Key Concepts in Economics

Scarcity: Limited resources versus unlimited wants.
Supply and Demand: Determines prices in a market economy.
- Law of Demand: Price increase leads to quantity demanded decrease.
- Law of Supply: Price increase leads to quantity supplied increase.
Opportunity Cost: The cost of the next best alternative foregone.

Market Economy: Decisions made by individuals and businesses; minimal government intervention.
Command Economy: Central authority makes decisions about production and distribution.
Mixed Economy: Combines elements of market and command economies.

Gross Domestic Product (GDP): Total value of goods and services produced in a country.
Unemployment Rate: Percentage of the labor force that is jobless and actively seeking employment.
Inflation Rate: Measure of the rate at which the general level of prices for goods and services is rising.

Traditional Economy: Based on customs and traditions; often agrarian.
Capitalist Economy: Emphasizes private ownership and free market competition.
Socialist Economy: Advocates for social ownership and democratic control of the means of production.

Perfect Competition: Many buyers and sellers; identical products.
Monopoly: Single seller dominates the market; no close substitutes.
Oligopoly: Few sellers dominate the market; products may be similar or differentiated.

Fiscal Policy: Government spending and tax policies to influence the economy.
Monetary Policy: Central bank actions to control money supply and interest rates.
- Expansionary Policy: Aims to increase economic activity.
- Contractionary Policy: Aims to decrease economic activity.

Comparative Advantage: The ability of a country to produce goods at a lower opportunity cost.
Trade Barriers: Tariffs, quotas, and regulations that restrict trade between countries.
Balance of Trade: Difference between a country's exports and imports.

Keynesian Economics: Advocates for increased government expenditures and lower taxes to stimulate demand.
Classical Economics: Emphasizes free markets and the idea that markets self-regulate.
Behavioral Economics: Studies the effects of psychological factors on economic decision-making.

Scarcity highlights the conflict between limited resources and unlimited human wants, necessitating choices in resource allocation.
Supply and demand interact to set market prices, guiding the distribution of goods and services.
The law of demand states that as prices rise, consumer demand for a product decreases, illustrating the inverse relationship.
The law of supply indicates that higher prices incentivize producers to supply more, reflecting a direct relationship.
Opportunity cost represents the value of the next best alternative sacrificed when making a decision.

A market economy is characterized by individual and business decision-making with limited government interference.
Command economies rely on central authority to dictate production and distribution processes.
Mixed economies integrate features from both market and command systems, allowing for a combination of free market and regulatory frameworks.

Gross Domestic Product (GDP) measures the total economic output of a country, reflecting its economic health.
The unemployment rate conveys the percentage of the workforce that is without a job and actively seeking employment, serving as an economic health indicator.
The inflation rate tracks the general increase in price levels over time, affecting purchasing power and economic stability.

Traditional economies are based on historical customs and practices, typically revolving around agriculture and sustainability.
Capitalist economies prioritize private ownership and encourage competition within free markets, driving innovation and efficiency.
Socialist economies promote collective or social ownership and usually involve democratic control over production means, aimed at equitable distribution of resources.

Perfect competition features a market with many buyers and sellers trading identical products, facilitating optimal pricing.
A monopoly occurs when a single entity controls the entire supply of a product or service with no close substitutes available.
Oligopolies consist of a few sellers dominating the market, where products can be either similar or differentiated, often leading to strategic pricing and competition.

Fiscal policy encompasses government strategies regarding spending and taxation aimed at influencing overall economic activity.
Monetary policy involves actions by central banks to regulate the money supply and manage interest rates to promote economic stability.
Expansionary policies seek to boost economic activity through increased government spending or reduced taxes.
Contractionary policies aim to slow down economic activity, often through reduced spending or increased taxes, to combat inflation.

Comparative advantage describes how countries can produce specific goods more efficiently than others, leading to beneficial trade relationships.
Trade barriers, such as tariffs, quotas, and regulations, limit cross-border trade, impacting economic interactions between nations.
The balance of trade measures the difference between a country's exports and imports, indicating economic strength or weakness in international markets.

Keynesian economics advocates for government intervention through higher expenditures and lower taxes to stimulate demand during economic downturns.
Classical economics believes in the self-regulating nature of markets, arguing that free markets will naturally meet supply and demand.
Behavioral economics examines how psychological influences affect economic decisions, providing insight into irrational behaviors in financial choices.