1.

Incentive - decision influencer

2. Economics - the study of how people make decisions among trade-offs; how they use limited resources to
satisfy unlimited wants etc….
3. Land – natural resource or material used to produce (may be refined)
4. Labor – physical and mental effort used to produce
5. Capital – equipment and tools used to produce
6. Entrepreneurship – organizational skills, motivation and risk taking needed to produce
7. Rent – payment for land
8. Wages – payment for labor
9. Interest – price of borrowing money; payment for capital
10. Profit - payment for entrepreneur ability ; the revenue for sales minus the cost of resources
11. Resource – (FOP’S) inputs needed for production
12. Market – any place where consumers and producers meet to exchange
13. Product market – market where household purchase goods and services from firms
14. Factor market – market where firms purchase resources from households
15. Marginal – incremental, one more or the next one
16. Microeconomics – study of the economic behavior of individuals and specific markets
17. Macroeconomics – study of the economic behavior of entire economy’s
18. Scarcity – idea that products and resources are limited
19. Ceteris Paribus – all things being constant
20. Positive statement – a statement based that can be proven or disproven by facts
21. Normative statement – a statement based on opinion or what should be
22. Causation fallacy- assuming that because two things are correlated, one caused the other
23. Composition fallacy – assuming that what is true for the individual is true for the whole
24. Secondary effects – any unintended consequence of an economic decision
25. Trade off – any choice forgone because of a decision
26. Opportunity cost – your most valuable trade-off
27. TINSTAAFL – there is no such thing as a free lunch
28. Sunk cost – a coast already incurred that cannot be recovered and is now irrelevant to future decisions
29. Production possibilities curve – an economic model used to illustrate limited resources and trade offs
30. Efficiency - the situation where all resources are being used to their capacity
31. Absolute advantage - being able to produce at a lower cost
32. Comparative advantage - being able to produce at a lower opportunity cost
33. Division of labor – organizing production into separate tasks
34. Specialization – focusing effort into one task
35. Market failure – when a market yields a socially undesirable result
36. Private good – good that is both rival and exclusive
37. Public good – good that is both non rival and non exclusive
38. Rival product – product that can only benefit one consumer at a time
39. Exclusive product – product that you can limit or charge for
40. Externality – cost or benefit that falls on a third party
41. Fiscal policy – use of spending, transferring, taxing, and borrowing to steer the macro economy
42. Monetary policy – central bank regulation of the money supply to steer the macro economy
43. Balance of payments – yearly record of all economic transaction between residents of one country and the
rest of the world (ROTW)
44. Foreign exchange – foreign money needed to carry out international transactions
45. Demand – amount consumers are willing and able to purchase at all possible prices
46. Complements – products that can go with each other, their cross price elasticity is negative
47. Substitute – products that can replace each other, their cost price elasticity is positive
48. Durable good – any good that lasts approx. longer than 3 years
49. Market demand – the sum of all individual demands in a market
50. Supply – quantity producers are willing and able to produce at all possible prices; the relationship is positive
51. Price – prevailing sale amount in dollars
52. Cost – measure of inputs
53. Market equilibrium – where supply meets demand, the most product is sold; mc=mb
54. Surplus – excess product, when P is about market equilibrium
55. Shortage – not enough product, when P is below market equilibrium
56. Normal good –demand for this good increase as income increase; vice versa
57. Inferior good – demand decrease as income increase; vice versa
58. Market supply – the sum of all individual supplies in a market
59. Elastic – relatively responsive to change; >1
60. Inelastic – relatively unresponsive to change; <1
61. Perfectly elastic – flat demand curve; consumers are perfectly price sensitive
62. Unit elastic – elasticity value of exactly 1
63. Price elasticity of demand – measure of consumers responsiveness to price change
64. Total revenue (tr) – price times quantity, total expenditures
65. Price ceiling – government imposed max price
66. Price floor –government imposed min price
67. Tax – source of government revenue; government imposed financial incentive used to discourage behavior
68. Subsidy – government imposed financial incentive used to encourage behavior
69. Price elasticity of supply – the measure of producers’ responsiveness to price change
70. Income elasticity – measure of consumers’ demand responsiveness to income change (-) is inferior good
71. Cross price elasticity – measure of sub/comp demand responsiveness to price change of a related product
72. GDP – total value of final goods and services produced in a year
73. Inflation – any increase in the overall price levels
74. Unemployment – percent of labor force without a job; healthy unemployment is 4-6%
75. Consumption – total household expenditures on new goods and services
76. Investment – firm spending on capital, net inventories, new homes
77. Government purchases – total government expenditures on new goods and services (doesn’t include
handouts)
78. Transfer payment – cash benefit from government to household
79. Recession – 2 consecutive quarters of negative GDP growth
80. Real – adjusted for inflation
81. Aggregate expenditure(AE) – sum of macro spending; C + G + I + (X-M) = AE = GDP
82. Aggregate income(AI) – sum of macro income; wages + profit + interest + rent = AI
83. Productivity – macro output/economic input (GDP per capita)
84. GDP per capita – productivity measurement of GDP/population
85. Disposable income – income available to households for spending and saving (AI-NT)
86. Net taxes (NT) – taxes minus transfer payments
87. Savings – household deposits into the financial market
88. Intermediate good – good that will come part of another good
89. Net exports – exports minus imports (x-m)
90. Depreciation – capital that becomes obsolete during the year
91. Net domestic product – GDP-depreciation
92. Nominal – not adjusted for inflation
93. Consumer price index – most common measure of inflation
94. Labor force – anyone 16 years or older who are either looking for work or are employed
95. Frictional unemployment – job seekers and employers need time to find each other
96. Structural unemployment – skills of jobseekers do not match the jobs in the area
97. Seasonal unemployment – seasonal change in demand for certain jobs
98. Full/normal employment – when cyclical unemployment is zero; 4-6% unemployment
99. Cyclical unemployment – laborers lose jobs during an economic downturn
100. Hyperinflation – severe inflation
101. Deflation – any decrease in the overall price level
102. Disinflation – any decrease in inflation
103. Demand pull inflation – inflation cause by too much demand
104. Cost push inflation – inflation cause by an increase in overall production cost