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