Budget Line - a graph showing the tradeoff (i.e. opportunity cost) between the amounts of two items that may be purchased using the same amount of money
Change in Demand - a change in the relationship between price and quantity demanded, caused by a change in one of the determinants of demand
Change in Quantity Demanded - a change in the quantity demanded, caused by a change in price
Change in Supply - a change in the relationship between price and quantity supplied, caused by a change in one of the determinants of supply
Change in Quantity Supplied - a change in the quantity supplied, caused by a change in price
Complements - goods that are usually used together, such as coffee and coffee mate
Conglomerate - a business that has multiple different products (such as four or more), each of which is substantially different from the others, and none of which contributes a majority of the business revenues.
Corporation - a type of business organization recognized by law as a separate legal entity having all the rights of an individual.
Cover - buying stock to repay shares that were previously sold short
Demand - the relationship between price (or opportunity cost) and the quantity of something that will be demanded at that price
Demand, Law of - price and quantity demanded are inversely related. That is, when the price (or opportunity cost) of something decreases, the quantity demanded increases.
Demand Curve - a graph showing the relationship between price and quantity demanded
Demand Deposit - Money deposited in a bank and payable on demand of the depositor. In other words, money deposited in checking accounts.
Demand Schedule - a listing of prices and the quantities demanded at each price
Determinants of Demand - the things that change the relationship between price and quantity demanded for a product. The list can be very long, but consider (1) consumer income, (2) consumer tastes and preferences, (3) a change in the price of substitutes, and (4) a change in the price of complements.
Determinants of Supply - the things that change the relationship between price and quantity supplied for a product. The list can be very long, but it includes anything that changes the profitability of producing a product, relative to other products, and excluding a change in the market price of the product (because that would be a change in supply instead). For example, a (1) change in the price of inputs in the production process, (2) a change in the number of producers, or (3) a change in government taxes or subsidies for the product.
Economic Rent - the amount paid to a factor of production above and beyond its opportunity cost. For example, if you are worth no more than $6.00/hour to any other employer, but you're paid $50.00/hour by the Acme Economic Consulting Firm, then you're earning $6.00/hour in opportunity cost and $44.00/hour in economic rent.
Elasticity - a flexible (no pun intended) economic concept that relates the magnitude of change in any two economic variables. The most common application is price elasticity of demand.
Equilibrium Price - that price at which quantity demanded is equal to quantity supplied.
Equilibrium Quantity - the quantity (both demanded and supplied) at the equilibrium price.
Externality - some economic side effect that either benefits ("positive externality") or harms ("negative externality") a third party not directly involved in the activity.
Factors of Production - land, labor, capital, and entrepreneurship.
Fixed Cost - costs that do not change when the level of output (production) changes
Fractional Reserve Banking - The system (used by all modern banks) in which only a fraction of banking deposits are kept on hand by the bank. [see reserve requirement] The remainder of the deposits (called "excess reserves") are loaned out so that the bank can earn money on interest payments.
Impute Value - This is the process of assigning a personal value to something based upon its ability to satisfy your own desires. For example, if owning a car allows you to have greater freedom of movement, then you might impute great value to owning your own car.
Indeterminate - something that cannot be determined with the information presented. For example, when both supply and demand increase, opposing pressures on price are operating. The supply increase tends to push price down. The demand increase tends to push price up. We say that the net effect on price is indeterminate. [We would need information on the magnitude of the two changes, plus the elasticity of supply and demand, to answer the question.]
Marginal Cost - the extra cost associated with something, such as the production of an additional unit, an additional 10 units, or a decision to skip another day of school (!)
Market Equilibrium - that price at which the quantity demanded is equal to the quantity supplied. Since there is neither a surplus nor a shortage, there is no tendency for price to change. Downward pressure on price is equal to upward pressure on price.
Money - The most marketable commodity in a society.
Monopolistic Competition - a market similar to pure competition, but with some degree of product differentiation among the sellers.
Monopoly - a market with only one seller.
Natural Monopoly - a market in which average cost per unit declines consistently over the likely size of the market. In this market, a single seller will be more efficient than many sellers. The largest firm in such a marketplace will have the lowest cost and, over time, will tend to become a monopoly.
Negative Externality - a harm absorbed by someone who is not a party to the economic activity that causes the harm. These things are usually called either pollution or crime, depending on the circumstances.
Net Advantage - the difference between the opportunity cost of one alternative and that of another
Oligopoly - a market with a few large sellers who dominate the marketplace.
Opportunity Cost - the value of foregone opportunities. It's what you have to give up to get what you want.
Partnership - a business owned jointly by two or more persons.
PE - the price earnings ratio. It is the ratio of the price per share of a stock divided by its earning per share in the previous year.
Positive Externality - a benefit received by someone who is not paying for it as a result of economic activity that does not directly involve him or her.
Price Elasticity of Demand - the relationship between the magnitude of change in quantity demanded and the magnitude of change in price. Expressed mathematically, it is the percentage change in quantity demanded divided by the percentage change in price.
Price Rationing - Scarce goods must be rationed. In a free market economy, like ours, the most frequent way of rationing scarce goods is by price. Those most willing and able to give up the bucks are those who get the product.
Product Differentiation - making your product different somehow from the products of other companies in the same market.
Production Possibilities Frontier - a graph showing the tradeoffs (i.e. opportunity costs) between the amounts of two things that can be produced with the same amount of resources.
Profit - Total Revenue - Total Cost
Profit-Maximizing Output - that level of output where marginal cost is equal to marginal revenue (MC=MR), or Total Revenue exceeds Total Cost by the maximum amount. These to output levels will be the same.
Reserve Requirement - The fraction of a banks total deposits that the Federal Reserve Board requires the bank to keep on reserve for withdrawals. [This amount is called "required reserves" or "legal reserves."] The actual fraction varies by type of deposit. The FED uses the reserve requirement as one of its tools of money supply management. Increasing the reserve requirement forces banks to keep more money on hand, therefore reducing the amount of loans available and therefore decreasing the supply of money in the system.
Round Lot - 100 shares of a stock. Stocks are usually traded in round lots. Often sales of stocks are reported this way. So a listing of sales of 3790 means that 3,790,000 shares were traded.
Scarcity - the problem of limited resources facing unlimited wants. In other words, there isn't enough stuff for everyone to have all they want for free.
Shortage - quantity demanded is greater than quantity supplied. This will be true at any price below the equilibrium price.
Short Sale - selling something, especially stock, that you don't own yet. Someone would do this on the belief that the price is likely to fall before they have to buy the stock to repay a loan of stock from the broker (i.e. cover).
Sole Proprietorship - a business owned and managed by a single person.
Stock Prices - prices of a share of stock on the stock exchanges and NASDAQ are reported as high (the most anyone paid), low (the least anyone paid), close (the last trade of the day) and change (the difference between the previous day's close and the current price. [In newspaper listings the change is the change between the close two days ago and yesterday's close.]
Substitutes - goods that can be used in place of one another, or instead of one another, such as hot dogs and hamburgers
Supply - the relationship between price (or opportunity cost) and the quantity of something that will be supplied at that price
Supply, Law of - price and quantity supplied are directly related. That is, when the price (or benefit) of something increases, the quantity supplied also increases.
Supply Curve - a graph showing the relationship between price and quantity supplied
Supply Schedule - a listing of prices and the quantities supplied at each price
Surplus - quantity supplied is greater than quantity demanded. This will be true at any price above the equilibrium price.
Total Cost - fixed costs plus variable costs
Total Revenue - price times the number of units sold
Utility Maximization - getting the most usefulness from a scarce resource
Variable cost - the cost that changes when the level of output changes