Economics vocabulary

1.INSTITUTIONS:social arrangement created to satisfy the needs of the people in the long run. ethics, justice and the State are three naturally created institutions.
languaje,morals(result of ethics(conscience) andcreate by imaginationis necessary to maintain some form of order to have a impartial judge),
justice,property rights(appear on third state of society in evolution/hunt/agriculture/farm/commercial interdependence->let government pursue laissez faire->self interest maximize well being of society->compare motivation of farmer because of assurance and a slave with no incentives of improve),
division of labor (it is with specialization makes cooperative production and  make worker more effcient) dl and
markets limitless possibilities to expand its wealth trough manufacture and trade
,money, and market and value(“use value” and “exchange value.”(is quantity of labor which enables him to purchase or command)now labor based on disutility,and value based also capital(profit),land(rent) and profits of stock.)Wealth of nation focus on the manner in wich institutional arrangement structure the decision making of the individual.
2. FIRST ECONOMIC REVOLUTION: The 1st Economic Revolution was the transition from nomadic hunting and gathering to agriculture (farming) and settlement.. Occurring in the 8.000 B.C, it brought forth the appearance of property rights savings  (people produced more than they needed) and the creation of the state who provide security,specialization and new military technologies. This ocurred in the Mesolithic (between the Paleolithic and Neolithic). In the Paleolithic people just huntered and gathered, and there was no scarcity. There was a gift economy, with a sense of communality and not based on the trade (it was not seen as natural except with a stranger). First economic revolution emerged when scarcity started. Afterwards, the glacial period came and scarcity began. In the Neolithic goods were discovered to be scarce so people had to economise. Having to choose brought about the notion of opportunity cost: the requirements for economics are scarcity and alternative use/ diversity.
3. ECONOMICS: Economics is the social science that studies the production, distribution, and consumption of goods and service,it involves the study of choices as they are affected by incentives and resources. Other definitions like Lionel Robbins based on scarcity and alternative uses of available resources.Two types gift economy, goods are communal, it is ideally voluntary and serves to redistribute wealth troughout a community.In contrast barter economy there is a exchange of goods and services for commodity or money
. 4. MONEY:is any object or record that is generally accepted as a payment for goods and services and repayment of debts in a given socio-economic context or country. Money emerged when there were different preferences between people, as barter couldn´t take place anymore. The first coins were created on 3.000 BC. Money has several functions:1.Means of exchange2. Store of value. It may vary with inflation.3. Unit of account/Standard of deferred payment.Types: commodity money is that whose value comes from the material out of which it is made. Ex: salt, silver, gold(contras underlying value can vary from its agreed currency value and they use to deteriorate..Historically, other forms of money were used which did have an underlying value, such as foods, fuels or metals.Fiat money is a currency that a government has declared to be legal tender, despite the fact that it has no value itself and is not backed by reserves.
5. LEGAL TENDER: Legal tender is any form of payment that must be accepted for a debt, according to the laws of the area. Generally, the term refers to government-issued cash money such as bills and coins, as opposed to credit lines, checks, or cards. The laws surrounding legal tender have proved vital in the formation of the fiscal policy of many nations.
6.MARKETS: social arrangement that allows buyers and sellers to discover information and carry out a voluntary exchange of goods or services, it origin on middle ages with creation of requires, at a minimum, that both parties expect to become better off as a result of the transaction. it with property rights organize  Markets.For Smith can not be created by authorities, but most market are regulated by them.types: goods and services are exchanged by market functions is called a market economy. An alternative economic system in which non-market forces (often government mandates) determine prices are called planned economies or command economies. Markets are efficient when the price of a good or service attracts exactly as much demand as the market can currently supply.
7. SUPPLY CHAIN: system of organizations, people, technology, activities, information and resources involved in moving a product or service from supplier to customer. Supply Chain includes purchasing, manufacturing, warehousing, transportation, customer service, demand planning , supply planning and Supply Chain management.
8. DIAMOND- WATER PARADOX: stablish the comparation between (makes  the question)water which it is fundamental for survival but its abundance reduces its value and diamonds which are highly valued despite their minimal value in use. Therefore, for Adam Smith, the value of an item is determined by its cost of production, which explains the paradox: diamonds, although their little use are hard to obtain.
9. PRODUCTION COST VALUE: to Adam Smith, value of goods are determined by the respective quantities of labor(natural measure of exchange(mirar institutions) required for their production  acting as a center of gravity for the price. Also its determine the “cost of production”, wages (effort), profits (Risk taking, Saving of time and Lucrum cessans) and the rent of the land (monopoly over a scarce resource), dosnt deny role of supply and demand on influence of prices,but are set by..
10. RATE OF INTEREST: are the price of credit (not of money). It is a fee paid on borrowed assets. most common form interest in money, but there areother assets may be lent to the borrower, such as shares, consumer goods through hire purchase, or entire factories in finance lease arrangements.There are interest rate because of time preferences(value more present is debtor and is a positive interest rate and in the opossite negative).being based on the agreemet between the lender who doesnt spend its money on the present and lend it(lucrum cessans)and the borrower(
benefcios.The amount lent,It is form by the principal (value of the assets lent) and the interest rate(The percentage of the principal which is paid as fee (the interest), over a certain period of time).and also depends on inflation.
11. NATURAL PRICE: to Adam Smith, it is the cost of production of an item, it remains constant in time, depending on wages, profits and the rent of the land It is the price of commodity which is sufficient to pay the production value so if the seller charges the natural price, he will not get any profit (not have to work as the price market but competition push it to this price.

: price that a good or service is offered at,According to Adam Smith and classical economics it’s the price determined by the demandand and in inverse relation with supply.The actual market price will establish a particular price point, valid for a short period which is the gear of current demand and supply.But when mp^ than np,competition seek mp low to np .Then will made losses,going out traders,decreasing supply and increasing again mp  in the marketplace.
13. DEMAND CURVE:For a given market of a commodity, demand shows the quantity that all buyers would be prepared to purchase at each unit price of the good.  represented using a graph relating price and quantity demanded.
characteristics:individual consumers act always rational”;taking into account  ‘constrained utility maximization’ (with income as the “constraint” on demand) and ‘utility’ as the preference relation for individual consumers;are used to see the effect of a price change on the quantity demanded; law of demand states that, in general, price and quantity demanded are inversely related(explain), so the demand curve usually slopes downwards from left to right.
exceptions:Veblen goods (luxury goods)(demand curve is elastic and Giffen goods (inferior goods)(inelastic).
relation between the price of a good and the quantity available for sale from suppliers at that price.represented using a graph relating price and quantity supplied.
Characteristics: Producers they meant to be profit-maximizers;Supply is a directly proportional relation between price and quantity supplied(explain); price below equilibrium(shortage)push price up and At a price above equilibrium(surplus)pushes price down.;generaly supply curves slope upwards;in short-run analysis can reflect the law of decreasing marginal return(exp); In the long run a positively-sloped supply curve can reflect diseconomies of scale or fixity of specialized resources (such as farm land or skilled labor).
exceptions:show on supply curve of labor when the wage reaches and extremely high amount,(disminishing of the marg in relation to its salry,work less(leisure)as its wage increase;market oil(1973 oil crisis)precios^production baja.

15. NOMINAL PRICE:It is the monetary value of a commodity.  It refers to an economic value expressed in fixed nominal terms in a given year or series of years. So, it is the money value which changes along the time.
adjusts nominal value to remove effects of general price level price changes over time.changes on nv reflect changes in quantities of the bundle or their associated prices and rv only quantitys Real values over time are a measure of the purchasing power.The real value is the nominal price/CPI (this process is called indexation, and in the case of wages WR= Wn/CPI). We need a base year to see what is happening with the Price in the long-run. on the other hand According to Adam Smith, the real price of every thing,is the toil and trouble of acquiring it. stablishing corn will be the basis for the real price in the short-run, and gold and silver in the long-run.
17.PURCHASING POWER PARITY (rate of exchange): theory based on the Fisher’s law that defends that, in the long run identical products and services in different countries should cost the same in different countries. This is based on the belief that exchange rates will adjust to eliminate the arbitrage opportunity of buying a product or service in one country and selling it in another. it is estimates the amount of adjustment needed on the Exchange rate between countries in order to be equivalent  e . p*= p.
18. GROSS DOMESTIC PRODUCT (GDP):Is the total value of final goods and services produced within a country’s borders in a year. GDP counts income according to where it is earned rather than who owns the factors of production.(ej income german car factory in spain is counted on spain gdp)   is more commonly used as an index measure (i.e. wealth inside a country, if GDP increases employment increases…)., considered an indicator of a country´s standard of living.depends on demand for consumption, investment, and public expecditure and balance of tradeGDP =c +i+pe+(e-i)
19. GROSS NATIONAL PRODUCT:total value of all final goods and services produced by a country’s factors of production and sold on the market in a given time period. (A UK taxpayer in Paris income to UK GNP but his output to French GDP). it measures the value of output during a given year using the prices prevailing during that year(taking into account inflation) .It does not include goods produced on a subsistence level,(consuming of farmers of its own products)GNP= GDP – Goods produced by foreigners inside+ Goods produced by nationals abroad
statistical estimate of the level of prices of goods and services bought for consumption purposes by households. Cpi changes because inflation and can be used for  evaluation of wages, salaries, pensions… we need to construct the CPI: price data(sample of goods and services from sample sales of point,locations and times) and weighting data( estimates of the shares of the different types of expenditure as fractions of the total expenditure covered by the index),The index is usually computed monthly, or quarterly in some countries;exclusions:consumers expenditures outside and visitors,black market,illegal drugs,prostitution(altough ethics require free moral judgements).saving and investment.
21. INFLATION:results in a rise in the general price level and decreased in the value of money(1/cpi), as measured against a standard level of purchasing power.
Diferents beliefs of measure inflation:”monetarists”( monetary effects set the rate of inflation), and”Keynesians” (interaction of money, interest and output dominate over other effects.

There are two causes for inflation:1. cost push  inflation, (costs of production are higher and this produces a rise on prices).maybe cause raw materials become scarce(oil)2.

demand pull inflation (demand increases and the firm rise the prices of that product/service). This type of inflation produces a profit for the firm (profit inflation) and employment is ecourage.
Bad consequences:1. Less purchasing power (inflationary tax).2. Instability. People lose faith in currency as a store of value and often borrow as much as possible to invest in ‘real’ assets like gold, houses and antiques3. Hoarding of durable goods.4. Less competitive for international trade.5.can penalize people on fixed incomes, like pensioners 6.High inflation rates lead to higher interest rates.7.There may be a wage spiral. (workers want increase wage,raise cost of product makin hyper-infkation
.Good consequences: increase in profit for businessmen, shareholders( if prices increase and cost remain constant, profits increase) no necessary relation between the level of inflation and the wealth of poverty of a nation. However high inflation is always negative.

22. PROFIT INFLATIONpossible in a demand-pull inflation because the demand of a product rises(and prices) while costs are still the same It is a positive effect of inflation,andencourages investment in non-monetary capital projects.According to Hume, the increase of the quantity of money affects prices in the long run. But in the short run, there would be profit inflation. (slow but constant increase in the quantity of money in circulation may provide  a constant stimulant to business activity)
reference period, the year used for comparison of an economic index over time. It is the first of a series of years in an economic or financial index. is normally set to an arbitrary level of 100. Any year can be chosen as a base year, but typically recent years are chosen. New, more up-to-date base years are periodically introduced to keep data current in a particular index.
two types unemployment  for
: 1. to refer to inputs to production that are not being fully used (unemployed capital goods). In its most general usage, unemployment might also denote objects not put to productive use.not being recognized as a issue in rural areasBefore industrialization unemployment.
2.condition of people seeking activelyfor a worker or”remunerated employment”. its is measure by the econmy to see how much people are wothout job on an economy usin the unemployment rate(which is the number of unemployed workers divided by the total civilian labor force). During periods of recession, an economy usually experiences a relatively high unemployment rate. For Adam Smith unemployment can be only voluntary or due to institutional or legal reasons, for Keynes it can be involuntary and generalized.

25. DISGUISED UNEMPLOYMENTWhen the labour marginal productivity is zero due to the fact that there are employed workers that do not produce at all. (high compesation for firing so you keep it on the firm)This people are not counted in the official unemployment statistics. An economy demonstrates disguised unemployment where productivity is low and where too many workers are filling too few jobs
26. COMPETITION/COLLUSION (HISTORICAL EXAMPLES): Competition is the rivalry of two or more parties over something. In economics, a competitive market, that runs under laissez-faire policies, is a free market. Collusion is a term to refer to acts of cooperation or collaboration among rival entities often takes place within the market form of oligopoly,Historical example: guilds which determined the “fair price” for handicrafts and the quality of .The ‘fair price’ was thought to be a price not so high to exploit the consumer and not so low to not have profit. Cartels are a special case of explicit collusion. Collusion which is not overt, on the other hand, is known as tact largely illegal in the US and most of the EU due to antitrust law. There are significant barriers to collusion, but the main one is potential entry as new firms may enter the industry, establishing a new baseline price and eliminating collusion (though anti-dumping laws and tariffs can prevent foreign companies entering the market).

27. MONOPOLY/ MONOPSONY (HISTORICAL EXAMPLES)Both are examples of imperfect competition.Monopoly( market where the is only one supplier of a good or service,which often results in high prices and inferios products). characterized by a lack of economic competition. different form collusion(which are various,an oligopoly.And exist an antimonoply regulation.An example are the East India Companies (France, Great Britain and Holland) that where the only traders in the coloniesand have the exclusivity in exchange for establishing order and justice there.Monopsomy:When only one buyer is available for a given commodity, so faces many sellers,  And as the only purchaser he monopsonist may dictate terms to its suppliers controlling its market. historical example:town companies(only one demanders of labour settled in a town, so they established the wages.)
28. GRESHAM´S LAWeconomic principle that states:“bad money drives out good.”(coins containing metal of different value have the same value as legal tender,coins with cheaper metal overvalued and ending circulate on the market and the ones with more expensive metal becomes undervalued being acumulated or exported and thus tend to disappear from circulation.(often ends when kings mixed it all,having the same value)It also aplay it on foreign exchange,Gresham’s law also implies that “When a government compulsorily overvalues one type of money and undervalues another, the undervalued money will leave the country or disappear from circulation into hoards, while the overvalued money will flood into circulation.”