Economics for Dummies

Externality: The cost or benefit that affects a party who did not choose to incur that cost or benefit.

Example: If you did not internalize the externalities, you would buy the generic brand and save a dollar.

Scarcity: The economic problem of having seemingly unlimited human wants in a world of limited resources.

Example: The scarcity of water in Nigeria lead to the farmers not being able to harvest

Economic Perspective: A viewpoint that envisions individuals and institutions making rational decisions by comparing the marginal benefits and marginal costs associated with their actions.

Example: An economic perspective would be how the U.S government is able to run a deficit to fund a war but is unable to do the same for war veterans.

Rational Self Interest: Actions that elicit the most personal benefit

Example: A rational self interest would be if i chose to buy ice cream because that is what would benefit me the most.

Opportunity Cost: The value of the next highest valued alternative use of that resource.

Example: An example of opportunity cost would be someone giving up watching a movie to study for a text.

Marginal Cost: The change in the opportunity cost that arises when the quantity produced is incremented by one unit, it is the cost of producing one more unit of good

Example: The total cost of one pen is $5 but the total cost of 2 pens is $9, then the marginal cost of expanding output by one unit is only $4.

Marginal Benefit: Additional satisfaction or utility that a person receives from consuming an additional unit of a good or service.

Example: The maximum amount someone is willing to pay to consume that additional unit of a good or service.

Marginal Analysis: An examination of the additional benefits of an activity compared to the additional costs incurred by that same activity

Example: Companies use marginal analysis as a decision-making tool to help them maximize their potential profits.

Utility: the measurement of "useful-ness" that a consumer obtains from any good

Example: Utility can measure how much someone liked a show or movie.

Incentive: something that motivates an individual to perform an action

Example: An incentive to do study would be to eat some candy after you finish a chapter.

Monetary Incentive:a money-based reward given when one meets or exceeds expectations

Example: A monetary incentive would offering to pay overtime instead of having time to spend time with your family.

Non-Monetary Incentive: An reward that does not require money when someone exceeds expectations

Example: A non-monetary incentive would be free babysitting for all teachers at valor high school.

Supply: the total amount of a specific good or service that is available to consumers

Example: the supply of iPhones is how many were manufactured.

Demand: a consumer's desire and willingness to pay a price for a specific good or service

Example: demand is how much of something a consumer wants.

Economics: the area of the production, distribution, or trade, and consumption of goods and services by different agents in a given geographical location.

Example: Economics is the the branch of knowledge that has to do with the consumption, production, and transfer of wealth.

Market: A regular gathering of people who buy and sell things.

Example: The market is where people buy their vegetables.

Public Goods: a product that someone can eat without making it harder for another person to get, and no one is excluded

Example: Public goods include education, air, and street lighting.

Private Costs: A product that must be bought in order to be consumed and by one person getting it, it prevents another person from having it too.

Example: Private costs include clothes, ice cream, and candy.

External Cost: when producing or consuming a good or service imposes a cost upon a third party.

Example: A cost that is covered like natural disasters.

Private Costs: A producer's or supplier's cost of providing goods or services

Example: An example of a private cost would be the money a company pays to start their business.

Private Benefit: The benefit that someone receives and not everyone does.

Example: A girl receives a private benefit when only she benefits from buying pizza because she is the only one eating it.

External Benefit: occurs when producing or consuming a good causes a benefit to a third party

Example: When everyone benefits from producing or consuming a specific thing.

Negative Externalities: The cost that is suffered by a third party, meaning someone or something that is not intended to suffer.

Example: A negative externality would be second hand smoking.

Positive Externalities: When the consumption or production of a good benefits a third party

Example: A positive externality would be people in a community getting a vaccine.

Traditional Economy: An economic system in which tradition, customs, and beliefs help produce the goods and services the economy produces.

Example: An example of a traditional economy would be the native american economy because they rely heavily on trade.

Command Economy: An economy in which the government controls everything.

Example: a command economy would be North Korea or a communist government.

Market Economy: An economy that is run by the people and businesses of the country.

Example: Australia or the U.S is a good example of Market Economy.

Mixed Economy: Economic system

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