Learn important economics vocabulary for students from A to Z! This list features 130 key economic terms with easy-to-understand meanings. Perfect for students and beginners looking to boost their economics knowledge. From “absolute advantage” to “zero inflation,” master the language of economics.
Economics Vocabulary Words A-Z
Here are Economics vocabulary words with meaning:
A
Absolute advantage: Ability to produce more of a good or service than others
Aggregate demand: Total demand for goods and services in an economy
Assets: Things of value owned by a person or company
Auction: Sale where items go to the highest bidder
Average cost: Total cost divided by quantity produced
B
Balance of trade: Difference between a country’s exports and imports
Bank: A financial institution that accepts deposits and makes loans
Budget: Plan for spending and saving money
Business cycle: Periodic fluctuations in economic activity
Bonds: Debt securities issued by governments or corporations
C
Capital: Resources used to produce goods and services
Competition: Rivalry between businesses for customers
Consumer: A person who buys goods and services
Cost-benefit analysis: Comparing the costs and benefits of an action
Credit: Ability to borrow money or access goods before payment
D
Demand: Willingness and ability to buy a good or service
Depression: Severe and prolonged economic downturn
Deflation: General decrease in prices over time
Dividend: Payment made by a company to its shareholders
Diversification: Spreading investments to reduce risk
E
Economics: Study of how people use resources to satisfy wants and needs
Equilibrium: Point where supply equals demand
Elasticity: Measure of responsiveness to changes in price or income
Exchange rate: Price of one currency in terms of another
Externality: Side effect of an economic activity affecting uninvolved parties
F
Factors of production: Resources used to create goods and services
Fiscal policy: Government’s use of spending and taxation to influence the economy
Free market: A system where prices are determined by supply and demand
Fiat money: Currency that is not backed by a physical commodity
Franchise: A business that operates under another company’s name
G
GDP (Gross Domestic Product): Total value of goods and services produced in a country
Globalization: Increasing interconnectedness of world economies
Goods: Physical items that satisfy human wants or needs
Gig economy: The labor market characterized by short-term contracts and freelance work
Government regulation: Rules imposed by the government on economic activity
H
Human capital: Knowledge and skills possessed by workers
Hyperinflation: Extremely high and typically accelerating inflation
Hedge: Investment made to reduce the risk of adverse price movements
Household: Group of people sharing living arrangements and expenses
Homo economicus: Concept of humans as rational and self-interested economic actors
I
Inflation: General increase in prices over time
Interest rate: Cost of borrowing money, usually expressed as a percentage
Investment: Putting money into something with the expectation of future gain
Income: Money received, typically in exchange for work or from investments
Import: Good or service bought from another country
J
Joint venture: A business arrangement where two or more parties agree to pool resources
Job market: The availability of employment and labor
Just-in-time inventory: Strategy of receiving goods only as they are needed
Junk bond: High-risk, high-yield bond
J-curve: Economic theory related to a country’s trade balance following currency devaluation
K
Keynesian economics: Economic theory emphasizing government’s role in managing the economy
Knowledge economy: System based on intellectual capabilities rather than physical inputs or natural resources
Keiretsu: Japanese term for a set of companies with interlocking business relationships
Kleptocracy: Government characterized by corrupt leaders using their power to exploit people and natural resources
Kondratieff wave: Proposed long-term economic cycle lasting 40-60 years
L
Labor: Human effort used in production
Laissez-faire: Policy of minimal government intervention in the economy
Liability: Financial obligation or debt
Liquidity: Ease with which an asset can be converted into cash
Law of demand: Principle that quantity demanded falls as the price rises
M
Monopoly: Market with only one seller
Macroeconomics: Study of the economy as a whole
Market: Place where buyers and sellers interact
Microeconomics: Study of individual markets and decision-making
Money supply: Total amount of money available in an economy
N
National debt: Total amount owed by a country’s government
Negative externality: Cost that affects a third party not involved in an economic transaction
Net worth: Total assets minus total liabilities
Non-profit organization: An entity that uses profits for its goals rather than distributing them to shareholders
Natural monopoly: A monopoly that arises due to high fixed costs
O
Oligopoly: Market dominated by a small number of firms
Opportunity cost: Value of the next best alternative given up when making a choice
Output: Total amount of goods or services produced
Overheads: Ongoing business expenses not directly related to creating a product or service
Open market operations: Central bank buying or selling of government securities to control the money supply
P
Price: Amount of money expected in exchange for a good or service
Profit: Financial gain, typically the difference between revenue and costs
Productivity: Measure of economic output per unit of input
Public goods: Products or services that benefit all and cannot be restricted
Progressive tax: Tax rate that increases as the taxable amount increases
Q
Quantity demanded: Amount of a good or service that consumers are willing to buy at a given price
Quantity supplied: Amount of a good or service that producers are willing to sell at a given price
Quota: Government-imposed limit on imports or exports
Quality of life: Standard of health, comfort, and happiness experienced by individuals or groups
Quasi-public good: Product or service that has characteristics of both private and public goods
R
Recession: Period of economic decline, typically defined as two consecutive quarters of negative GDP growth
Revenue: Income generated from the sale of goods or services
Risk: Potential for uncontrolled loss of something of value
Rational choice theory: Framework for understanding economic decision-making
Real GDP: GDP adjusted for inflation
S
Supply: Amount of a good or service available at a given price
Scarcity: Limited availability of resources to satisfy unlimited wants
Stock: Ownership share in a company
Subsidy: Government payment to reduce the cost of producing a good
Socialism: Economic system characterized by social ownership of means of production
T
Trade: Exchange of goods and services
Tariff: Tax on imported goods or services
Tax: Mandatory financial charge imposed by a government
Trickle-down economics: The theory that benefits the wealthy will eventually benefit everyone
Transaction cost: Cost incurred in making an economic exchange
U
Unemployment: A situation where people who are actively seeking work remain unhired
Utility: Satisfaction or benefit derived from consuming a good or service
Underwriting: Process by which investment banks raise capital from investors on behalf of corporations and governments
Underground economy: Economic activities that are not reported to governmental authorities
Unit cost: Total cost divided by the number of units produced
V
Value: Worth of something in terms of money or other goods
Variable cost: Expenses that change with the level of production
Venture capital: Financing provided to start-up companies and small businesses with perceived long-term growth potential
Velocity of money: Rate at which money is exchanged in an economy
Vertical integration: Strategy where a company owns its supply chain
W
Wages: Payment for labor or services
Wealth: Abundance of valuable resources or material possessions
Welfare: Government support for the poor
World Bank: International financial institution that provides loans to developing countries
Wholesale: Sale of goods in large quantities, typically to retailers
X
X-efficiency: Effectiveness with which a given set of inputs is used to produce outputs
X-factor: Important element with unknown consequences
Xenocurrency: Currency traded in markets outside of its domestic borders
X-tax: Proposed progressive consumption tax
X-yield: Yield on a bond expressed as a percentage and shown on a chart
Y
Yield: Return on an investment, expressed as a percentage
Year-over-year: Method of evaluating financial results by comparing them with the same period from the previous year
Yen carry trade: Borrowing at low interest rates in Japanese yen and investing in higher-yielding currencies
Yellow dog contract: Agreement where an employee agrees not to join a labor union
Yield curve: Line that plots interest rates of bonds with equal credit quality but different maturity dates
Z
Zero-sum game: A situation where one person’s gain is equivalent to another’s loss
Zero-based budgeting: A method of budgeting in which all expenses must be justified for each new period
Zero coupon bond: A bond that does not pay interest but is traded at a deep discount
Z-score: Statistical measurement of a score’s relationship to the mean in a group of scores
Zero inflation: A situation where the general price level in an economy remains unchanged
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