22 Economics Terms Everyone Should Know
Economics can seem like a daunting subject. It’s a field that encompasses markets, supply, demand, human behavior, externalities, property rights, and…well, you get the point.
But despite its intimidating nature, economics is a subject that everyone encounters in one way or another. And even if you don’t realize it, you likely use economics terms in your normal, everyday conversations.
Here are 22 economics terms everyone should know.
Absolute Advantage
A producer has a distinct advantage over rivals if they can create more of a given good or service with the same amount of work and resources. Even if you’re the best at something, it doesn’t necessarily follow that doing it is the best use of your limited economic resources. The best way to decide what to specialize in and how to maximize the advantages of global trade is to use comparative advantage. The relative and absolute advantages can both alter dramatically over time.
Adverse Selection
Adverse selection occurs when there is asymmetry of information between the insurance seller and the buyer.
In a perfect world, insurance rates would be determined by the risk of a randomly chosen individual within the insured segment of the population. In…
