Gross Domestic Product (GDP)
The total market value of all FINAL goods and services produced within a nation's borders in a given time period
Per Capita GDP
The dollar value of GDP divided by total population; average GDP
Economic Growth
An increase in output (real GDP); an expansion of production possibilities
Factors of Production
Resource inputs used to produce goods and services, such as land, labor, capital, and entrepreneurship
Human Capital
The knowledge and skills possessed by the workforce
Capital-Intensive
Production processes that use a high ratio of capital to labor inputs
Productivity
Output per unit of input, such as output per labor-hour
Externalities
Costs or benefits of a market activity borne by a third party
Monopoly
A firm that produces the entire market supply of a particular good or service
Income Quintile
One-fifth of the population, rank-ordered by income (top fifth)
Factor Market
Any place where factors of production (land, labor, capital) are bought and sold
Product Market
Any place where finished goods and services (products) are bought and sold
Opportunity Cost
The most desired goods or services that are forgone in order to obtain something else
Supply
The ability and willingness to sell (produce) specific quantities of a good at alternative prices in a given time period, ceteris paribus
Demand
The ability and willingness to buy specific quantities of a good at alternative prices in a given time period, ceteris paribus
Demand Curve
A curve describing the quantities of a good a consumer is willing and able to buy at alternative prices in a given time period, ceteris paribus
Law of Demand
The quantity of a good demanded in a given time period increases as its price falls, ceteris paribus
Substitute Goods
Goods that substitute for each other; when the price of good x rises, the demand for good y increases, ceteris paribus
Complementary Goods
Goods frequently consumed in combination; when the price of good x rises, the demand for good y falls, ceteris paribus
Ceteris Paribus
The assumption of nothing else changing
Shift in Demand
A change in the quantity demanded at any (every) given price
Market Demand
The total quantities of a good or service people are willing and able to buy at alternative prices in a given time period; the sum of individual demands
Market Supply
The total quantities of a good that sellers are willing and able to sell at alternative prices in a given time period, ceteris paribus
Law of Supply
The quantity of a good supplied in a given time period increases as its price increases, ceteris paribus
Equilibrium Price
The price at which the quantity of a good demanded in a given time period equals the quantity supplied
Market Mechanism
The use of market prices and sales to signal desired outputs (or resource allocations)
Price Floor
Lower limit set for the price of a good
Market Surplus
The amount by which the quantity supplied exceeds the quantity demanded at a given price; excess supply
Market Shortage
The amount by which the quantity demanded exceeds the quantity supplied at a given price; excess demand
Price Ceiling
Upper limit imposed on the price of a good
Optimal Mix of Output
The most desireable combination of output attainable with existing resources, technology, and social values
Market Mechanism
The use of market prices and sales to signal desired outputs (or resource allocations)
Market Failure
An imperfection in the market mechanism that prevents optimal outcomes
Private Good
A good or service whose consumption by one person excludes consumption by others
Public Good
A good or service whose consumption by one person does not exclude consumption by others
free rider
an individual who reaps direct benefits from someone elses purchase (consumption) of a public good
externalities
costs or benefits of a market activity borne by a third party; the difference between the social and private costs (benefits) of a market activity
monopoly
a firm that produces the entire market supply of a particular good or service
market power
the ability to alter the market price of a good or a service
antitrust
government intervention to alter market structure or prevent abuse of market power
natural monopoly
an industry in which one firm can achieve economies of scale over the entire range of market supply
unemployment
the inability of labor-force participants to find jobs
inflation
an increase in the average level of prices of goods and services
opportunity costs
the most desired goods or services that are forgone in order to obtain something else
government failure
government intervention that fails to improve economic outcomes
intermediate goods
goods or services purchased for use as input in the production of final goods or in services
value added
the increase in the market value of a product that takes place at each stage of the production process
nominal GDP
the value of final output produced in a given period, measured in the prices of that period (current prices)
real GDP
the value of final output produced in a given period, adjusted for changing prices
base year
the year used for comparitive analysis; the basis for indexing price changes
Real GDP in year t= nominal GDP in year t/price index
inflation
an increase in the average level of prices of goods and services
production possibilities
the alternative combinations of final goods and services that could be produced in a given time period with all available resources and technology
depreciation
the consumption of capital in the production process; the wearing out of plant and equipment
net domestic product (NDP)
GDP less depreciation
Investment
expenditures on the production of new plant, equipment, and structures (capital) in a given time period, plus changes in business inventories
gross investment
total investment expenditure in a given time period
net investment
gross investment less depreciation
exports
goods and services sold to international buyers
imports
goods and services purchased from international sources
net exports
the value of exports minus the value of imports
labor force
all persons age 16 and over who are either working for pay or actively seeking paid employment
labor force participation rate
the percentage of the working age population working or seeking employment
production possibilities
the alternative combinations of final goods and services that could be produced in a given time period with all available resources and technology
unemployment
the inability of labor force participants to find jobs
unemployment rate
the proportion of the labor force that is unemployed
unemployment rate= number of unemployed people/labor force
discouraged worker
an individual who isnt actively seeking employment but would look for or accept a job if one were available (not included in labor force)
underemployment
people seeking full-time paid employment who work only part time or are employed at jobs below their capacity
seasonal unemployment
unemployment due to seasonal changes in employment or labor supply
frictional unemployment
brief periods of unemployment experienced by people moving between jobs or into the labor market
structural unemployment
unemployment caused by a mismatch between the skills (or location) of job seekers and the requirments (or location) of available jobs
cyclical unemployment
unemployment attributable to a lack of job vacancies, that is, to an inadequate level of aggregate demand