101 Things Everyone Should Know About Economics: A Down and Dirty Guide to Everything from Securities and Derivatives to Interest Rates and Hedge Funds – And What They Mean For You by Peter Sander

101 Things Everyone Should Know About Economics: A Down and Dirty Guide to Everything from Securities and Derivatives to Interest Rates and Hedge Funds – And What They Mean For You by Peter Sander

CHAPTER 1
The Basics
If you have taken an introductory economics course in college or have read a
basic economics textbook, you can probably skip this chapter and go right to
the next one. But if you want to refresh your grasp of basic economic terms,
read on. Feel free, as you go through this book, to flip back to this chapter if
you get confused by some of the terminology.
A GLOSSARY OF BASIC ECONOMIC TERMS
Asset. Something that is owned. For businesses, it can take the form of things
such as factories, products, and equipment. Assets can also be intangibles
such as patents, trademarks, and copyrights. These kinds of things often fall
into the category of intellectual property, a concept that’s the subject of a
growing body of law. In the age of the Internet, determining the value of an
intangible asset has grown very complicated, and is probably going to become
more so in the future.
Broker. Someone who sells or buys things on behalf of other people. For
example, a mortgage broker buys and sells mortgages. An insurance broker
arranges the sale of insurance policies to clients, and so on. The term
brokerage firm usually refers to a company that deals in stocks. Brokers often
make recommendations to their clients about what to buy and sell, but
ultimately the buy-or-sell decision rests with the client.
Capital. Originally, this word described one of the factors used to produce
goods (the others included things like land and labor). In today’s economy,
“capital” generally refers to cash as well as to material goods like
manufacturing equipment, tools, and so on. The term financial capital is used
when talking about the monetary resources entrepreneurs use to create their
products or services.
Competitive Advantage. It’s the nature of capitalism that businesses
compete against one another. Each one tries to find some special way of
beating its rivals, something that makes it stand out. That something is
competitive advantage (also sometimes called the competitive edge). This is
one of the most valuable tools a company has to ensure its growth, and
companies try to protect their competitive advantages from all rivals.
Consumer. Anyone who uses goods and services that companies produce.
Consumers have become a major driving force in the U.S. economy, and
companies compete fiercely for their business. To this end, they spend a lot of
time analyzing consumers, trying to figure out their buying patterns, their
psychology, and so on.
Credit. Money that’s loaned to someone or something. Credit can be in the
form of a mortgage, a car loan, a line of credit through a credit card, or any
one of numerous other forms. When you have credit, that’s money that has
been loaned to you by someone else. If you’re a creditor, you’ve loaned
money to someone, and they’ll have to pay it back to you, usually with
interest.
Debt. Something you owe to someone else. Personal debt has become a huge
issue in the United States in recent years, and many people, as a result of their
exploding debt, have suffered bankruptcies and foreclosures. However, some
debt can be good—for example, if it’s used to buy something that will
produce value (like a business asset) or increase in value over time (like
certain real estate investments), or something that you need but will cost more
in the future. Bad debt is when you purchase something you don’t need and
can’t afford.

101 Things Everyone Should Know About Economics: A Down and Dirty Guide to Everything from Securities and Derivatives to Interest Rates and Hedge Funds – And What They Mean For You by Peter Sander