Economics · Subjects

Economics

Key vocabulary and reference summaries for micro and macroeconomics, including supply and demand fundamentals.

Individual Markets

Microeconomics vocabulary

Term	Meaning
Opportunity cost	The value of the next-best alternative you give up when making a choice
Scarcity	The basic economic problem: unlimited wants, limited resources
Elasticity	How much quantity demanded/supplied changes in response to a price change
Marginal cost / benefit	The cost or benefit of producing/consuming one additional unit
Market equilibrium	The price where quantity supplied equals quantity demanded
Monopoly	A market with a single seller controlling supply and price

Fundamentals

Law of demand: As price rises, quantity demanded falls (all else equal) - the demand curve slopes downward.
Law of supply: As price rises, quantity supplied rises (all else equal) - the supply curve slopes upward.
Shift vs. movement: A price change causes movement along a curve. A change in another factor (income, technology, expectations) shifts the whole curve.
Surplus and shortage: A surplus happens when price is set above equilibrium (supply > demand); a shortage happens when price is set below equilibrium (demand > supply).

The Whole Economy

Term	Meaning
GDP	Gross Domestic Product - the total value of goods and services produced in a country in a given period
Inflation	A general rise in prices over time, reducing the purchasing power of money
Unemployment rate	The percentage of the labor force actively seeking work but unable to find it
Fiscal policy	Government use of spending and taxation to influence the economy
Monetary policy	Central bank actions (like adjusting interest rates) to influence the money supply and economy
Recession	A significant decline in economic activity, commonly defined as two consecutive quarters of falling GDP