Term Definition

An amount that has to be paid or spent to buy or obtain something. 

Creative Destruction

A process through which something new brings about the demise of whatever existed before it. The standard example is the buggy-whip manufacturers who went out of business as automobiles overtook the horse and buggy.


Relating to, involving, or being a crime.

Crony Capitalism

An economic system characterized by close, mutually advantageous relationships between business leaders and government officials.

Customer Engagement

The depth of the relationship a customer has with a brand.

Deadweight Loss

Also known as excess burden or allocative inefficiency. A loss of economic efficiency that can occur when the free market equilibrium for a good or a service is not achieved.


An amount of money owed by a person, firm, or government to a lender.


In tax policy, a deficit occurs when spending exceeds tax revenue. 


The economic principle referring to a consumer's desire to purchase goods and services and willingness to pay a price for a specific good or service. Holding all other factors constant, an increase in the price of a good or service will decrease the quantity demanded, and vice versa.

Demand Schedule

The relationship between quantity demanded and own price, holding all other factors constant. The demand schedule is a way to show the relationship between quantity demanded and own price. 

Discouraged Worker

People who disengage from the labor market, either by not working, or by not actively seeking employment. Discouraged workers are not counted as unemployed, nor are they counted as employed. 

Division of Labor

The assignment of different parts of a manufacturing process or task to different people in order to improve efficiency. Under this regime each worker becomes an expert in one isolated area of production, thus increasing his efficiency. The fact that laborers do not have to switch tasks during the day further saves time and money. Adam Smith was one of the first people to write about the division of labor. 


A term used to distinguish the home country of concern from foreign, international, or global markets. 

Economic Indicator

Indicators that tell us what the economy is up to, and what direction it is likely to take in the future. The unemployment rate is an example of an economic indicator. 

Economic Profit

The difference between the revenue received from the sale of an output and the costs of all inputs used and any opportunity costs


The study or systematic investigation of the principles of human action.


The wealth and resources of a country or region, especially in terms of the production and consumption of goods and services


A way of thinking that serves entrepreneurs in the processes of opportunity identification and new venture creation. Effectuation includes a set of decision-making principles expert entrepreneurs are observed to employ in situations of uncertainty.


In economics, efficiency implies an economic state in which every resource is optimally allocated to serve each individual or entity in the best way while minimizing waste and inefficiency. When an economy is economically efficient, any changes made to assist one entity would harm another. In terms of production, goods are produced at their lowest possible cost, as are the variable inputs of production.


A person who organizes and operates a business or businesses, taking on greater than normal financial risks in order to do so


The activity of setting up a business or businesses, taking on financial risks in the hope of profit.


The state in which quantity supplied and quantity demanded are equal.

Equilibrium Price

The market price when markets are in a state of equilibrium. This means that equilibrium price is the market price where the quantity of goods supplied is equal to the quantity of goods demanded.

Equilibrium Quantity

The quantity supplied when markets are in a state of equilibrium. This means that equilibrium quantity is the quantity supplied where the quantity of goods supplied is equal to the quantity of goods demanded.


What is left after debt is subtracted from assets. 


Moral principles that govern a person's behavior or the conducting of an activity. Also, the branch of knowledge that deals with moral principles.


Fiscal policy is "expansionary" when the spending plan results in a deficit. 


A strong belief that something will happen or be the case in the future. Similarly, a belief that someone will or should achieve something.


The act of a country shipping goods and services out of the port of a country. In international trade, an export refers to the selling of goods and services produced in the home country to other markets (other countries).

Federal Reserve

Also commonly known as "The Fed", the Federal Reserve is the central bank of the United States. The Fed regulates the U.S. monetary and financial system. 


The system of political organization prevailing in Europe from the 9th to about the 15th centuries, having as its basis the relation of lord to vassal with all land held in fee, and as chief characteristics homage, the service of tenants under arms and in court, wardship, and forfeiture.

Fiduciary Responsibility

The legal term describing the relationship between two parties that obligates one to act solely in the interest of the other. The party designated as the fiduciary owes the legal duty to a principal, and strict care must be taken to ensure no conflict of interest arises between the fiduciary and his principal.

Financial Leverage

The ratio of total assets divided by equity. When a firm has no liabilities (debt), then its financial leverage is 1.0, because all the assets are accounted for as equity. Stated alternatively, for each $1 of equity the firm has, the firm also has $1 of assets. A financial leverage of 1.0 means the firm is not financially leveraged at all, or it does not use debt to finance assets. 

Fiscal Policy

Policy relating to government revenue and expenditures.

Formal Freedom

Formal freedom can be thought of as "freedom-from." That is to say, freedom from being interfered with. This can be juxtaposed against "freedom-to," which is the freedom to do something.  A law saying Person A cannot buy a home is a law that infringes on A's formal freedom. 

Fractional Reserve Banking

A system in which only a fraction of bank deposits are backed by actual cash on hand and available for withdrawal. This is done to theoretically expand the economy by freeing capital for lending.