Economics Key Concepts

Economic Concepts

• Supply and Demand: a fundamental principle in economics that regulates prices, where the amount of a commodity available meets the desire of buyers for it.

Cost Concepts

• Sunk Cost: a cost incurred by an entity that cannot be recovered by any means, and should not influence future decisions.
• Opportunity Costs: the potential gain lost when choosing one alternative over others, representing a trade-off in decision-making.

Market Dynamics

• Inflation: a sustained increase in prices and a decrease in the purchasing power of money, affecting the economy as a whole.
• Tragedy of the Commons: an economic problem where individual self-interest in a shared resource leads to its depletion, harming others.

Comparative Advantage

• Comparative Advantage: the ability of an individual or group to perform a particular economic activity more efficiently than others, promoting specialization and trade.

Decision-Making Tools

• Cost-Benefit Analysis: a systematic approach to weigh the benefits of a situation or action against its associated costs, facilitating informed decision-making.

Key Figures and Institutions

• Adam Smith: renowned as the Father of Modern Economics, known for his work "The Wealth of Nations" and the concept of the "Invisible Hand".
• Banks: financial establishments that invest deposited money, provide loans, and exchange currency, serving as a backbone of the economy.
• Credit Unions: non-profit cooperatives that allow members to borrow at low interest rates, promoting financial inclusion.

Financial Concepts

• Capital: wealth in the form of money or assets used for starting a business, investing, or other economic pursuits.
• Capital Gains: profits earned from the sale of property or investments, subject to taxation.