Supply and demand with a twang

​Economic Concepts

Bailout:  providing assistance to a troubled firm that has an imminent risk of failure.  Shuttin' Detroit Down  

​Business cycle:  alternating increases and decreases in economic activity.​  Cost of Livin' ; Shuttin' Detroit Down ; Song of the South

Comparative advantage:  this occurs when an individual or country can produce a good or service at a lower opportunity cost than others can.  Made in America ; Pretty Good at Drinkin' Beer ; I'll Name the Dogs 

Compensating wage differentials:  differences in rates of pay among occupations that compensate for negative job characteristics.  Big Money  

Complementary goods:  goods that are consumed together.  She Only Smokes When She Drinks 

Conspicuous consumption:  spending on consumer goods, often luxury goods, which is meant to exhibit your social status and class to the rest of society.  This term was coined by economist Thorstein Veblen.  Rich and Miserable     

Consumer preferences:  the ordering of choices based on their relative utility.  Gone Country   

Consumption:  the act of purchasing goods and services by individuals and households.  Huntin', Fishin', and Lovin' Every Day Little Bit of Everything

Correlation vs. Causation:  the assumption that two correlated events have a causal relationship implying that one event causes the other.  It Ain't My Fault    

Creative destruction:  a term coined by economist Joseph Schumpeter which describes the natural growth and demise of industries as a result of technological innovation.  It is thought that 'creative destruction' is the driver of economic growth and leads to higher standards of living.  Here's a Quarter    

Cyclical unemployment:  unemployment that results from changes in the business cycle.  Cost of Livin' ;Shuttin' Detroit Down;Song of the South   

Demand:  the amount of goods and services that consumers are willing and able to purchase at various price levels, ceteris paribus.  I Hold On ; She Only Smokes When She Drinks    

Diminishing marginal utility:  the decrease in marginal utility that arises from consuming consecutive units of the same good or service, while holding the consumption of other goods or services constant.   Little Bit of Everything ; One More Day


Discouraged workers:  ​persons not in the labor force who are available for work and have looked during the last 12 months, but who are currently not working because they believe there are no jobs available or none for which they are qualified.  Red, White, and Pink Slip Blues   

Discretionary income:  after tax income used to purchases non-essential goods or services.  Beer Money  

Division of labor:  the separation of a complex process into smaller, more specialized tasks in order to increase efficiency. I'll Name the Dogs  

Durable goods:  consumer goods that have an average lifespan of at least three years.  This group of goods is sometimes referred to as 'big ticket items', and serves as an economic indicator for economists.  Are the Good Times Really Over 

Economics:  the study of how society allocates scarce resources to satisfy unlimited wants.  Rich and Miserable

Escalator clause:  a clause that allows for the adjustment of prices, wages, or income to account for inflation.  

Love Like Crazy  


Fiat money:  money with no intrinsic value.  Are the Good Times Really Over

Fiscal policy:  the targeted use of changes in government spending or taxes to influence the macroeconomy and return it to full employment output.  Song of the South  

Free market:  an economic system that is founded on individual choice and incentives which is relatively free of government intervention.  Gone Country    


Frictional unemployment:  short-term unemployment caused by the time it takes to match workers and jobs.  

Gone Country ; Take This Job and Shove It  

Gross Domestic Product (GDP):  the total market value of all final goods and services produced within a country, region, or state during a specific period.  Buy Me a Boat ; Live a Little ; Fake I.D. ; Rich and Miserable 

Great Depression:  an economic recession in the United States that lasted from 1929 through the late 1930s.  High unemployment, low incomes, and deflation were the result of the worst economic downturn in U.S. history.  In Color ;Song of the South 

Human capital:  ​the knowledge and skills that workers acquire through education and on-the-job training.  Rich and Miserable   

Incentives:  ​anything that motivates or discourages a particular activity.  Big Money   

Income:  money received by individuals and businesses for work, through investments, or the sale of products.  Buy Me a Boat ;Huntin', Fishin', and Lovin' Every Day; I Hold On  ; Right Where I Need to Be


Inferior goods:  goods for which demand decreases when consumer income increases.  Alright   

Inflation:  an overall increase in prices for goods and services throughout the economy.  Cost of Livin' ; Love Like Crazy Here's a Quarter 

Job search:  the act of looking for a job when one is unemployed.  Cost of Livin'  

Keynesian macroeconomics:  an economic concept that uses expansionary fiscal or monetary policy to boost aggregate demand during a recession and move the economy back to full employment more rapidly.  Song of the South  

Labor force participation rate:  the fraction of the working age population that is in the labor force (i.e. Employed or unemployed)  Keep the Wolves Away ; Are the Good Times Really Over

Labor economics:  the study of wages, employment, income distribution, discrimination, collective bargaining, and many other areas in the labor market.  Keep the Wolves Away ; Big Money

Leisure:  any time not spent working for pay or profit.  Live a Little ; Rich and Miserable  

Marginal benefit (utility):  the extra benefit (i.e. utility) received from consuming one additional unit of a good or service.  In terms of production, this is viewed as the additional revenue from selling one more unit of output and is called marginal revenue.       

Leave the Night On ; One More Day

Marginal cost:  the extra cost (i.e. disutility) received from consuming one additional unit of a good or service.  In terms of production, marginal cost is the additional cost of producing one more unit of output.   

Leave the Night On   

Market failure:  ​an inefficient allocation of resources in a market.  Keep the Wolves Away

Medium of exchange: the function of money that allows people to purchase goods and services.  Buy Me a Boat  Somethin' Bad  

Money:  anything that the general population accepts in payment for goods and services.  Buy Me a Boat ; Somethin' Bad ; Fake I.D. ; Are the Good Times Really Over  

Moral hazard:  the problem that arises when economic agents are not fully responsible for the risks they take, and are thus more likely to continue their risky behavior.  Shuttin' Detroit Down   

Negative externalities:  ​costs borne by a 3rd party from economic activity.  Keep the Wolves Away  

Nominal:  an unadjusted rate or value.  Love Like Crazy

Normal goods:  goods for which demand increases when consumer income increases.  Most goods are considered normal goods.  Cost of Livin' ; I Hold On ; Alright

Opportunity cost:  what one forgoes to get something else; the next best alternative.  Chillin' It ; Made in America ;

Time is Love ; Right Where I Need to Be ; I'm Gonna Miss Her

Production Possibility Frontier (PPF):  an economic model that assumes the production of two items with fixed resources and technology.  Points on the curve represent maximum production and efficient use of resources.  Time is Love ; Rain is a Good Thing

Production function:  the relationship between inputs and output (i.e. production).  Rain Is a Good Thing  

Real:  an adjusted rate or value.  The adjustment is to account for inflation.  Love Like Crazy  

Recession:  a downturn in economic activity that is typically associated with above average unemployment.  Cost of Livin' ; Shuttin' Detroit Down ; Song of the South  


Resources:  inputs used in the production process.  The three main categories are land, labor, and capital.  

Rain Is a Good Thing  

Social class:  social groups based primarily on economic status and income level.  Keep the Wolves Away ; Rich and Miserable

Social safety net:  assistance such as welfare, health care, unemployment benefits, which are provided by the government with the goal of improved societal outcomes.  Keep the Wolves Away  

Scarcity:  unlimited societal wants constrained by limited or fixed resources.  Runnin' Outta Moonlight ; A Girl Like You

Specialization:  when an individual or country chooses to focus more of its resources on a certain good or service in which it has a comparative advantage.  Made in America ; Red, White, and Pink Slip Blues ; I'll Name the Dogs    


Spending multiplier:  the concept that one dollar of spending will lead to an increase in income/GDP of more than one dollar.  Cost of Livin' ; Song of the South Red, White, and Pink Slip Blues      

Standard of living:  a relative measure of society's well-being based primarily on the amount of goods and services individuals are able to consume.  Buy Me a Boat ; Huntin', Fishin', and Lovin' Every Day ;Live a Little ; Right Where I Need to Be ; Are the Good Times Really Over ; Rich and Miserable ; Alright  

Store of value:  the function of money that allows people to hold wealth and transfer purchasing power from one period to the next.  Somethin' Bad  

Structural unemployment:  unemployment caused by sectoral shifts in the economy which is often characterized by longer periods of unemployment.  Red, White, and Pink Slip Blues   

Student loan debt:  the amount of debt accumulated in the pursuit of a college degree.  Rich and Miserable  

Supply:  the amount of goods and services that businesses are willing and able to provide at various price levels, ceteris paribus.  I Hold On ; She Only Smokes When She Drinks 

Technological advancement:  advances in technology or production methods that allow for greater productivity.  In Color Here's a Quarter ; Are the Good Times Really Over  

Trade:  the exchange of goods and services between two or more parties.  Typically in reference to the exchange of goods and services between countries.  Made in America ; Red, White, and Pink Slip Blues ; I'll Name the Dogs   

Underground economy:  economic activity that is not counted in official GDP statistics.  Although sometimes nefarious in nature, activity in the underground economy can also be quite benign, such as a teenager mowing lawns and being paid in cash. Fake I.D.      

Unemployment:  ​a situation where an individual does not have a job but wants to work, and has been actively seeking employment during the last four weeks.  Keep the Wolves Away ; Red, White, and Pink Slip Blues  

Value:  the importance or worth of an item.  Runnin' Outta Moonlight ; A Girl Like You