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| Term | Definition |
|---|---|
| Implicit Cost | An implicit cost, also known as an imputed cost, implied cost, or notional cost, is the opportunity cost equal to what a firm must give up to use a factor of production for which it already owns and does not pay rent. It is the opposite of an explicit cost, which is borne directly. |
| Import Quota | An import quota is a trade restriction setting a physical limit on the quantity of a good that can be imported into a country within a given period. |
| Imports | Goods or services produced in a foreign country and purchased domestically. Imports encompass money spent on vacations or purchases in foreign countries. |
| Incentive | Something that motivates or drives one to do something or behave in a certain way. Two types of incentives affect human decision-making. |
| Income | Income is the consumption and saving opportunity gained by an entity within a specified timeframe, generally expressed in monetary terms. |
| Income Distribution | Income distribution covers how a country’s total GDP is distributed among its population. |
| Income Effect | The change in consumption resulting from a change in income. |
| Increasing Returns | A situation where each additional amount of a resource used in a production process brings forth successively larger amounts of output. |
| Indifference Curve | An indifference curve connects points on a graph representing different quantities of two goods, points between which a consumer is indifferent. |
| Individual Retirement Account (IRA) | A retirement savings instrument that allows a person to save money over time while deferring taxes on that income until retirement. |
| Industrial Organization | Industrial organization is a field that builds on the theory of the firm by examining the structure of firms and markets. |
| Industrial Policy | Government policies aimed at fostering the domestic development of particular desirable or productive industries to boost productivity, create higher-paid jobs, and enhance international trade performance. |
| Industry | A sector of the economy in which different firms produce similar or identical goods or services. |
| Inelastic Demand | Demand that is not very sensitive to changes in price, resulting in a relatively small effect on the quantity of the good demanded. Contrast elastic demand. |
| Inequality | The distribution of income across individual households typically demonstrates inequality between higher-income and lower-income households. |
| Inflation | A process whereby the average price level in an economy increases over time. |
| Inflation Rate | A measure of how the overall level of prices in the economy changes over time. If positive, prices are rising; if negative, prices are falling. |
| Informal Economy | The informal sector of the economy represents the production of goods and services for own-use or informal trade in communities, distinct from the formal economy. |
| Information Economics | A branch of microeconomic theory studying how information and information systems affect an economy and economic decisions. |
| Innovation | Producers, including private companies, endeavor to develop new products and processes to enhance market share and profitability. Innovation refers to finding better ways to produce better goods and services. |
| Institutionalist Economics | A school of heterodox economics emphasizing the importance of institutional development and evolution in explaining economic and social development. |
| Interest | A lender charges interest as the price of lending money to a borrower, typically as a specified percentage of the loan’s value per specified time period. |
| Intermediate Products | Products produced not for consumption but to be used in the production of some other good or service. Examples include capital goods and raw materials. |
| International Monetary Fund (IMF) | An international financial institution regulating and stabilizing financial relationships among countries, ensuring the free flow of finance worldwide. |
| Intertemporal Choice | The process by which people make decisions about what and how much to do at various points in time, considering that choices at one time influence possibilities at other points in time. |
| Inventory Bounce | A term describing an economy’s bounce back to normal GDP levels after a recession, also known as inventory bounce-back. |
| Investment | Represents production not consumed but utilized in the production of other additional output, adding to the capital stock of an economy. |
| Investment Fund | An investment fund allows individuals to invest money alongside others, benefiting from inherent advantages such as risk reduction. |
| Invisible Hand | Adam Smith’s concept that in a competitive market, each firm’s pursuit of self-interest results in socially optimal outcomes, guided by an invisible hand. |
| IS–LM Model | A two-dimensional macroeconomic tool showing the relationship between interest rates and assets market (real output in goods and services market plus money market). |