Personal Finance Glossary

Question 1

Risk

Answer 1

anything that affects the outcome of your choices that can associated with a probability

Question 2

Oligopoly

Answer 2

a market characterized by a small number of firms who realize they are interdependent in their pricing and output policies

Question 3

Specialization

Answer 3

individuals dividing up labor within/across trades

Question 4

Assumptions

Answer 4

an abstraction that simplifies a scenario

Question 5

Flat Money

Answer 5

items not valuable as a commodity but function as money because a government states that they are usable for debts

Question 6

Unjust outcomes

Answer 6

unfair outcomes due to inequality of the implementation of rules

Question 7

Assumptions

Answer 7

an abstraction that simplifies a scenario

Question 8

Price of related goods

Answer 8

a variable that is impacted by complements and substitutes (related goods)

Question 9

Normal Goods

Answer 9

any good in which demand increases as income increases

Question 10

Marginal Cost

Answer 10

why the supply line slopes up; inverse relationship with marginal productivity
Graphs

Question 11

Returns to scale

Answer 11

degree to which a change in the scale of production changes the level of output (decreasing, constant, increasing)

Question 12

Rent-seeking

Answer 12

preventing a loss in market power

Question 13

Consumption

Answer 13

the act of deriving utility (sometimes using things, but only with goods)

Question 14

Negative externalities

Answer 14

activity that imposes negative effects (e.g. pollution); market failure results from a private actor not taking all costs into effect

Question 16

Constrained Optimization Problem

Answer 16

a situation where one maximizes utility in the face of scarcity

Question 17

Commutative justice

Answer 17

fairness of the rules by which the “market game” is played

Question 18

Commodity money

Answer 18

items that function as money but are also valuable themselves

Question 19

Fiat money

Answer 19

items not valuable as a commodity but function as money because a government states that they are usable for debts

Question 20

Factor markets

Answer 20

the exchange of inputs we produce

Question 21

Product markets

Answer 21

the exchange of goods and services