopoly: A market with only one seller.
• Lagging Indicators: Metrics that follow changes in the economic cycle.
• Debtors: People who borrow money.
• Unemployment: The percentage of people who are not working.
• Indexing: A method to help taxpayers offset rising costs.
• Supply Schedule: A table showing the quantity supplied.
• Law of Demand: Demand for a product varies inversely with price.
• Equilibrium Price: The price where quantity supplied equals quantity demanded.
• Nondurable Goods: Goods that are used up or wear out quickly.
• Macroeconomics: The study of overall economic activity.
• Consumer Goods: Goods bought by final users.
• Opportunity Cost: The cost of giving up one thing for another.
• Command Economy: A nation where the government controls economic decisions.
• Money Supply: Business cycles are affected when the government adjusts the money supply.
• Leading Indicators: Metrics that signal upcoming changes in the economy.
• Real Income: Income expressed in terms of purchasing power.
• Inflation: An overall rise in prices.
• Bonds: Certificates issued by a business or government.
• Variable Cost: Costs that change as the production level changes.
• Supply: The amount of a good or service available.
• Surplus: When supply is greater than demand.
• Unemployment Insurance: A government program for unemployed workers.
• Production Possibilities: The range of choices available to an economy.
• Monopolistic Competition: A market with many sellers offering similar products.
• Full Employment: A state where everyone who wants to work has a job.
• Capital: Money, machinery, and buildings used for production.
• Oligopoly: A market dominated by a few sellers.
• Technology: Tools and methods that help a nation increase production.
• Stagflation: Rising prices combined with high unemployment.
• Productivity: Calculated by dividing total output by input.
• Creditors: People who lend money.
• Minimum Wage: The lowest wage set by law.
• Supply Elasticity: The effect of a change in price on supply.
• Marginal Cost: The additional cost of producing one more unit.
• Shortage: When demand is greater than supply.
• Total Cost: The sum of fixed and variable costs.