Key Economic Terms and Definitions
Basic Economic Principles
Absolute Advantage: The ability to produce a good using fewer inputs than another producer.
Comparative Advantage: The ability to produce a good at a lower opportunity cost than another producer.
Exports: Goods produced domestically and sold abroad.
Imports: Goods produced abroad and sold domestically.
Opportunity Cost: Whatever must be given up to obtain some item.
General Economic Concepts
Business Cycle: Fluctuations in economic activity, such as employment and production.
Economics:
Labor Economics: Supply, Demand, and Market Equilibrium
Labor Economics
Lecture 1 (Ch1)
Labor Supply
Definitions of Unemployment and Other Statistics
In the Current Population Survey, people aged 16 and greater are classified into the following three categories:
- Employed: In the reference week, the person must work at least one hour with pay, or work at least 15 hours in a non-paid job (family farm, etc.).
- Unemployed: The person is on temporary layoff from a job, or has no job but is actively seeking a job.
- Out of the labor force: Neither employed nor unemployed.
Economics Key Concepts: Opportunity, Demand, and Elasticity
Key Economic Concepts
Opportunity Cost
Opportunity Cost – Value of the next best alternative (ratio of goods where the cost is the second good in the denominator).
Absolute Advantage
Absolute Advantage – Can produce more with fewer resources or in the same time.
Comparative Advantage
Comparative Advantage – Lower opportunity cost for a good.
Maximum Willingness to Trade
- Write a country’s ratio with the desired item in the denominator.
- Multiply by the amount of the desired product.
Minimum Willingness to Give
- Dimensional
Exchange Rate Impact on Import and Export Dynamics
1. Revaluation Effects on Imports:
An imported good’s price (Pi) is determined by the exchange rate (tc) multiplied by the foreign price (Pe): Pi = tc * Pe. The autarky price is Pa. When Pi < Pa, demand exceeds supply (qd > qo), resulting in imports (qd – qo). A revaluation decreases tc, lowering Pi. This increases demand and decreases supply, leading to qd’ > qo’, and thus increased imports (qd’ – qo’ > qd – qo). Therefore, the initial conclusion that revaluation decreases imports is
Read MoreKey Concepts in Microeconomics: Market Structures and Resource Demand
Chapter 3: Supply and Demand Fundamentals
An increase in income decreases the demand for an inferior good. A surplus refers to an excess supply. Excess demand situations push prices up toward equilibrium. The ceteris paribus clause in the law of demand allows only the price of the good to change. Changes in the price of a good change the quantity demanded of a good, not the demand for the good. An increase in the price of a substitute good will increase the demand for a good. A decrease in the price
Read MoreUnderstanding Firm Supply and Average Costs in Economics
Average Costs
Average Costs represent the cost per unit of output produced. It is calculated as: AC = Total Cost / Output. The average cost graph can be divided into three sections:
- Economies of Scale (Increasing Returns to Scale): This occurs when output increases by more than the proportional change in costs.
- Constant Returns to Scale (CRS): This occurs when output increases by the same proportional change as all average costs.
- Diseconomies of Scale (Decreasing Returns to Scale): This occurs when