#separator:tab #html:false #tags column:4 Microeconomics The study of individual consumers, firms and markets economics-concepts-high-school Macroeconomics The study of the whole economy: growth, inflation and jobs economics-concepts-high-school Marginal analysis Weighing the added benefit and added cost of one more unit economics-concepts-high-school Marginal cost The extra cost of producing one more unit economics-concepts-high-school Marginal benefit The extra satisfaction from one more unit economics-concepts-high-school Diminishing returns Adding more of one input eventually adds less output economics-concepts-high-school Economies of scale Average costs fall as output grows economics-concepts-high-school Price elasticity of demand How much quantity demanded changes when price changes economics-concepts-high-school Elastic demand Buyers respond strongly to price changes economics-concepts-high-school Inelastic demand Buyers respond little to price changes, like necessities economics-concepts-high-school Substitute goods Goods that can replace each other, like butter and margarine economics-concepts-high-school Complementary goods Goods used together, like printers and ink economics-concepts-high-school Normal good A good you buy more of when income rises economics-concepts-high-school Inferior good A good you buy less of when income rises economics-concepts-high-school Determinants of demand Income, tastes, prices of related goods, expectations and number of buyers economics-concepts-high-school Determinants of supply Input costs, technology, taxes and number of sellers economics-concepts-high-school Price ceiling A legal maximum price economics-concepts-high-school Price floor A legal minimum price, like a minimum wage economics-concepts-high-school Deadweight loss Lost value when a market does not trade at the efficient level economics-concepts-high-school Consumer surplus The difference between what buyers would pay and what they do pay economics-concepts-high-school Producer surplus The difference between the price received and the lowest price a seller would accept economics-concepts-high-school Perfect competition Many sellers, identical products and no control over price economics-concepts-high-school Oligopoly A market with a few large firms economics-concepts-high-school Monopolistic competition Many firms with differentiated products economics-concepts-high-school Natural monopoly An industry where one firm can serve the market at the lowest cost economics-concepts-high-school Antitrust law Laws that promote competition and limit monopolies economics-concepts-high-school Public good Non-excludable and non-rival, like national defense economics-concepts-high-school Free rider A person who benefits from a good without paying for it economics-concepts-high-school Externality A cost or benefit that affects people who are not part of a transaction economics-concepts-high-school Gross domestic product Total market value of goods and services produced in a country in a year economics-concepts-high-school Real GDP GDP adjusted for inflation economics-concepts-high-school Economic growth Increase in real GDP over time economics-concepts-high-school Business cycle Recurring phases of expansion, peak, contraction and trough economics-concepts-high-school Recession A significant decline in economic activity economics-concepts-high-school Unemployment rate Percent of the labor force without a job but looking for one economics-concepts-high-school Frictional unemployment Short-term joblessness while changing jobs economics-concepts-high-school Structural unemployment Job loss because skills do not match available jobs economics-concepts-high-school Cyclical unemployment Job loss caused by an economic downturn economics-concepts-high-school Inflation A general rise in the price level economics-concepts-high-school Consumer Price Index A measure of the average change in prices consumers pay economics-concepts-high-school Fiscal policy Government spending and taxation to influence the economy economics-concepts-high-school Monetary policy Central bank actions that influence interest rates and money supply economics-concepts-high-school Federal Reserve The US central bank, created in 1913 economics-concepts-high-school Federal funds rate The interest rate banks charge each other overnight, a key policy tool economics-concepts-high-school Stimulus Government action to boost the economy economics-concepts-high-school Budget deficit When spending exceeds revenue in a year economics-concepts-high-school National debt The total of past deficits the government owes economics-concepts-high-school Progressive tax Higher earners pay a higher percentage economics-concepts-high-school Regressive tax Lower earners pay a larger share of income economics-concepts-high-school Aggregate demand Total demand for all goods and services in an economy economics-concepts-high-school Aggregate supply Total goods and services producers will supply economics-concepts-high-school Multiplier effect An initial spending change leads to larger changes in income economics-concepts-high-school Comparative advantage Producing something at a lower opportunity cost than others economics-concepts-high-school Absolute advantage Producing more of something with the same resources economics-concepts-high-school Trade deficit Imports exceed exports economics-concepts-high-school Exchange rate The price of one currency in terms of another economics-concepts-high-school World Trade Organization International body that sets rules for trade economics-concepts-high-school Gold standard Money tied to a fixed amount of gold economics-concepts-high-school Adam Smith Author of The Wealth of Nations (1776), who described the 'invisible hand' of markets economics-concepts-high-school Invisible hand Smith's idea that self-interested trading can benefit society economics-concepts-high-school John Maynard Keynes Economist who argued governments should spend to fight depressions economics-concepts-high-school Milton Friedman Economist who stressed the money supply and free markets economics-concepts-high-school Karl Marx Writer who criticized capitalism and wrote Das Kapital economics-concepts-high-school Human capital Skills and knowledge workers have economics-concepts-high-school Labor force People working or looking for work economics-concepts-high-school Minimum wage Lowest hourly pay allowed by law economics-concepts-high-school Labor union Workers' group that bargains for pay and conditions economics-concepts-high-school Productivity growth Rising output per worker, which raises living standards economics-concepts-high-school Gig economy Short-term, flexible work done through apps and platforms economics-concepts-high-school Supply chain The steps that move a product from raw materials to customers economics-concepts-high-school