Definition of Economic Terms

Economics studies the allocation of resources.

Economics is a field riddled with jargon. Many students avoid pursuing economics due to the terminology and complicated graphs. When such terms are explained, however, they are quite easy to understand.

Competitive Advantage

A competitive advantage is anything, such as natural resources or education, that provides a benefit to you over competitors. If your farm has better soil and can yield more crops than farmers in Arabia, you have a competitive advantage in the production of wheat.

Arbitrage

Arbitrage is buying one good (or asset) and selling it to a different marketplace for a higher price. For example, many Americans engage in arbitrage by buying well-known American brands of jeans and making money by selling them for more when they go abroad to Europe.

Opportunity Cost

Opportunity cost measures foregone options or, what you sacrifice to pursue something else. The opportunity cost of helping a friend move might be watching a new movie or money earned by working instead.

Laissez-faire

The French phrase laissez-faire is translated as, "let it be." A laissez-faire market is one with no government regulation or intervention.

Price Elasticity

Economist.com explains that elasticity is the sensitivity of demand when the price of a good changes. A product can be elastic or inelastic. For example, gas is fairly inelastic: When the price of it changes, consumers usually do not buy more or less of it.

References

• The Economist: Economic Terms Defined

Resources

• Economicshelp: Economics Dictionary