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Updated:
April 2, 2006
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ECONOMIC TERMS A B C D E F G H I J K L M N O P Q R S T U V W X Y Z Absolute Advantage The ability of an economic actor (an individual, a
household or a firm) to produce some particular good or service with a
smaller total input of economic resources (labor, capital, land, etc.) per
unit of output than other economic actors. Adverse Selection Refers to a situation in which sellers have relevant
information that buyers lack (or vice-versa) about
some aspect of product quality. Agency Problem Also sometimes referred to as the principal-agent problem.
The difficult but extremely important and recurrent organizational design
problem of how organizations can structure incentives so that people
("agents") who are placed in control over resources that are not
their own with a contractual obligation to use these resources in the
interests of some other person or group of people actually will perform this
obligation as promised -- instead of using their delegated authority over
other people's resources to feather their own nests at the expense of those
whose interests they are supposed to be serving (their
"principals"). Aggregate Demand & Supply This is one of the key concepts introduced by John Maynard
Keynes that still today is at the heart of most macroeconomic theories about
the determination of the overall level of employment (and thus the level of
national income produced) and prices in a country's economy during a given
year. Anarchism Any of a variety of ideologies sharing the fundamental
belief that the state and all similar forms of governmental authority are unjustified
and oppressive and illegitimate and therefore ought to be abolished, with
future social and economic cooperation to be carried out only by means of
voluntary relationships and consensual agreements. Barriers to Entry Conditions or circumstances that make
it very difficult or unacceptably costly for outside firms to enter a
particular market to compete with the established firm or firms that are
already selling the good or service involved. Barter Trading of goods or services directly
for other goods or services, without using money or any other similar unit of
account or medium of exchange. Black Market A market in which certain goods or services are routinely
traded in a manner contrary to the laws or regulations of the government in
power. Business Cycle More or less regular swings or
wave-like fluctuations in the pace of a country's economic growth, well above
and well below the long-term trend in the growth rate of total production;
the ups and downs of overall business activity, as evidenced by surges and
declines in GNP and GNP, unemployment rates, and the general price level; the
boom-and-bust pattern of recession (or depression) and recovery. Capital The existing stock of goods which are to be used in the
production of other goods or services and which have themselves been produced
by previous human activities. Capitalism System of economic organization which allows for the
ownership of property and economic production by private citizens. Cartel A formal organization set up by a group of firms that
produce and sell the same product for the purpose of exacting and sharing
monopolistic rents. Ceteris Paribus Latin expression for "other things being equal." Coase's Theorem States that private economic actors
can solve the problem of externailites among
themselves. Whatever the initial distribution of rights, the Coase theorem insists that the interested parites can always reach a bargain in which everyone is
better off and the outcome is efficient. Communism 1) Any ideology based on the communal
ownership of all property and a classless social structure, with economic
production and distribution to be directed and regulated by means of an
authoritative economic plan that supposedly embodies the interests of the
community as a whole. 2) The specifically Marxist-Leninist variant of socialism
which emphasizes that a truly communist society can be achieved only through
the violent overthrow of capitalism and the establishment of a
"dictatorship of the proletariat" that is to prepare the way for
the future idealized society of communism under the authoritarian guidance of
a hierarchical and disciplined Communist Party. Comparative Advantage The ability of one economic actor (an individual, a household,
a firm, a country, etc.) to produce some particular good or service at a
lower opportunity cost than other economic actors can. Complementary Goods Two products for which the demand schedules are related to
each other so that an increase in the price of the first good will cause a
leftward shift of the entire demand schedule for the other good(s) -- that
is, less of the second good will now be demanded at any given available price
of the second good. Conservatism A general preference for the existing order of society and
an opposition to all efforts to bring about rapid or fundamental change in
that order. Conservative ideologies characteristically strive to show that
existing economic and political inequalities are well justified and that the
existing order is about as close as is practically attainable to an ideal
order. Corporation Also referred to as "limited liability
corporation." A type of legal entity provided for in the laws of most
modern economically developed countries that two or more investors may agree
to create for the purpose of combining some of their resources and going into
business together. |
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