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Economics & Strategy

Economic concepts, game theory, and strategic thinking

12 categories128 words

All 12 Categories

Microeconomics

Individual and firm-level economic behavior

Macroeconomics

Economy-wide phenomena and policy

Financial Economics

Markets, investments, and financial instruments

Behavioral Economics

Psychology of economic decision-making

Game Theory Fundamentals

Core concepts of strategic interaction

Strategic Concepts

Advanced strategic thinking patterns

Decision Theory

Rational choice under uncertainty

Collective Action

Problems and solutions in group dynamics

Market Fundamentals

Core concepts that every market participant needs to know

Technical Analysis

Chart patterns, indicators, and price action concepts

Options & Derivatives

Contracts and instruments derived from underlying assets

Trading Strategies & Orders

Order types, risk management, and core trading approaches

All 128 Words in Economics & Strategy

Complete vocabulary list for easy reference and copy-paste.

💹Microeconomics10

Term	Definition	Example
supply and demand	the relationship between availability and desire that determines price	"Supply and demand set the equilibrium price of wheat."
elasticity	the responsiveness of demand or supply to price changes	"Luxury goods have high price elasticity of demand."
marginal cost	the cost of producing one additional unit	"Firms maximize profit where marginal cost equals marginal revenue."
equilibrium	a state where supply equals demand	"The market reaches equilibrium at $50 per unit."
scarcity	the fundamental economic problem of unlimited wants and limited resources	"Scarcity forces societies to make allocation choices."
utility	the satisfaction or benefit derived from consuming a good	"Economists measure utility to understand consumer choices."
monopoly	a market with only one seller	"The utility company operates as a regulated monopoly."
oligopoly	a market dominated by a few large sellers	"The airline industry is an oligopoly."
perfect competition	a market with many buyers and sellers trading identical products	"Agricultural commodities approach perfect competition."
price discrimination	charging different prices to different customers for the same product	"Student discounts are a form of price discrimination."

🌐Macroeconomics10

Term	Definition	Example
GDP	gross domestic product; the total value of goods and services produced	"GDP growth of 3% indicates a healthy economy."
inflation	a general increase in prices and fall in purchasing power	"Inflation eroded the value of savings."
deflation	a general decrease in prices	"Japan experienced deflation in the 1990s."
recession	a significant decline in economic activity lasting months	"The recession caused unemployment to spike."
fiscal policy	government spending and taxation decisions	"Expansionary fiscal policy increased the deficit."
monetary policy	central bank actions affecting money supply and interest rates	"The Fed tightened monetary policy to fight inflation."
aggregate demand	total demand for goods and services in an economy	"Stimulus checks boosted aggregate demand."
multiplier effect	the amplified impact of spending through successive rounds	"Government spending has a multiplier effect on GDP."
stagflation	stagnant growth combined with high inflation	"The 1970s oil crisis caused stagflation."
trade deficit	when imports exceed exports	"The trade deficit widened as imports surged."

📈Financial Economics10

Term	Definition	Example
arbitrage	profiting from price differences in different markets	"Arbitrage opportunities disappear quickly in efficient markets."
liquidity	the ease of converting an asset to cash without loss	"Real estate has lower liquidity than stocks."
leverage	using borrowed money to amplify potential returns	"High leverage increases both risk and potential reward."
hedge	an investment to offset potential losses	"Airlines hedge against fuel price increases."
derivative	a financial instrument whose value derives from an underlying asset	"Options and futures are common derivatives."
yield	the return on an investment, usually expressed as a percentage	"Bond yields rose as prices fell."
volatility	the degree of variation in trading prices over time	"Market volatility spiked during the crisis."
portfolio	a collection of investments held by an individual or institution	"Diversifying your portfolio reduces risk."
capital	wealth used to generate more wealth	"The startup raised capital from venture investors."
asset	anything of value owned by an individual or entity	"Real estate is a major asset class."

🧠Behavioral Economics10

Term	Definition	Example
bounded rationality	decision-making limited by information, time, and cognitive capacity	"Bounded rationality explains satisficing behavior."
loss aversion	the tendency to prefer avoiding losses over acquiring gains	"Loss aversion makes people hold losing stocks too long."
anchoring	over-relying on the first piece of information encountered	"The initial price serves as an anchor in negotiations."
endowment effect	valuing something more simply because you own it	"The endowment effect explains reluctance to sell at fair prices."
hyperbolic discounting	preferring smaller immediate rewards over larger later ones	"Hyperbolic discounting explains procrastination."
framing effect	different reactions to the same information based on presentation	"Describing meat as '90% fat-free' vs '10% fat' is a framing effect."
herd behavior	following the crowd rather than independent analysis	"Herd behavior amplifies market bubbles."
status quo bias	preference for the current state of affairs	"Status quo bias keeps people with suboptimal investments."
mental accounting	treating money differently based on subjective categories	"Mental accounting explains why people splurge tax refunds."
nudge	subtle policy changes that guide behavior without mandates	"Making organ donation opt-out is a nudge."

♟️Game Theory Fundamentals10

Term	Definition	Example
game theory	the study of mathematical models of strategic interaction	"Game theory explains why competitors often end up in suboptimal equilibria."
Nash equilibrium	a state where no player benefits by unilaterally changing strategy	"Both companies advertising heavily is a Nash equilibrium."
payoff	the reward or outcome a player receives from a strategy	"The payoff matrix shows outcomes for all strategy combinations."
dominant strategy	a strategy that yields the best outcome regardless of opponents' choices	"Defecting is a dominant strategy in the prisoner's dilemma."
zero-sum game	a situation where one player's gain equals another's loss	"Chess is a zero-sum game; one player wins, the other loses."
positive-sum game	a situation where all players can benefit simultaneously	"Trade is often a positive-sum game benefiting all parties."
prisoner's dilemma	a game where rational self-interest leads to worse collective outcomes	"Price wars exemplify the prisoner's dilemma in business."
minimax	a strategy minimizing the maximum possible loss	"The minimax algorithm is used in chess-playing computers."
mixed strategy	a strategy involving randomization among possible moves	"In rock-paper-scissors, the optimal mixed strategy is equal probability."
information asymmetry	a situation where some players have more information than others	"Used car markets suffer from information asymmetry."

🎯Strategic Concepts10

Term	Definition	Example
first-mover advantage	the benefit gained by being the initial actor in a market or game	"Amazon's first-mover advantage in e-commerce proved decisive."
commitment device	a mechanism that binds one to a future course of action	"Burning bridges is a commitment device signaling no retreat."
signaling	actions taken to convey information about oneself to others	"A college degree serves as signaling of ability to employers."
screening	actions by the uninformed party to induce information revelation	"Insurance deductibles are a screening mechanism."
moral hazard	increased risk-taking by someone protected from consequences	"Bailout expectations create moral hazard in banking."
adverse selection	the tendency for higher-risk individuals to seek insurance	"Adverse selection can cause insurance markets to collapse."
credible threat	a threat that is believable because carrying it out is rational	"MAD made nuclear threats credible during the Cold War."
brinkmanship	pushing a dangerous situation to the edge to force concessions	"The negotiator's brinkmanship nearly collapsed the deal."
Schelling point	a solution people converge on without communication	"Grand Central Station is a Schelling point for meeting in NYC."
tit for tat	a strategy of cooperating first, then mirroring opponent's previous move	"Tit for tat won Axelrod's iterated prisoner's dilemma tournament."

⚖️Decision Theory10

Term	Definition	Example
expected utility	the weighted average of utilities across possible outcomes	"Rational agents maximize expected utility."
risk aversion	preference for certainty over gambles with equal expected value	"Risk aversion explains why people buy insurance."
risk neutral	indifference between certain outcomes and gambles of equal expected value	"Corporations often behave as risk neutral for small bets."
sunk cost	a past cost that cannot be recovered	"Rational decisions should ignore sunk costs."
opportunity cost	the value of the best alternative forgone	"The opportunity cost of college includes lost wages."
marginal utility	the additional satisfaction from consuming one more unit	"Marginal utility typically decreases with consumption."
diminishing returns	decreasing incremental output as input increases	"Adding more workers eventually yields diminishing returns."
pareto optimal	a state where no one can be made better off without making another worse off	"A perfectly competitive market reaches Pareto optimality."
revealed preference	inferring preferences from observed choices	"Revealed preference shows she values time over money."
time preference	the relative valuation of present versus future consumption	"High time preference leads to lower savings rates."

👥Collective Action10

Term	Definition	Example
tragedy of the commons	depletion of shared resources due to individual self-interest	"Overfishing exemplifies the tragedy of the commons."
free rider problem	the tendency to benefit from collective goods without contributing	"National defense suffers from the free rider problem."
coordination problem	difficulty in aligning actions when mutual benefit requires agreement	"Which side of the road to drive on is a coordination problem."
public good	a good that is non-excludable and non-rivalrous	"Street lighting is a classic public good."
externality	a cost or benefit affecting parties not involved in a transaction	"Pollution is a negative externality of manufacturing."
club good	a good that is excludable but non-rivalrous	"Streaming services are club goods."
common pool resource	a resource that is rivalrous but non-excludable	"Fisheries are common pool resources vulnerable to overuse."
mechanism design	creating rules to achieve desired outcomes given strategic behavior	"Auction design is an application of mechanism design."
incentive compatibility	a system where honest behavior is in each participant's interest	"The Vickrey auction is incentive compatible."
social dilemma	a situation where individual rationality leads to collective irrationality	"Climate change is a global social dilemma."

📈Market Fundamentals14

Term	Definition	Example
bull market	a prolonged period of rising asset prices, typically defined as a 20% gain from recent lows	"The bull market of the 2010s lasted over a decade, rewarding patient investors."
bear market	a prolonged decline in asset prices of 20% or more from recent highs	"During the bear market of 2022, many growth stocks lost over 70% of their value."
market capitalization	the total market value of a company's outstanding shares, calculated as share price times share count	"Apple's market capitalization exceeded $3 trillion, making it the most valuable company in the world."
liquidity	the ease with which an asset can be bought or sold without significantly affecting its price	"Large-cap stocks have high liquidity; you can sell millions of shares without moving the price."
volatility	the degree of variation in an asset's price over time, often measured as standard deviation of returns	"Cryptocurrency markets are known for extreme volatility — 20% swings in a single day are common."
bid-ask spread	the difference between the highest price a buyer will pay and the lowest price a seller will accept	"The bid-ask spread on the thinly traded stock was $0.50, making it expensive to trade."
dividend	a portion of a company's earnings distributed to shareholders, usually in cash	"The company increased its quarterly dividend for the 25th consecutive year."
yield	the income generated by an investment expressed as a percentage of its current price	"The bond's yield rose to 5% as its price fell in the rising rate environment."
short selling	borrowing and selling shares you do not own, betting the price will fall so you can buy them back cheaper	"The hedge fund profited by short selling the overvalued tech stock before its collapse."
margin	borrowed money used to purchase securities, amplifying both gains and losses	"Trading on margin doubled his returns during the rally but wiped out his account when the market turned."
portfolio	a collection of financial investments held by an individual or institution	"She diversified her portfolio across equities, bonds, and real estate to reduce risk."
index fund	a passively managed fund that tracks a market index such as the S&P 500	"Warren Buffett famously recommended index funds for most retail investors."
IPO	initial public offering — the first sale of a company's stock to the public	"The company's IPO was oversubscribed ten times, reflecting enormous investor demand."
circuit breaker	a regulatory mechanism that temporarily halts trading when prices fall too sharply	"Circuit breakers triggered three times in a single week during the March 2020 crash."

📊Technical Analysis12

Term	Definition	Example
support level	a price point where buying interest is strong enough to prevent further decline	"The stock bounced repeatedly off the $50 support level before finally breaking through."
resistance level	a price point where selling pressure is strong enough to prevent further advance	"The stock failed to break above the resistance level at its 52-week high."
moving average	a calculation that smooths price data by creating a constantly updated average price over a defined period	"When the 50-day moving average crossed below the 200-day, traders interpreted it as a bearish signal."
candlestick	a chart element showing the open, close, high, and low prices for a period, resembling a candle	"The long-wick candlestick suggested sellers drove the price down before buyers regained control."
breakout	when a price moves above a resistance level or below a support level with increased volume	"The breakout above $200 on heavy volume confirmed the bullish trend continuation."
dead cat bounce	a temporary recovery in a declining asset's price, followed by a continuation of the downtrend	"Investors who mistook the dead cat bounce for a reversal suffered further losses."
head and shoulders	a chart pattern with three peaks — a higher middle peak flanked by two lower ones — signaling a trend reversal	"The head and shoulders pattern formed over six months, warning of the major decline ahead."
RSI	relative strength index — a momentum oscillator measuring the speed and magnitude of recent price changes, scaled 0 to 100	"An RSI above 70 indicated the stock was overbought and potentially due for a pullback."
MACD	moving average convergence divergence — a trend-following momentum indicator showing the relationship between two moving averages	"The MACD crossover signal triggered the algorithm to enter a long position."
Fibonacci retracement	horizontal lines on a chart at key Fibonacci ratios indicating where support or resistance may occur	"The stock retraced to the 61.8% Fibonacci level before resuming its uptrend."
overbought	describes a security that has risen sharply and may be due for a price correction	"With an RSI of 85, the stock was deeply overbought after a three-week rally."
volume	the total number of shares or contracts traded for a security during a given period	"The breakout was confirmed by volume three times the 30-day average."

⚙️Options & Derivatives10

Term	Definition	Example
call option	a contract giving the buyer the right, but not obligation, to purchase shares at a set price before expiration	"He bought call options on the stock ahead of earnings, expecting a positive surprise."
put option	a contract giving the buyer the right, but not obligation, to sell shares at a set price before expiration	"She bought put options as insurance against a decline in her portfolio."
strike price	the predetermined price at which an option holder can buy or sell the underlying asset	"With the stock at $110, the $100 strike price call option was in the money."
premium	the price paid to purchase an options contract	"The high implied volatility made the option premium expensive relative to historical norms."
implied volatility	the market's forecast of likely future price movement, derived from current option prices	"Implied volatility spiked before the earnings announcement, making options expensive."
delta	the rate of change in an option's price relative to a $1 move in the underlying asset	"The call option had a delta of 0.60, meaning it would gain $0.60 for every $1 the stock rose."
theta	the rate at which an option loses value each day due to the passage of time; time decay	"Theta of -$0.05 meant the option lost five cents of value every day it sat idle."
hedge	an investment made to reduce the risk of adverse price movements in an asset	"The airline hedged its fuel costs by buying oil futures six months out."
futures contract	an agreement to buy or sell an asset at a predetermined price on a specific future date	"Farmers use futures contracts to lock in crop prices before harvest."
leverage	the use of borrowed capital to amplify potential returns — and potential losses	"With 10x leverage, a 5% move in the underlying wiped out the trader's entire position."

🎯Trading Strategies & Orders12

Term	Definition	Example
stop-loss order	an order to sell a security automatically when it reaches a specified price, limiting downside loss	"He set a stop-loss order 8% below his entry price to protect against a major decline."
limit order	an order to buy or sell a security only at a specified price or better	"She placed a limit order at $95, refusing to pay more than that for the stock."
dollar-cost averaging	investing a fixed dollar amount at regular intervals regardless of price, reducing the impact of volatility	"By dollar-cost averaging into the index fund monthly, she avoided the trap of trying to time the market."
rebalancing	adjusting a portfolio back to its target asset allocation by buying and selling assets	"After the equity rally, he rebalanced his portfolio by trimming stocks and adding bonds."
alpha	excess return on an investment relative to the return of a benchmark index	"The fund manager generated 4% alpha by outperforming the S&P 500."
beta	a measure of how much a security moves relative to the broader market; a beta above 1 means more volatile	"The utility stock's beta of 0.4 meant it moved much less than the market."
P/E ratio	price-to-earnings ratio — the price of a stock divided by its annual earnings per share	"At a P/E ratio of 40, the stock was priced for aggressive future growth."
short squeeze	a rapid price increase that forces short sellers to buy back shares at a loss, accelerating the rise	"The GameStop short squeeze of 2021 became one of the most dramatic in market history."
market order	an instruction to buy or sell a security immediately at the best available current price	"She placed a market order to sell all her shares when the bad news broke."
diversification	spreading investments across different assets, sectors, or geographies to reduce risk	"Diversification across 12 sectors meant one bad industry could not sink his portfolio."
drawdown	the peak-to-trough decline in a portfolio's value during a specific period	"The fund's maximum drawdown of 35% during the crash tested investors' conviction."
risk-reward ratio	the expected profit of a trade compared to its potential loss, used to evaluate trade quality	"A risk-reward ratio of 1:3 means risking $100 to potentially make $300."

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