Economics-Glossary-Flashcards
absolute advantage
Whatever one does better than others. (see comparative advantage and theory of absolute advantage)
advertising
The science of arresting human intelligence long enough to get money from it.
affectation
A social disease requiring its victims to wear hole-in-the-knee jeans. (see conspicuous consumption)
alienation theory
A thesis that explains why some citizens feel they are in, but not part of a society; e.g., the iron law of wages (Karl Marx). or the Vietnamese War. (see reconciliation theory)
anti-cyclical
Any market behavior that drives the price toward the trend line or moving average. Buying or selling that stabilizes the market price by minimizing the vagaries of the cycle. (see pro-cycle
anti-prosperity
tenet (see pro-prosperity tenet)
antitrust trilogy
The Sherman, Clayton, and Robinson-Patman Acts.
a priori
(Latin) At the outset; that which exists prior to examination.
arbitrage
A simultaneous transaction in two or more markets, buying in the cheap (low price) market and selling in the dear (high price) market.
archaist
Someone who studies or praises the past, or whose intellectual perspective and values are shaped by reverence for the past. (see futurist)
area of decreasing marginal cost
Any quantity of production before the minimum point on the marginal cost function; i.e., before the inflection point on the total cost function. The area of increasing returns.
area of decreasing returns
Any quantity of production beyond the point of diminishing returns. The area of increasing marginal cost.
area of increasing marginal cost
Any quantity of production beyond the minimum point on the marginal cost function; i.e., beyond the inflection point on the total cost function. The area of decreasing returns.
area of increasing returns
Any quantity of production before the point of diminishing returns. The area of decreasing marginal cost.
arithmetic progression
A series of numbers increasing at a decreasing rate; i.e., 1, 2, 3, 4. (see geometric progression and rate of increase)
Arrow’s Impossibilities Theorem
That which is mathematically impossible may, in the marketplace, occur. Kenneth Arrow’s observation that no method of calculating consumer data can accurately predict market behavior 100% of the time; i.e., aggregating individual preferences does not necessarily forecast group preference. (see Voter’s Paradox)
artificial barrier to trade
A non-economic barrier to a market such as a union contract, an intellectual property law, or crime.
asymptote
A function which continuously approaches a line or axis without meeting it at any finite distance; e.g., an indifference curve or average fixed cost function. Technically, a tangent at infinity.
asymptotic
What happens if you get scared half-to-death ? twice.
auction with reserve
The seller reserves the right to influence the price by setting a minimum price, using a shill, or withdrawing the item prior to the falling of the gavel.
average costs (AC)
Total costs (TC) divided by the number of units produced (q ).
average fixed cost function
An asymptote found by dividing fixed cost by the number of units produced.
balance sheet
(see Note on Accounting and Finance)
bank
A place where money automatically increases in value when you need to borrow it.
banker
Someone who will loan you an umbrella when the sun is shining and want it back when it starts to rain.
bankruptcy
A court ruling which provides permanent relief (Chapter 7); or temporary relief to a municipality or county (Chapter 9), a firm (Chapter 11), or an individual (Chapter 13). Such relief may be granted if insolvency exists or is anticipated. (see insolvency)
Benelux
An acronym for the common market that pre-dated (and is now included in) the European Community formed by the nations of Belgium, Netherlands, and Luxembourg.
best-seller
A book that is bought by as many people that attend a single USC football game.
black hole
Where God divided by zero. (see Note on Algebraic Terms and Operations, NN 9)
black market
An illegal transaction; i.e., the sale of a prohibited good or service.
blue chip stock
A major corporation with a reputation for financial stability and an excellent history of dividend payments. (see glamour stock)
bookcase
A piece of furniture used in America to display bowling trophies and Elvis collectibles. break-even point, where total revenue (TR) equals total cost (TC).
broker
What a broker makes people.
bullionist
An English mercantilist. The word is derived from the British use of small gold bars called bullion. (see mercantilism and Colbertist)
business cycle
Variations above and below the trend line of an economy or the price of a stock, with periods measured from trough to trough. Economists have identified major cycles of 50 years (Nikolai Kondratieff), 20 years (Karl Marx), and four years (Roy Harrod and Evsey Domar). (see cycles)
capacity point
The optimal level of production, when all factors of production are being employed at their highest and best use. The minimum point on the average cost curve.
capital
In economics, a good (e.g., machine, truck, warehouse, etc.) used by the business sector to produce another good. (see factor of production)
capitalism
A legal system that safeguards private property and permits free enterprise without government interference.
cardinal numbers
Numbers that assign specific value; e.g., 1, 2, 10. (see ordinal numbers)
cartel
A syndicate of two or more firms that divide up the market (by geography, quantity, or product differentiation) for the purpose of colluding. (see collusion)
caveat emptor
(Latin) In business, let the buyer beware. In economics, this term encapsulates the essence of the market system; i.e., that everyone must be responsible for his or her own economic decisions.
cease and desist order
A ruling by a judge ordering one party to stop what they’re doing and to not do it again. Such rulings include TRO’s (temporary restraining orders), preliminary injunctions, and permanent injunctions.
ceteris paribus
(Latin) All else remains constant. Examining the changes in two or three variables while assuming that all other variables do not change.
chancery court
A court of equity, originally (13th century England) held in the residence (chancery) of a church bishop.
classical economics
The doctrines (theories) and paradigms (models) developed from 1752 through 1867 that formed an academic discipline originally called “political economy.” The founders of this subject matter, called “Ricardians,” promoted free trade as their universal tenet and believed that the concept of price was explained by the labor theory of value.
classical rent doctrine
David Ricardo’s theory that surplus value is captured by the landlord. (see labor theory of value)
Clayton Antitrust Act
In addition to outlawing specific anticompetitive behaviors, this 1914 law authorized federal judges to issue preliminary injunctions when they hear evidence that the Sherman Antitrust Act has been violated. (see Antitrust Trilogy)
Colbertist
A French mercantilist. The word reflects the enormous power and influence of Jean Colbert, Finance Minister to Louis XIV. (see mercantilism and bullionist)
collusion
Two or more firms acting in concert to manipulate the market to their benefit, thereby adversely affecting the consumer. (see mergers and acquisitions, cartel, and price fixing)
comic nose
An anagram for economics.
common market
An economic territory with the absence of internal tariffs, a common external tariff, and factor mobility.
communism
The liberation of the people from the burdens of liberty.
comparative advantage
Something that A (one person or country) does better than B (another person or country) relative to everything else that A does. (see absolute advantage)
complementary goods
When the use of one good requires the use of another ; i.e., they are mutually dependent. (see substitution good, factor good, and interdependent markets)
concave vs. convex
A description of a curvilinear function as per its relationship to a point of reference. A bowl is concave relative to the ceiling, but convex relative to the table it sits on. The lunar surface is convex from the perspective of the earth, but concave relative to the center of the moon. (see Note on Geometric Terms and Operations, No 4)
conspicuous consumption
Thorstein Veblen’s thesis that some goods are preferred to others because of their social implications; i.e., that prestige is afforded as a function of price. (see affectation and reverse substitution effect)
constant costs
Marginal costs (per unit) that remain the same regardless of the number of units produced.
consultant
- An expert who is hired to support a decision that has already been made. 2. A guru who knows that you can’t solve the problem until you know whose problem it is. 3. A jobless person who shows executives how to work.
consumer price line
The average revenue function; the demand curve.
consumer surplus
Utility received, but not paid for.
consumption good
A good or service used by the household sector. (see investment good)
contract
An enforceable agreement; i.e., an understanding between two or more parties that entitles an aggrieved party to present a dispute to the trier of fact in a court of law. (see elements of a contract)
conventional wisdom
That which is believed by common fools.
convex
(see concave vs. convex)
corporate culture
One of the supreme oxymorons of our time.
corporation
A business organization (entity) having a legal status, with liability limited to the assets of the corporation. (see proprietorship)
cost-push inflation
When factor shortages raise marginal costs and thereby push prices up the aggregate demand function. (see demand-pull inflation)
counterpart funds
Soft currency of de minimis value that is used to offset commodity transfers between nations; e.g., the payment of taka by Bangladesh to the United States in exchange for a shipment of food.
credit card
A plastic passport to the valley of the shadow of debt. customs duty A tax on imports; i.e., a tariff.
customs union
An economic partnership with an absence of internal tariffs and a common external tariff.
cycles
A succession of periodically recurring events. (see business cycle)
cynic
Someone who knows the price of everything and the value of nothing.
debt
An ingenious substitute for the chain and whip.
deductive logic
Reasoning from the general to the particular. The use of an internally consistent hypothesis. (see methodology and inductive logic)
demand
- Both the ability and willingness to enter the market at some specific price. (see effective demand) 2. An anagram of damned.
demand-pull inflation
When deficit spending pulls prices up the aggregate supply function; i.e., more dollars are chasing the same quantity of goods. (see cost-push inflation)
demography
The study of populations.
Department of Justice
DOJ
dialectic
Plato’s system of inductive logic that begins with a thesis (an initial assumption of reality) tempered by an antithesis (an observed exception) to form a synthesis (the new thesis). (see Hegelian logic and dialectical materialism)
dialectical materialism
The Marxian application of Hegelian logic to the study of economic history. (see dialectic and Hegelian logic)
differentiated products
Competitive goods made different by physical characteristics or distinguished by advertising. (see homogenous products)
diminishing marginal utility
(see law of diminishing marginal utility)
diminishing returns
Decreasing returns to the variable factor. (see law of diminishing returns)
distribution theory
A model that explains for whom the economy produces. (see feudalism, Marxism_ and meritocracy)
doctrine
Used in economics, especially during the 19th century, as a synonym for theory; i.e., a scientific principle or prediction. (see theory) duopoly Two producers.
Dutch auction
A reverse auction. where the offering price begins high and proceeds down until there is a buyer.
dynamics
An analysis which considers all significant variables over a time series. (see statics)
econometrics
The combined use of statistical methods and mathematical economics to measure, estimate, and forecast quantitative economic relationships, variables, and outcomes. (see mathematical economics)
economic development
(see growth and development)
economic good
A good (tangible product) or service (intangible commodity).
economic good vs. free good
Carl Menger’s distinction between a good which is scarce (an economic good) and therefore commands a price, and one that is not scarce and therefore is free.
economic growth
(see growth and development)
economic history
The study of history in terms of economic causes and effects; e.g., The Industrial Revolution, The Potato Famine, The Gold Rush, etc. (see history of economic thought and megaeconomics)
economic rent
A payment to a factor of production. (see quasi rent)
economics
- The study of scarcity. 2. The study of natural laws. 3. The metaphysics of accounting. 4. A counter-intuitive thought process for comprehending social order.
economist
I. Someone who does it with models. 2. Someone who gets rich explaining why others are poor. 3. Someone who sees something work in practice and asks if it would work in theory. 4. Someone who won’t sell his children because he believes that their market value will increase in the future.
economists
- A large group of academics, if laid end to end, would not reach a conclusion. 2. A small group of academics who refuse to speak English so that no one else can understand them.
economy vs. efficiency
To economize is to minimize inputs with the given output. To make efficient is to maximize output with the given inputs.
educational vouchers
State issued tuition warrants permitting parents to enroll their children at the school of their choice, public or private.
effective demand
Both the ability and willingness to pay the current market price. (see demand)
efficiency
(see economy vs. efficiency)
elasticity
Responsiveness of a dependent variable to a change in an independent variable. In economics, Q = f(P ).
elements of a contract
The necessary conditions of an enforceable agreement; i.e., offer (proposal), acceptance (affirmative notification), and consideration (quid pro quo). (see contract)
eminent domain
The right or power of the state to take private property for public use, usually for adequate compensation.
empiricism
Extrapolation of the future from the past. The logic of experience.
entitlement
A unilateral transfer payment from the government to the household sector required by law. (see unilateral transfer payment and welfare)
entrepreneurial capacity constraint
Milton Friedman’s explanation of how decreasing cost industries eventually experience diminishing returns when “reach exceeds the grasp” of the CEO. When an organization becomes so vertical that a decision to innovate becomes confused in communication, enthusiasm for change lost in translation, and feedback from subordinates too muffled to be heard.
entrepreneurship
The fourth factor of production (as defined by Joseph Alois Schumpeter) can be pursued in one or more of five ways: 1. Introduction of new products (e.g., Edison), 2. New methods of production (e.g., Ford), 3. Opening of new markets (e.g., Russia), 4. Development of productive factors (e.g., General Motors Institute), and 5. Catalyst of productive factors (e.g., NASA).
equilibrium price
The price that clears the market; i.e., the price at which the quantity supplied equals the quantity demanded. The quintessence of supply and demand theory.
equilibrium theory
Leon Walras’ synthesis of two disparate mathematical concepts; i.e., supply and demand. Arguably the most important natural law of economics, whether applied to a market (partial equilibrium) or an economy (general equilibrium).
Eurodollar
US dollars on deposit at a European bank or banks in the British Caribbean.
excellence
It’s an attitude.
excess profit
The accounting profit in excess of normal profit.
exchange control
A form of trade restriction whereby a government controls the foreign currency market by establishing an official rate and location of exchange, and retains the foreign currency for use as determined by the political leadership.
exchange rate
The price at which one nation’s currency is traded for another.
expected R/C ratio (E)
In probability theory. the revenue from an event divided by its cost. For example, a savings bond with a maturity value of S 100 which may be purchased for $25 has an expected R/C ratio of 4; i.e., E = 100 = 25 = 4. (see fair bet, measure of risk, and Note on Probability Theory)
external economy vs. external diseconomy
An autonomous (independent) economic activity with beneficial spreading effects; called an external diseconomy if the effects are detrimental.
external tariff
A customs duty on goods imported into an economic area of business zone from states or political entities not members of that area. (see internal tariff)
fact
The result of research; unfinished, but presently abandoned. (see theory)
factor good
A good used in the production of another good. When a change in the market price of a good (e.g., autos) affects the market price of a factor good (e.g., steel), the two goods are said to be interdependent. (see intermediate good, factors of production, substitution good, complementary good, and interdependent markets)
factor oriented industry
A business that reduces cost by locating near a factor of production; e.g., highly skilled labor, specialized land use, or an exceptionally heavy input. (see location theory and weight-subtracting industry)
factors of production
Land (T), labor (L), and capital (K) are the classical factors. Land and labor are the primary factors; they exist a priori. Capital is the secondary factor; it is produced by land and labor. Modern economists are also concerned with entrepreneurship, energy, and information. (see capital, a priori, and entrepreneurship)
fair bet
A risk where the probability of success times the expected R/C ratio equals 1; i.e., pxE = 1. (see expected R/C ratio, measure of risk, and Note on Probability Theory)
fallacy of composition
Assuming what is true for the part to be true for the whole.
featherbedding
Paying an employee to produce nothing; i.e., disguised unemployment.
feudalism
A distribution system based on birthright. (see distribution theory)
FEUR
(see full-employment-unemployment-rate)
finance
The art of passing currency from hand to hand until it finally disappears.
fixed cost (FC )
A cost that is incurred regardless of the level of production; i.e., even if output were zero. The height of the total cost function; i.e., where TC crosses the vertical axis.
fixed supply
Totally inelastic supply; i.e., the quantity supplied remains the same regardless of price. (see price taker)
General Theory
(…of Employment.. Interi_ and Ntone ) The foundations of macroeconomic analysis by John Maynard Keynes.
general theory of employment
John Maynard Kent’s’ explanation that employment is a function of aggregate demand; i.e.. consumption.. investment and government expenditures. (see special theory of employment)
general theory of relativity
Albert Einstein’s proposition that space is curved and time slows down near a gravitating mass. (see special theory of relativity)
genius
A person whom all idiots oppose.
geometric progression
A series of numbers increasing at a constant rate; e.g., 1, 2, 4, 8. (see arithmetic progression and rate of increase)
gestalt
The whole, where the whole is greater than the sum of the parts.
Giffen good
(see inferior good)
glamour stock
A corporation perceived by the market to have enormous growth potential. (see blue chip stocks)
gross national product
GNP
government paternalism
The condition that exists when the political leadership believes that the principle of caveat emptor cannot or should not be relied upon.
gross domestic product
GDP
gross domestic product (GDP)
The total dollar value of all new goods and services sold during a fiscal year, which were produced within the geographic borders of a country regardless of the nationality of the producers. (see gross national product)
