25 Theories to Get You Started Supply and Demand

Opportunity cost

Opportunity cost is the cost of missing an opportunity in order to take on a different opportunity. An example of opportunity cost can be seen in investors, who may have to forego investing in one company in order to invest in another.

Stagflation

Stagflation describes an economy that is experiencing slow economic growth, whilst also experiencing inflation and high levels of unemployment. Stagflation is far less common than inflation or deflation.

The invisible hand

An idea introduced by the philosopher Adam Smith, the invisible hand describes the benefits that society can enjoy as a result of the actions of self-interested individuals. The invisible hand was an argument used to advocate the benefits of a free market.

Trade barriers

Trade barriers relate to a government policy or regulation that limits or controls international trade. Examples include:

Tariffs;

Trade quotas; and

Embargos

Interest

Most of us are familiar with the concept of interest in our daily lives. If we invest $100 at 10% interest for a year, at the end of the year we will have $110. If we waited another year we would have $121. If you thought that we should have $120, look again. 10% of $110 is $11, so if we add this amount to what we have, we get $121. This phenomenon is called compounding interest, where we get more and more money from an investment as time goes on, even at the same interest rate because interest is accruing based on all the money we have now, not just what we started with.