In international economics, the capability of one producer to produce a given good using fewer resources than any other producer.
A comprehensive term that refers to the sum total of individual elements. Commonly used in various fields such as economics, statistics, and business to describe the collective or total amount.
Aggregate demand is the total quantity of goods and services demanded across all levels of an economy at a particular time and price level. It reflects the aggregate expenditure for 'everything that will be bought' in an economy.
A line on a graph that represents the total quantity of a good or service consumed at each price level within a range of prices. For most normal goods, the quantity demanded decreases as the price increases, producing a downwardly sloping line on the graph.
The Aggregate Supply (AS) Curve represents the total quantity of goods and services that firms in an economy are willing and able to produce at each price level within a given range of prices. Illustrated on a graph, the curve typically slopes upward, indicating that higher price levels generally encourage firms to increase production.
Allocation of Resources refers to the central subject of economics involving how scarce factors of production are distributed among producers and how scarce goods are distributed among consumers.
Allocative efficiency is an economic concept that occurs when resources are distributed in a way that maximizes the net benefit to society. It reflects a situation where goods and services are produced according to consumer preferences, and marginal cost equals marginal benefit.
The term 'appreciate' carries dual meanings in various contexts. Firstly, it refers to an increase in value over time. Secondly, it describes understanding or recognizing the significance of something.
The arithmetic mean, commonly known as the average, is calculated by summing individual quantities and dividing by their total number. This measure is frequently used in various fields, although it can be misleading in the presence of outliers.
A graphical depiction of the average cost per unit to produce a product for a given level of output based on current technology and scale employed by existing firms.
Average Fixed Cost (AFC) is a cost metric in economics that measures the fixed costs on a per-unit basis. It is calculated by dividing the total fixed costs by the number of units produced.
Average Fixed Cost (AFC) is a financial metric in economics which is calculated by taking the total fixed costs (TFC) of production and dividing them by the total output (Q) produced. AFC helps in understanding how fixed costs are spread across units produced, giving insights into the cost structure of production.
Average Revenue is the amount of money received by a firm per unit of output sold. It is calculated by dividing the total revenue by the quantity of goods sold.
Backward Integration is the process whereby a firm purchases or creates production facilities needed to produce its goods, such as an automobile manufacturer that buys a steel mill.
The evaluation of a proposed activity by determining the value of the anticipated benefits compared to the costs incurred, ensuring a financially attractive decision when benefits exceed costs. It’s essential to also consider non-financial factors and the potential disparities in who benefits and bears the costs.
A budget constraint represents the various combinations of goods and services a consumer can purchase given their income and the prices of goods and services. It forms a crucial element in consumer choice theory within economics, illustrating the trade-offs consumers face as they allocate their limited resources among competing needs and wants.
In economics, a budget line represents the various combinations of two items or services that a consumer can afford given their income and the prices of those items or services.
Capital assets are forms of property with a relatively long life, often used in trade or business, that receive specific tax treatments when sold, resulting in either capital gain or capital loss.
Cash equivalents are highly liquid investments that are readily convertible into a known amount of cash and are subject to an insignificant risk of changes in value.
Ceteris Paribus is a Latin phrase meaning 'all other things being equal.' It is a fundamental concept in economics used to isolate the relationship between two variables by holding all other influencing factors constant.
Change in demand and change in quantity demanded are key concepts in economics. The former involves shifts due to changes in factors like income or consumer preferences, whereas the latter is caused by price changes and results in movement along the demand curve.
Understand the critical differences between a change in supply, which relates to factors affecting production, and a change in quantity supplied, which is a response to changes in market price.
The Chartered Property and Casualty Underwriter (CPCU) is a professional designation that signifies expertise in various areas including insurance, risk management, economics, finance, management, accounting, and law. To earn this prestigious designation, candidates must complete 10 national examinations and have at least three years of work experience in the insurance industry or a related field.
An explanation of market adjustments to changes in supply and demand, in which prices oscillate toward an equilibrium price, often forming a pattern resembling a spider web on a graph.
The concept of comparative advantage explains the efficiency of individuals or groups in particular economic activities compared to others, encouraging specialization and trade for maximum benefit.
Competitive equilibrium refers to a market state where supply equals demand, resulting in an equilibrium price where no buyer or seller has an incentive to change their behavior.
Complementary goods are products that are often consumed together, where the demand for one increases when the price of the other decreases, and vice versa.
Constant dollars refer to dollars of a base year, used as a gauge in adjusting the dollars of other years to ascertain actual purchasing power.
Constant Returns to Scale refers to a situation in economic production where the amount of output changes at the same rate as the quantity of inputs used. For example, a doubling of raw materials and labor would result in a doubling of the final product.
Consumer surplus is an economic concept that represents the excess value a consumer derives from consuming goods over the amount paid for those goods.
The consumption function is a mathematical relationship between the level of consumption and the level of income. It posits that consumption is greatly influenced by income.
The Consumption Possibility Line represents the maximum amounts of consumption possible at varying levels of disposable income, or of Gross Domestic Product (GDP).
The term 'core' has multiple definitions across various fields including technology, economics, and hardware, among others. This article provides a detailed definition, examples, frequently asked questions, related terms, and suggested resources for further study.
The Cost-of-Living Index is a tool that measures the relative cost of living over time or between different locations. It is typically used to compare the expense required to maintain a certain standard of living across various cities or countries.
A type of inflation caused by increasing prices, typically resulting from rising costs of production inputs such as raw materials and wages.
Currency appreciation refers to an increase in the value of a currency relative to another currency, while currency depreciation refers to a decrease in the value of a currency relative to another currency. These concepts are pivotal in international trade, impacting everything from import/export prices to inflation rates.
Currency in circulation refers to the paper money and coins that are circulating within an economy and are counted as part of the total money supply, which also includes demand deposits in banks.
Cyclical unemployment refers to the unemployment caused by a downturn in the business cycle. It typically rises during economic recessions and falls when the economy improves.
Decreasing returns to scale is a characteristic of the production of a good that requires proportionally higher amounts of inputs to produce each unit of output as the amount of output increases.
Degression refers to a tendency to descend or decrease; it implies a progressive decline in an item, such as value, over time. An example includes the deterioration in a company’s market share for its product line.
Demand represents the economic expression of the desire and the ability to pay for goods and services. It is distinct from mere need or desire as it encapsulates the willingness to exchange value for varying amounts of goods or services, depending on the price asked.
A graphical depiction of the demand schedule. It illustrates the relationship between the price of a good or service and the quantity demanded, typically resulting in a downward sloping curve due to higher quantity demanded at lower prices.
The price that consumers are willing to pay in the market for a given quantity of output. It is derived from the demand schedule or demand curve.
A demand schedule is a table that showcases the relationship between the price of a good or service and the quantity demanded at different price levels. It is a fundamental concept in economics that helps illustrate consumer behavior and market dynamics.
Demand-pull inflation occurs when the aggregate demand in an economy outpaces the aggregate supply, leading to an increase in the general price level.
The process of systematically reducing the recorded cost of a tangible fixed asset over its useful life.
An economic condition characterized by a significant decrease in business activity, falling prices, reduced purchasing power, excess supply over demand, rising unemployment, accumulating inventories, deflation, plant contraction, public fear, and caution.
A phenomenon in economics where adding additional units of resources to a production process results in smaller increments of output due to overcrowding, inefficiency, or less effective resource allocation.
Dissaving, or negative saving, occurs when consumer spending exceeds disposable income, often financed through accumulated savings or loans.
A fundamental characteristic of the demand for most goods and services, resulting in lower quantities demanded as the price increases, producing a curve that slopes downward on a graph.
A detailed explanation and exploration of the term 'Duty,' including its application in taxation, fiduciary obligations, and additional contexts.
The term 'economic' pertains to matters related to the economy or the study of economics, encompassing various aspects such as production, consumption, and distribution of goods and services within a society.
Economic Analysis pertains to the systematic study and understanding of trends, phenomena, and information that are economic in nature, aimed to decipher how economies function and to predict future economic conditions.
Economic goods are commodities and products that require effort and resources, and are available at a price in the market. They are distinct from freely available goods or those with no utility.
Economic rent refers to the payment to a factor of production or a resource above its opportunity cost. It usually applies to resources that are unique or inelastic in supply.
Economics is the study of how societies allocate scarce resources. It includes the examination of production, distribution, exchange, and consumption of goods and services.
A division of the U.S. Department of Commerce that provides timely economic analysis, disseminates national economic indicators, and oversees the U.S. Census Bureau and the Bureau of Economic Analysis (BEA).
An economist is a professional who studies and analyzes economic data and trends to provide insights and forecasts regarding economic matters, influencing policy, investment decisions, and business strategies.
Elastic demand (supply) refers to the sensitivity of the quantity demanded (supplied) of a good or service to changes in its price. It is a measure of how consumer or producer behavior changes with price fluctuations.
Engel's Law is an economic principle formulated by 19th-century economist Ernst Engel, stating that as a family's income increases, the proportion of income spent on food decreases, even if absolute spending on food rises.
Entrepreneurial profit refers to the compensation for the expertise and successful effort of a skilled businessperson, encompassing the portion of profit exceeding the normal profit for typically competent management.
The equilibrium price is the price at which the quantity of goods producers wish to supply matches the quantity demanders want to purchase.
The equilibrium quantity is the amount of a good that will be produced and sold when the market for the good is in equilibrium, where demand equals supply.
Ex Ante is a Latin term meaning 'before the event,' often used in finance and economics referring to predictions, forecasts, or estimations about future events.
In economics, the Exclusion Principle refers to the right of an owner of private property to exclude others from using or enjoying it.
Externalities are costs or benefits that affect third parties who did not choose to incur those costs or benefits, often a consideration in economics and public policy.
In economics, an externality represents a cost or benefit incurred by an economic agent that is not reflected through financial transactions. They can be positive or negative and can affect both individuals and businesses, with common examples including environmental pollution and increased local prosperity.
The Federal Reserve Open Market Committee (FOMC) is a branch of the Federal Reserve Board that determines the direction of monetary policy specifically by directing open market operations.
Pertaining to public finance and financial transactions; relating to the public treasury.
A fiscalist is an economist who believes that government intervention in the economy, primarily through changes in taxation and government spending, is essential for managing economic stability and growth.
The Fisher Effect is an economic theory proposed by American economist Irving Fisher, which describes the relationship between nominal interest rates and real interest rates under the impact of inflation.
Fixation refers to the process of setting the present or future price of a commodity based on market analyses and assessments of supply and demand.
A fixed cost is a type of business expense that is constant and does not fluctuate with changes in the level of goods or services produced. These costs are incurred regularly, regardless of the business's activity level.
Flow of funds in economics refers to the way in which capital moves across various sectors of the economy, transferring from savings surplus units to savings deficit units through financial intermediaries.
The Foreign Trade Multiplier is a concept in economics that measures the increase in a country's GDP due to efficiencies and interconnections of foreign trade activities. It demonstrates how trade can amplify economic growth by leveraging the comprehensive benefits of exporting and importing.
The concept of 'free lunch' refers to something good available at no cost, although the fuller expression, 'there's no such thing as a free lunch,' suggests that even seemingly free things have hidden costs.
An economic policy where governments do not restrict imports or exports through tariffs, quotas, or subsidies, allowing unrestricted flow of goods between countries.
Frictional unemployment refers to the short-term, transitional phase of unemployment that occurs when individuals are temporarily out of work while moving between jobs, entering or re-entering the labor market.
Game Theory is a branch of mathematics and economics that studies strategic interactions where the outcomes depend on the actions of multiple agents, each aiming to maximize their own payoff.
General Equilibrium Analysis is a complex and systematic theoretical model in economics that includes all markets simultaneously and is used to examine relationships among markets.
An economic equilibrium that exhibits an equality of expected real interest rates among countries when there are no restrictions on international trade, credit, and currency exchanges.
A theory in economics that suggests bad money drives out good money from circulation. When two forms of commodity money are in circulation which are accepted by law as having similar face value, the more valuable one will be hoarded and the less valuable one will be spent.
Growth accounting is a method used in economics to determine the contribution of different factors (such as labor, capital, and technology) to economic growth.
Consisting of dissimilar or diverse parts, the term 'heterogeneous' frequently describes organizations involved in selling a wide array of different products.
Hidden inflation refers to a subtle price increase implemented by offering a smaller quantity or poorer quality of a product or service with no change in its original price.
A holdout is an individual or entity that refuses to sell an asset or agree to terms in the early stages of negotiation, typically in an attempt to realize a higher price or more favorable conditions.
A market structure characterized by a few firms producing products that are virtually indistinguishable from one another. Examples include the petroleum industry and network television.
An imperfect competitor is a consumer or supplier who has the ability to control the price that it pays or is paid. This ability is usually tied to being large enough to constitute a large percentage of the demand or supply of a given good, thereby enjoying monopoly or monopsony characteristics.
Implicit cost elements refer to the costs associated with missed opportunities in the utilization of a company's resources. These costs are not directly compensated through cash transactions but reflect the opportunity cost of applied resources.
The term 'import' refers to the action of bringing in goods or services produced outside of a specific economy into that economy. It also signifies the process within computer applications of incorporating files created by another program.
Imputed value, or imputed income, refers to a logical or implicit value that is not recorded in any account. This involves assigning a value to goods, services, or investments that are not explicitly quantified.
Income represents an economic benefit, encompassing money or value received over a period. It is a crucial concept in various domains like accounting, taxation, and economics.
In economics, the income effect refers to the change in purchasing power and quantity demanded of goods due to a change in consumers' real income resulting from a price change.
Income Elasticity of Demand measures the extent to which the demand for a good is affected by a change in income. High elasticity indicates luxury goods, while low elasticity points to necessities.
Increasing costs refer to the scenario in an industry or firm where unit costs escalate as the quantity of output rises. This may be due to factors such as the need for more resources, inefficiencies, or production bottlenecks.
A characteristic of a production process that becomes more efficient at larger levels of output. The marginal cost of producing each additional unit decreases, often due to high fixed costs relative to marginal costs.
An index of leading indicators is a composite index comprised of various economic indicators that are used to predict the future direction of the economy.
Monthly statistic released by the Federal Reserve Board (FRB) on the total output of all U.S. factories and mines. These numbers are a key economic indicator.
Inelastic supply and demand refer to situations where the quantity supplied or demanded of a good or service changes very little in response to changes in its price. This concept is crucial in economics as it affects pricing, revenue, and market equilibrium.
Inelasticity refers to the characteristic of a good or service for which the quantity demanded or supplied is relatively unaffected by changes in price.
