Glossary

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Glossary Entries

Word(s)	Definition	Image	Caption	Link	Source
Sample Word 1	Sample Definition 1
circular flow diagram	a diagram that views the economy as consisting of households and firms interacting in a goods and services market and a labor market
command economy	an economy where economic decisions are passed down from government authority and where resources are owned by the government
division of labor	the way in which the work required to produce a good or service is divided into tasks performed by different workers
economics	the study of how humans make choices under conditions of scarcity
economies of scale	when the average cost of producing each individual unit declines as total output increases
exports	products (goods and services) made domestically and sold abroad
fiscal policy	economic policies that involve government spending and taxes
globalization	the trend in which buying and selling in markets have increasingly crossed national borders
goods and services market	a market in which firms are sellers of what they produce and households are buyers
gross domestic product (GDP)	measure of the size of total production in an economy
imports	products (goods and services) made abroad and then sold domestically
labor market	the market in which households sell their labor as workers to business firms or other employers
macroeconomics	the branch of economics that focuses on broad issues such as growth, unemployment, inflation, and trade balance.
market	interaction between potential buyers and sellers; a combination of demand and supply
market economy	an economy where economic decisions are decentralized, resources are owned by private individuals, and businesses supply goods and services based on demand
microeconomics	the branch of economics that focuses on actions of particular agents within the economy, like households, workers, and business firms
model	see theory
monetary policy	policy that involves altering the level of interest rates, the availability of credit in the economy, and the extent of borrowing
private enterprise	system where the means of production (resources and businesses) are owned and operated by private individuals or groups of private individuals
scarcity	when human wants for goods and services exceed the available supply
specialization	when workers or firms focus on particular tasks for which they are well-suited within the overall production process
theory	a representation of an object or situation that is simplified while including enough of the key features to help us understand the object or situation
traditional economy	typically an agricultural economy where things are done the same as they have always been done
underground economy	a market where the buyers and sellers make transactions in violation of one or more government regulations
allocative efficiency	when the mix of goods being produced represents the mix that society most desires
budget constraint	all possible consumption combinations of goods that someone can afford, given the prices of goods, when all income is spent; the boundary of the opportunity set
comparative advantage	when a country can produce a good at a lower cost in terms of other goods; or, when a country has a lower opportunity cost of production
invisible hand	idea that self-interested behavior by individuals can lead to positive social outcomes
law of diminishing marginal utility	as we consume more of a good or service, the utility we get from additional units of the good or service tend to become smaller than what we received from earlier units
law of diminishing returns	as additional increments of resources are added to producing a good or service, the marginal benefit from those additional increments will decline
marginal analysis	examination of decisions on the margin, meaning a little more or a little less from the status quo
normative statement	statement which describes how the world should be
opportunity cost	measures cost by what is given up in exchange; opportunity cost measures the value of the forgone alternative
opportunity set	all possible combinations of consumption that someone can afford given the prices of goods and the individual’s income
positive statement	statement which describes the world as it is
production possibilities frontier	a diagram that shows the productively efficient combinations of two products that an economy can produce given the resources it has available.
productive efficiency	when it is impossible to produce more of one good (or service) without decreasing the quantity produced of another good (or service)
sunk costs	costs that are made in the past and cannot be recovered
utility	satisfaction, usefulness, or value one obtains from consuming goods and services
ceteris paribus	other things being equal
complements	goods that are often used together so that consumption of one good tends to enhance consumption of the other
consumer surplus	the extra benefit consumers receive from buying a good or service, measured by what the individuals would have been willing to pay minus the amount that they actually paid
deadweight loss	the loss in social surplus that occurs when a market produces an inefficient quantity
demand	the relationship between price and the quantity demanded of a certain good or service
demand curve	a graphic representation of the relationship between price and quantity demanded of a certain good or service, with quantity on the horizontal axis and the price on the vertical axis
demand schedule	a table that shows a range of prices for a certain good or service and the quantity demanded at each price
economic surplus	see social surplus
equilibrium	the situation where quantity demanded is equal to the quantity supplied; the combination of price and quantity where there is no economic pressure from surpluses or shortages that would cause price or quantity to change
equilibrium price	the price where quantity demanded is equal to quantity supplied
equilibrium quantity	the quantity at which quantity demanded and quantity supplied are equal for a certain price level
excess demand	at the existing price, the quantity demanded exceeds the quantity supplied; also called a shortage
excess supply	at the existing price, quantity supplied exceeds the quantity demanded; also called a surplus
factors of production	the combination of labor, materials, and machinery that is used to produce goods and services; also called inputs
inferior good	a good in which the quantity demanded falls as income rises, and in which quantity demanded rises and income falls
inputs	the combination of labor, materials, and machinery that is used to produce goods and services; also called factors of production
law of demand	the common relationship that a higher price leads to a lower quantity demanded of a certain good or service and a lower price leads to a higher quantity demanded, while all other variables are held constant
law of supply	the common relationship that a higher price leads to a greater quantity supplied and a lower price leads to a lower quantity supplied, while all other variables are held constant
normal good	a good in which the quantity demanded rises as income rises, and in which quantity demanded falls as income falls
price	what a buyer pays for a unit of the specific good or service
price ceiling	a legal maximum price
price control	government laws to regulate prices instead of letting market forces determine prices
price floor	a legal minimum price
producer surplus	the extra benefit producers receive from selling a good or service, measured by the price the producer actually received minus the price the producer would have been willing to accept
quantity demanded	the total number of units of a good or service consumers are willing to purchase at a given price
quantity supplied	the total number of units of a good or service producers are willing to sell at a given price
shift in demand	when a change in some economic factor (other than price) causes a different quantity to be demanded at every price
shift in supply	when a change in some economic factor (other than price) causes a different quantity to be supplied at every price
shortage	at the existing price, the quantity demanded exceeds the quantity supplied; also called excess demand
social surplus	the sum of consumer surplus and producer surplus
substitute	a good that can replace another to some extent, so that greater consumption of one good can mean less of the other
supply	the relationship between price and the quantity supplied of a certain good or service
supply curve	a line that shows the relationship between price and quantity supplied on a graph, with quantity supplied on the horizontal axis and price on the vertical axis
supply schedule	a table that shows a range of prices for a good or service and the quantity supplied at each price
surplus	at the existing price, quantity supplied exceeds the quantity demanded; also called excess supply
total surplus	see social surplus
interest rate	the “price” of borrowing in the financial market; a rate of return on an investment
minimum wage	a price floor that makes it illegal for an employer to pay employees less than a certain hourly rate
usury laws	laws that impose an upper limit on the interest rate that lenders can charge
constant unitary elasticity	when a given percent price change in price leads to an equal percentage change in quantity demanded or supplied
cross-price elasticity of demand	the percentage change in the quantity of good A that is demanded as a result of a percentage change in good B
elastic demand	when the elasticity of demand is greater than one, indicating a high responsiveness of quantity demanded or supplied to changes in price
elastic supply	when the elasticity of either supply is greater than one, indicating a high responsiveness of quantity demanded or supplied to changes in price
elasticity	an economics concept that measures responsiveness of one variable to changes in another variable
elasticity of savings	the percentage change in the quantity of savings divided by the percentage change in interest rates
inelastic demand	when the elasticity of demand is less than one, indicating that a 1 percent increase in price paid by the consumer leads to less than a 1 percent change in purchases (and vice versa); this indicates a low responsiveness by consumers to price changes
inelastic supply	when the elasticity of supply is less than one, indicating that a 1 percent increase in price paid to the firm will result in a less than 1 percent increase in production by the firm; this indicates a low responsiveness of the firm to price increases (and vice versa if prices drop)
infinite elasticity	the extremely elastic situation of demand or supply where quantity changes by an infinite amount in response to any change in price; horizontal in appearance
perfect elasticity	see infinite elasticity
perfect inelasticity	see zero elasticity
price elasticity	the relationship between the percent change in price resulting in a corresponding percentage change in the quantity demanded or supplied
price elasticity of demand	percentage change in the quantity demanded of a good or service divided the percentage change in price
price elasticity of supply	percentage change in the quantity supplied divided by the percentage change in price
tax incidence	manner in which the tax burden is divided between buyers and sellers
unitary elasticity	when the calculated elasticity is equal to one indicating that a change in the price of the good or service results in a proportional change in the quantity demanded or supplied
wage elasticity of labor supply	the percentage change in hours worked divided by the percentage change in wages
zero inelasticity	the highly inelastic case of demand or supply in which a percentage change in price, no matter how large, results in zero change in the quantity; vertical in appearance
backward-bending supply curve for labor	the situation when high-wage people can earn so much that they respond to a still-higher wage by working fewer hours
behavioral economics	a branch of economics that seeks to enrich the understanding of decision-making by integrating the insights of psychology and by investigating how given dollar amounts can mean different things to individuals depending on the situation.
budget constraint line	shows the possible combinations of two goods that are affordable given a consumer’s limited income
consumer equilibrium	when the ratio of the prices of goods is equal to the ratio of the marginal utilities (point at which the consumer can get the most satisfaction)
diminishing marginal utility	the common pattern that each marginal unit of a good consumed provides less of an addition to utility than the previous unit
fungible	the idea that units of a good, such as dollars, ounces of gold, or barrels of oil are capable of mutual substitution with each other and carry equal value to the individual.
income effect	a higher price means that, in effect, the buying power of income has been reduced, even though actual income has not changed; always happens simultaneously with a substitution effect
marginal utility	the additional utility provided by one additional unit of consumption
marginal utility per dollar	the additional satisfaction gained from purchasing a good given the price of the product; MU/Price
substitution effect	when a price changes, consumers have an incentive to consume less of the good with a relatively higher price and more of the good with a relatively lower price; always happens simultaneously with an income effect
total utility	satisfaction derived from consumer choices
accounting profit	total revenues minus explicit costs, including depreciation
average profit	profit divided by the quantity of output produced; profit margin
average total cost	total cost divided by the quantity of output
average variable cost	variable cost divided by the quantity of output
constant returns to scale	expanding all inputs proportionately does not change the average cost of production
diseconomies of scale	the long-run average cost of producing each individual unit increases as total output increases
economic profit	total revenues minus total costs (explicit plus implicit costs)
explicit costs	out-of-pocket costs for a firm, for example, payments for wages and salaries, rent, or materials
firm	an organization that combines inputs of labor, capital, land, and raw or finished component materials to produce outputs.
fixed cost	expenditure that must be made before production starts and that does not change regardless of the level of production
implicit costs	opportunity cost of resources already owned by the firm and used in business, for example, expanding a factory onto land already owned
long-run average cost curve	shows the lowest possible average cost of production, allowing all the inputs to production to vary so that the firm is choosing its production technology
LRAC	shows the lowest possible average cost of production, allowing all the inputs to production to vary so that the firm is choosing its production technology
marginal cost	the additional cost of producing one more unit
private enterprise	the ownership of businesses by private individuals
production	the process of combining inputs to produce outputs, ideally of a value greater than the value of the inputs
production technologies	alternative methods of combining inputs to produce output
revenue	income from selling a firm’s product; defined as price times quantity sold
short-run average cost curve	the average total cost curve in the short term; shows the total of the average fixed costs and the average variable costs
SRAC	the average total cost curve in the short term; shows the total of the average fixed costs and the average variable costs
total cost	the sum of fixed and variable costs of production
variable cost	cost of production that increases with the quantity produced
entry	the long-run process of firms entering an industry in response to industry profits
exit	the long-run process of firms reducing production and shutting down in response to industry losses
long-run equilibrium	where all firms earn zero economic profits producing the output level where P = MR = MC and P = AC
marginal revenue	the additional revenue gained from selling one more unit
market structure	the conditions in an industry, such as number of sellers, how easy or difficult it is for a new firm to enter, and the type of products that are sold
perfect competition	each firm faces many competitors that sell identical products
price taker	a firm in a perfectly competitive market that must take the prevailing market price as given
shutdown point	level of output where the marginal cost curve intersects the average variable cost curve at the minimum point of AVC; if the price is below this point, the firm should shut down immediately
allocative efficiency	producing the optimal quantity of some output; the quantity where the marginal benefit to society of one more unit just equals the marginal cost
barriers to entry	the legal, technological, or market forces that may discourage or prevent potential competitors from entering a market
copyright	a form of legal protection to prevent copying, for commercial purposes, original works of authorship, including books and music
deregulation	removing government controls over setting prices and quantities in certain industries
intellectual property	the body of law including patents, trademarks, copyrights, and trade secret law that protect the right of inventors to produce and sell their inventions
legal monopoly	legal prohibitions against competition, such as regulated monopolies and intellectual property protection
marginal profit	profit of one more unit of output, computed as marginal revenue minus marginal cost
monopoly	a situation in which one firm produces all of the output in a market
natural monopoly	economic conditions in the industry, for example, economies of scale or control of a critical resource, that limit effective competition
patent	a government rule that gives the inventor the exclusive legal right to make, use, or sell the invention for a limited time
predatory pricing	when an existing firm uses sharp but temporary price cuts to discourage new competition
trade secrets	methods of production kept secret by the producing firm
trademark	an identifying symbol or name for a particular good and can only be used by the firm that registered that trademark
cartel	a group of firms that collude to produce the monopoly output and sell at the monopoly price
collusion	when firms act together to reduce output and keep prices high
differentiated product	a product that is perceived by consumers as distinctive in some way
duopoly	an oligopoly with only two firms
game theory	a branch of mathematics often used by economists that analyzes situations in which players must make decisions and then receive payoffs based on what decisions the other players make
imperfectly competitive	firms and organizations that fall between the extremes of monopoly and perfect competition
kinked demand curve	a perceived demand curve that arises when competing oligopoly firms commit to match price cuts, but not price increases
monopolistic competition	many firms competing to sell similar but differentiated products
oligopoly	when a few large firms have all or most of the sales in an industry
prisoner’s dilemma	a game in which the gains from cooperation are larger than the rewards from pursuing self-interest
acquisition	when one firm purchases another
antitrust laws	laws that give government the power to block certain mergers, and even in some cases to break up large firms into smaller ones
bundling	a situation in which multiple products are sold as one
concentration ratio	an early tool to measure the degree of monopoly power in an industry; measures what share of the total sales in the industry are accounted for by the largest firms, typically the top four to eight firms
cost-plus regulation	when regulators permit a regulated firm to cover its costs and to make a normal level of profit
exclusive dealing	an agreement that a dealer will sell only products from one manufacturer
four-firm concentration ratio	the percentage of the total sales in the industry that are accounted for by the largest four firms
Herfindahl-Hirschman Index (HHI)	approach to measuring market concentration by adding the square of the market share of each firm in the industry
market share	the percentage of total sales in the market
merger	when two formerly separate firms combine to become a single firm
minimum resale price maintenance agreement	an agreement that requires a dealer who buys from a manufacturer to sell for at least a certain minimum price
price cap regulation	when the regulator sets a price that a firm cannot exceed over the next few years
regulatory capture	when the firms supposedly being regulated end up playing a large role in setting the regulations that they will follow and as a result, they “capture” the people doing the regulation, usually through the promise of a job in that “regulated” industry once their term in government has ended.
restrictive practices	practices that reduce competition but that do not involve outright agreements between firms to raise prices or to reduce the quantity produced
tying sales	a situation where a customer is allowed to buy one product only if the customer also buys another product
additional external cost	additional costs incurred by third parties outside the production process when a unit of output is produced
biodiversity	the full spectrum of animal and plant genetic material
command-and-control regulation	laws that specify allowable quantities of pollution and that also may detail which pollution-control technologies must be used
externality	a market exchange that affects a third party who is outside or “external” to the exchange; sometimes called a “spillover”
international externalities	externalities that cross national borders and that cannot be resolved by a single nation acting alone
market failure	When the market on its own does not allocate resources efficiently in a way that balances social costs and benefits; externalities are one example of a market failure
marketable permit program	a permit that allows a firm to emit a certain amount of pollution; firms with more permits than pollution can sell the remaining permits to other firms
negative externality	a situation where a third party, outside the transaction, suffers from a market transaction by others
pollution charge	a tax imposed on the quantity of pollution that a firm emits; also called a pollution tax
positive externality	a situation where a third party, outside the transaction, benefits from a market transaction by others
property rights	the legal rights of ownership on which others are not allowed to infringe without paying compensation
social costs	costs that include both the private costs incurred by firms and also additional costs incurred by third parties outside the production process, like costs of pollution
spillover	see externality
free rider	those who want others to pay for the public good and then plan to use the good themselves; if many people act as free riders, the public good may never be provided
intellectual property	the body of law including patents, trademarks, copyrights, and trade secret law that protect the right of inventors to produce and sell their inventions
nonexcludable	when it is costly or impossible to exclude someone from using the good, and thus hard to charge for it
nonrivalrous	even when one person uses the good, others can also use it
positive externalities	beneficial spillovers to a third party or parties
private benefits	the dollar value of all benefits of a new product or process invented by a company that can be captured by the investing company
private rates of return	when the estimated rates of return go primarily to an individual; for example, earning interest on a savings account
public good	good that is nonexcludable and nonrivalrous, and thus is difficult for market producers to sell to individual consumers
social benefits	the dollar value of all benefits of a new product or process invented by a company that can be captured by other firms and by society as a whole
social rate of return	when the estimated rates of return go primarily to society; for example, providing free education
earned income tax credit	a method of assisting the working poor through the tax system
EITC	a method of assisting the working poor through the tax system
effective income tax	percentage of total taxes paid divided by total income
estate tax	a tax imposed on the value of an inheritance
income	a flow of money received, often measured on a monthly or an annual basis
income inequality	when one group receives a disproportionate share of total income or wealth than others
Lorenz curve	a graph that compares the cumulative income actually received to a perfectly equal distribution of income; it shows the share of population on the horizontal axis and the cumulative percentage of total income received on the vertical axis
Medicaid	a federal–state joint program enacted in 1965 that provides medical insurance for certain (not all) low-income people, including the near-poor as well as those below the poverty line, and focusing on low-income families with children, the low-income elderly, and the disabled
near-poor	those who have incomes just above the poverty line
poverty	the situation of being below a certain level of income needed for a basic standard of living
poverty line	the specific amount of income needed for a basic standard of living
poverty rate	percentage of the population living below the poverty line
poverty trap	antipoverty programs set up so that government benefits decline substantially as people earn more income—as a result, working provides little financial gain
progressive tax system	a tax system in which the rich pay a higher percentage of their income in taxes, rather than a higher absolute amount
quintile	dividing a group into fifths, a method often used to look at distribution of income
redistribution	taking income from those with higher incomes and providing income to those with lower incomes
safety net	the group of government programs that provide assistance to the poor and the near-poor
Supplemental Nutrition Assistance Program	a federally funded program, started in 1964, in which each month poor people receive SNAP cards they can use to buy food
SNAP	Supplemental Nutrition Assistance Program
wealth	the sum of the value of all assets, including money in bank accounts, financial investments, a pension fund, and the value of a home
affirmative action	active efforts by government or businesses that give special rights to minorities in hiring, promotion, or access to education to make up for past discrimination
collective bargaining	negotiations between unions and a firm or firms
discrimination	actions based on the belief that members of a certain group or groups are in some way inferior solely because of a factor such as race, gender, or religion
labor union	an organization of workers that negotiates with employers over wages and working conditions
adverse selection	when groups with inherently higher risks than the average person seek out insurance, thus straining the insurance system
asymmetric information	a situation where the seller or the buyer has more information than the other regarding the quality of the item being sold
coinsurance	when an insurance policyholder pays a percentage of a loss, and the insurance company pays the remaining cost
collateral	something valuable—often property or equipment—that a lender would have a right to seize and sell if the loan is not repaid
copayment	when an insurance policyholder must pay a small amount for each service, before insurance covers the rest
cosigner	another person or firm who legally pledges to repay some or all of the money on a loan if the original borrower does not do so
deductible	an amount that the insurance policyholders must pay out of their own pocket before the insurance coverage pays anything
fee-for-service	when medical care providers are paid according to the services they provide
health maintenance organization	an organization that provides health care and is paid a fixed amount per person enrolled in the plan—regardless of how many services are provided
HMO	health maintenance organization
imperfect information	a situation where either the buyer or the seller, or both, are uncertain about the qualities of what is being bought and sold
insurance	method of protecting a person from financial loss, whereby policy holders make regular payments to an insurance entity; the insurance firm then remunerates a group member who suffers significant financial damage from an event covered by the policy
money-back guarantee	a promise that the buyer’s money will be refunded under certain conditions
moral hazard	when people have insurance against a certain event, they are less likely to guard against that event occurring
occupational license	licenses issued by government agencies, which indicate that a worker has completed a certain type of education or passed a certain test
premium	payment made to an insurance company
risk group	a group that shares roughly the same risks of an adverse event occurring
service contract	the buyer pays an extra amount and the seller agrees to fix anything specified in the contract that goes wrong for a set time period
warranty	a promise to fix or replace the good for a certain period of time
actual rate of return	the total rate of return, including capital gains and interest paid on an investment at the end of a period of time
bond	a financial contract through which a borrower like a corporation, a city or state, or the federal government agrees to repay the amount that was borrowed and also a rate of interest over a period of time in the future
bond yield	the rate of return a bond is expected to pay at the time of purchase
bondholder	someone who owns bonds and receives the interest payments
capital gain	a financial gain from buying an asset, like a share of stock or a house, and later selling it at a higher price
certificate of deposit	a mechanism for a saver to deposit funds at a bank and promise to leave them at the bank for a time, in exchange for a higher rate of interest
CD	certificate of deposit
checking account	a bank account that typically pays little or no interest, but that gives easy access to money, either by writing a check or by using a “debit card”
compound interest	an interest rate calculation on the principal plus the accumulated interest
corporate bond	a bond issued by firms that wish to borrow
corporate governance	the name economists give to the institutions that are supposed to watch over top executives in companies owned by shareholders
corporation	a business owned by shareholders who have limited liability for the company’s debt yet a share of the company’s profits; may be private or public and may or may not have publicly-traded stock
coupon rate	the interest rate paid on a bond; can be annual or semi-annual
debit card	a card that lets the person make purchases, and the cost is immediately deducted from that person’s checking account
diversification	investing in a wide range of companies to reduce the level of risk
dividend	a direct payment from a firm to its shareholders
equity	the monetary value a homeowner would have after selling the house and repaying any outstanding bank loans used to buy the house
expected rate of return	how much a project or an investment is expected to return to the investor, either in future interest payments, capital gains, or increased profitability
face value	the amount that the bond issuer or borrower agrees to pay the investor
financial intermediary	an institution, like a bank, that receives money from savers and provides funds to borrowers
high yield bonds	bonds that offer relatively high interest rates to compensate for their relatively high chance of default
index fund	a mutual fund that seeks only to mimic the overall performance of the market
initial public offering	the first sale of shares of stock by a firm to outside investors
IPO	initial public offering
junk bonds	see high yield bonds
liquidity	refers to how easily money or financial assets can be exchanged for a good or service
maturity date	the date that a bond must be repaid
municipal bonds	a bond issued by cities that wish to borrow
mutual funds	funds that buy a range of stocks or bonds from different companies, thus allowing an investor an easy way to diversify
partnership	a company run by a group as opposed to an individual
present value	a bond’s current price at a given time
private company	a firm owned by the people who run it on a day-to-day basis
public company	a firm that has sold stock to the public, which in turn can be bought and sold by investors
risk	a measure of the uncertainty of that project’s profitability
savings account	a bank account that pays an interest rate, but withdrawing money typically requires a trip to the bank or an automatic teller machine
shareholders	people who own at least some shares of stock in a firm
shares	the stock of a firm, divided into individual portions
simple interest	an interest rate calculation only on the principal amount
sole proprietorship	a company run by an individual as opposed to a group
stock	a claim on partial ownership of a specific firm
Treasury bond	a bond issued by the federal government through the U.S. Department of the Treasury
venture capital	financial investments in new companies that are still relatively small in size, but that have potential to grow substantially
logrolling	the situation in which groups of legislators all agree to vote for a package of otherwise unrelated laws that they individually favor
median voter theory	theory that politicians will try to match policies to what pleases the median voter preferences
pork-barrel spending	spending that benefits mainly a single political district
rational ignorance	the theory that rational people will not vote if the costs of becoming informed and voting are too high or because they know their vote will not be decisive in the election
special interest groups	groups that are small in number relative to the nation, but well organized and thus exert a disproportionate effect on political outcomes
voting cycle	the situation in which a majority prefers A over B, B over C, and C over A
absolute advantage	when one country can use fewer resources to produce a good compared to another country; when a country is more productive compared to another country
gain from trade	a country that can consume more than it can produce as a result of specialization and trade
intra-industry trade	international trade of goods within the same industry
splitting up the value chain	many of the different stages of producing a good happen in different geographic locations
tariffs	taxes that governments place on imported goods
anti-dumping laws	laws that block imports sold below the cost of production and impose tariffs that would increase the price of these imports to reflect their cost of production
common market	economic agreement between countries to allow free trade in goods, services, labor, and financial capital between members while having a common external trade policy
disruptive market change	innovative new product or production technology which disrupts the status quo in a market, leading the innovators to earn more income and profits and the other firms to lose income and profits, unless they can come up with their own innovations
dumping	selling internationally traded goods below their cost of production
economic union	economic agreement between countries to allow free trade between members, a common external trade policy, and coordinated monetary and fiscal policies
free trade agreement	economic agreement between countries to allow free trade between members
General Agreement on Tariffs and Trade	forum in which nations could come together to negotiate reductions in tariffs and other barriers to trade; the precursor to the World Trade Organization
GATT	General Agreement on Tariffs and Trade
import quotas	numerical limits on the quantity of products that can be imported
national interest argument	the argument that there are compelling national interests against depending on key imports from other nations
nontariff barriers	ways a nation can draw up rules, regulations, inspections, and paperwork to make it more costly or difficult to import products
protectionism	government policies to reduce or block imports
race to the bottom	when production locates in countries with the lowest environmental (or other) standards, putting pressure on all countries to reduce their environmental standards
World Trade Organization	organization that seeks to negotiate reductions in barriers to trade and to adjudicate complaints about violations of international trade policy; successor to the General Agreement on Tariffs and Trade (GATT)
WTO	World Trade Organization