Mistakes Were Made
This type of good is "non-excludable" and "non-rivalrous"—it’s for everyone, like national defense or that one street lamp outside your house.
Public goods
If the price of coffee goes through the roof, the demand for this "substitute" likely increases.
tea
To find this, you simply multiply Price by Quantity (P times Q).
revenue
This curve shows the trade-off between inflation and unemployment, named after an economist who probably didn't enjoy being stuck in stagflation.
phillips curve
This "frontier" curve shows the maximum combinations of two goods an economy can produce given its resources.
PPC curve
This behavioral term describes being "hooked" or influenced by the very first price or piece of information you see.
What is Anchoring?
When the government gives money to firms to help lower their costs, the supply curve shifts in this direction.
right or outward
If the price changes by 10% and the quantity demanded changes by 20%, the absolute value of the PED is this.
2
When the central bank decides to lower interest rates to boost the economy, they are using this "expansive" policy.
expansionary monetary policy
This "circular" diagram shows how money moves between households and firms.
circular flow of income
When a factory dumps chemicals into a river without paying for it, they are creating this specific "external" cost.
negative production externality
This "confusing" good is one where people actually buy less of it as they get richer, like instant noodles or old used cars.
inferior goods
This number between 0 and 1 measures income inequality; if it’s 1, then one person has all the money.
gini coefficient
If the value of the Dollar goes from 1 Euro to 1.20 Euros in a floating system, we say the Dollar has done this.
What is Appreciated?
You draw this diagram to show why society over-consumes "demerit goods" like cigarettes.
negative consumption externality diagram
This assumption says humans want to be logical, but we have limited time, information, and brainpower to make the perfect choice.
bounded rationality
If the government borrows too much money, it might raise interest rates and "crowd out" this specific component of Aggregate Demand.
investment
You calculate this "social" value by adding together Consumer Surplus and Producer Surplus.
What is Social/Community Surplus?
This comparison method uses a "basket of goods" to see what money can actually buy in different countries.
What is Purchasing Power Parity (PPP)?
This "king" of market structures has only one firm and huge barriers to entry.
monopoly
This "adverse" situation occurs when only the people who are most likely to use insurance (like the very sick) actually buy it.
adverse selection
This "sticky" situation occurs in the Keynesian model when the economy is stuck below its full employment potential.
recessionary gap
When using the expenditure approach for GDP, you add Consumption, Investment, and Government Spending to this
net exports
This condition states that a currency devaluation only improves the trade balance if the combined PED of exports and imports is greater than 1.
marshall Lerner condition
This "bowed" curve is used to visualize the degree of income inequality in a country's population.
lorenz curve