Key Terms
Microeconomics
Individual-level study; prices and quantities in specific markets Nominal GDP: GDP at current prices Nominal interest ra
Ceteris paribus
"all other things being equal." Every supply and demand curve is drawn assuming nothing else changes. If something else
Demand
The quantity of a good consumers are willing AND able to purchase at various prices, during a given time period, ceteris
Law of demand
Price and quantity demanded move in opposite directions. Higher price = lower quantity demanded.
Supply
The quantity of a good firms are willing to sell at various prices, during a given time period, ceteris paribus.
Equilibrium
The point where supply and demand curves intersect. Quantity demanded = quantity supplied.
Above equilibrium price
Surplus (excess supply). Sellers have unsold product; they cut prices.
Below equilibrium price
Shortage (excess demand). Buyers want more than sellers offer; sellers raise prices.
Macroeconomics
Economy-wide study; inflation, unemployment, GDP
Inflation
A general increase in the price level across the economy. Purchasing power falls; a dollar buys less than it did before.
Unemployment rate
Percentage of the labor force that is unemployed.
Formula
Percent Change = ((New Value - Old Value) / Old Value) x 100
GDP
The market value of all final goods and services produced within a country during a year.
Business cycle
Recurring pattern of expansion, peak, contraction, trough Ceteris paribus: all else held constant CPI: inflation measure
Cycle length
Measured from one trough to the next trough. Average contraction: ~17 months.