Term Definition
Normal Good

Any good for which demand increases when income increases.

Noxious Market

A market in things that should not be for sale. 

Objective Value

The intrinsic value of a good or service. Objective values should be able to be measured by objective measures. 

Open Market Operations

The Federal Reserve purchases and sells U.S. Treasury securities on the open market in order to regulate the supply of money that is on deposit in U.S. banks, and therefore available to loan out to businesses and consumers. It purchases Treasury securities to increase the supply of money and sells them to reduce the supply of money. By using this system of open market purchasing, the Federal Reserve can produce the target federal funds rate it has set. It calls this process its open market operations.

Opportunity Cost

The value of the next-highest-valued alternative use of that resource. Example: If you spend time and money going to a movie, you cannot spend that time at home reading a book, and you cannot spend the money on something else.

Parcel

A quantity or amount of something, especially as dealt with in one commercial transaction. To divide something into parcels is to divide it into discrete sections.

Pecuniary Externality

An externality that affects someones welfare only by affecting the price of what they are trying to sell. 

Perfect Competition

the situation prevailing in a market in which buyers and sellers are so numerous and well informed that all elements of monopoly are absent and the market price of a commodity is beyond the control of individual buyers and sellers. 

Positive Externality

 A benefit that is enjoyed by a third-party as a result of an economic transaction.

Prescriptive (Procedural) Knowledge

Applied knowledge which deals with how things work in practice to solve human problems. Sometimes this is referred to as technology or "technique."

Price Ceiling

The highest legal price a commodity can be sold at. Price ceilings are used by the government to prevent prices from being too high.

Price Floor

The lowest legal price a commodity can be sold at. Price floors are used by the government to prevent prices from being too low. The most common price floor is the minimum wage.

Price Level

An overall measurement of the prices of goods and services in an economy at a particular time. 

Price-maker

An entity, such as a firm, with a monopoly that gives it the power to influence the price it charges as the good it produces does not have perfect substitutes.

Price-takers

A person or company that has no control to dictate prices for a good or service. A price-taking firm can only decide how much of a good to supply to the market at the going price. 

Principal

The person or entity who hires an agent to make decision on their behalf. 

Principal-Agent

The principal-agent problem occurs when a principal creates an environment in which an agent's incentives don't align with those of the principal.

Private Property

 Property that is held and managed privately.

Privatization

The process of transferring an enterprise or industry from the public sector to the private sector. The public sector is the part of the economic system that is run by government agencies.

Producer Surplus

The gain obtained by sellers because they can sell at a market price that is higher than their willingness to sell.

Production Possibilities Frontier (PPF)

a curve which shows various combinations of the amounts of two goods which can be produced within the given resources and technology. It is a graphical representation showing all the possible options of output for two products that can be produced using all factors of production, where the given resources are fully and efficiently utilized per unit time. The PPF is a collection of points that shows the relationship between maximum possible production outcomes given a fixed set of resources over a period of time. 

Profit

A financial gain, especially the difference between the amount earned and the amount spent in buying, operating, or producing something.

Profit and Loss Statement

 a summary for a period of time of all of the sales or revenue of a firm, its expenses, and the resulting profit (or loss). The time period is at the discretion of the firm, but most firms have monthly, quarterly, and annual profit and loss statements. Once again there is a basic equation that captures the profit and loss statement. This is: P = S – CGS – SGA – T

Where P = profit or loss, S = sales or revenue, CGS = cost of goods and services sold, SGA = selling and general administrative expenses, and  T = taxes

Profit Margin

The amount by which revenue from sales exceeds costs in a business.

Property Rights

Property rights are theoretical socially-enforced constructs in economics for determining how a resource or economic good is used and owned. Resources can be owned by (and hence be the property of) individuals, associations, collectives, or governments.

Propositional Knowledge

The abstract knowledge that informs us how things work in the natural or physical world, and also how people and groups of people behave in social settings. 

Protectionism

the economic policy of restricting imports from other countries through methods such as tariffs on imported goods, import quotas, and a variety of other government regulations.

Public Choice Theory

The idea that the people who run governments, courts, and legislatures are the same kind of people as those who run businesses or households. Some people want money. Some want power. But everyone who spends a lifetime competing for power wants to use it for something. 

Quantity Demanded

A term used in economics to describe the total amount of goods or services demanded at any given point in time. It depends on the price of a good or service in the marketplace, regardless of whether that market is in equilibrium.

Quantity Supplied

The quantity of a commodity that producers are willing to sell at a particular price at a particular point of time.

Real

A real value is one which has been adjusted for inflation, enabling comparison of quantities as if the prices of goods had not changed on average.

Rent Seeking

Occurs when an entity seeks to gain added wealth without any reciprocal contribution of productivity. Typically, it revolves around government-funded social services and social service programs.

Reputation

The beliefs or opinions that are generally held about someone or something. 

Reserve Requirements

The amount of cash that banks must have, in their vaults or at the closest Federal Reserve bank, in line with deposits made by their customers. Set by the Fed's board of governors, reserve requirements are one of the main tools of monetary policy.

Resource Integration

Using or combining resources in a way that enables them to be offered in a new and valuable way. 

Resources

A stock or supply of money, materials, staff, and other assets that can be drawn on by a person or organization in order to function effectively.