Barter: Direct exchange of goods and services without using money, requiring a double coincidence of wants.
Money: A medium of exchange that facilitates trade, serving as a medium of exchange, a unit of account, a store of value, and a standard of deferred payment.
Economic Interdependence
The mutual reliance between different sectors or countries for goods and services, increased by globalization and specialization.
Absolute Advantage and Comparative Advantage
Absolute Advantage: A country’s ability to produce a good more efficiently than another country.
Comparative Advantage: A country’s ability to produce a good at a lower opportunity cost than another country, forming the basis for trade.
Wealth and Mass Production
Wealth: The abundance of valuable resources or material possessions.
Mass Production: Large-scale production of standardized products, often using assembly lines, leading to lower costs and prices.
Demand and the Law of Demand
Demand: The quantity of a good or service consumers are willing and able to purchase at various prices.
Law of Demand: The principle that, with other factors constant, an increase in price leads to a decrease in demand, and vice versa.
Substitute Good and Complementary Good
Substitute Good: A good that can be used in place of another.
Complementary Good: A good used together with another.
Supply and Law of Supply
Supply: The quantity of a good or service producers are willing and able to offer at various prices.
Law of Supply: The principle that, with other factors constant, an increase in price leads to an increase in supply, and vice versa.
Revenue
The income generated from selling goods and services, calculated as price per unit times the number of units sold.
Demand and Supply Elasticity
Demand Elasticity: How much the quantity demanded of a good responds to a change in price.
Supply Elasticity: How much the quantity supplied of a good responds to a change in price.
Demand Schedule and Demand Curve
Demand Schedule: A table showing the relationship between price and quantity demanded.
Demand Curve: A graph showing the relationship between price and quantity demanded.
Supply Schedule and Supply Curve
Supply Schedule: A table showing the relationship between price and quantity supplied.
Supply Curve: A graph showing the relationship between price and quantity supplied.
Change in Quantity Demanded vs. Change in Demand
Change in Quantity Demanded: A movement along the demand curve due to a change in price.
Change in Demand: A shift of the entire demand curve due to factors other than price.
Change in Quantity Supplied vs. Change in Supply
Change in Quantity Supplied: A movement along the supply curve due to a change in price.
Change in Supply: A shift of the entire supply curve due to factors other than price.
Income Effect and Substitution Effect
Income Effect: The change in quantity demanded resulting from a change in the consumer's real income.
Substitution Effect: The change in quantity demanded resulting from a change in the price of a good relative to substitute goods.
Quantity Supplied and Market Supply
Quantity Supplied: The amount of a good producers are willing and able to sell at a specific price.
Market Supply: The total quantity of a good available for purchase across all producers.
Change in Supply
A shift in the supply curve, caused by factors such as changes in production costs, technology, or producer expectations.
Supply Chain
The sequence of processes involved in the production and distribution of a commodity.
Equilibrium Price and Market Equilibrium
Equilibrium Price: The price at which quantity demanded equals quantity supplied.
Market Equilibrium: A situation where market supply and demand balance each other, resulting in stable prices.
Shortage
A situation where the demand for a good or service exceeds its supply.
Price Floor and Price Ceiling
Price Floor: A legally established minimum price for a good or service, e.g., minimum wage.
Price Ceiling: A legally established maximum price for a good or service, e.g., rent control.
Monopolies
A market structure with a single seller dominating the market.
Market Structure
The characteristics of a market, including the level of competition and nature of the goods sold.
Oligopoly
A market structure dominated by a few large firms.
Market Failure
A situation where the allocation of goods and services is not efficient, leading to a net social welfare loss.