Consumer Economics Glossary

An asset is either in the form of money or equipment used to produce goods or services.

The profit comes from selling an investment for more than you paid. You will often hear this term used after a consumer sells their house for a profit. The capital gains are the remaining money after paying off the mortgage(s) and the real estate seller fees. People often use this to buy a new house to avoid paying higher taxes.

The loss resulting from selling an investment for less than you paid.

An economic system where the production and distribution of goods and services is the responsibility of individuals or entities, a free market. Capitalism is usually associated with a market economy and relies on a for-profit motive. America is a capitalist society, meaning we practice capitalism.

A type of savings-based investment where you pay a set amount and get a return with a preset interest rate at a fixed maturity date.

A bank account where you make deposits pay bills, and withdrawals.

An insured person’s submission for compensation due to loss incurred and protected under the policy.

It is a percentage of a medical invoice that the insured pays after the insurance policy’s deductible is surpassed up to the policy’s stop loss.

A specified amount of incurred medical expenses the insurer pays at the time of service.

A pledged asset used to secure a loan.

Interest-earning interest is when you earn interest on both the money you save and the interest you earn. The interest paid on the principal amount invested continues to compound because it makes interest when reinvested. Comparing two equal investments clarifies compound interest’s power. One earns simple interest, while the other is compound interest. Simple interest only pays on the invested principal. For example, bonds pay simple interest. A ten-year $10,000 bond earning five percent annually will pay $500 ($10,000*.05) each year until it matures. The principal investment remains $10,000. Over ten years, the bond will earn $5,000 interest.

An individual who purchases goods or services for personal needs or use, not for resale.

An item sold for direct use by customers is also referred to as final goods.

The most standard measure of inflation. A change measurement in the prices for goods and services.

When consumers pay less for a good or service, they are willing to pay—the difference between their willingness versus the actual price.

Activities designed to protect the rights of shoppers.

A secondary person who signs a loan, credit account, or promissory note becoming jointly responsible for the debt obligation along with the primary signer. A cosigner is often required if the primary obligator does not have the desired credit score or assets for the creditor to approve them alone.

The amount of money needed to buy a consumer good or service.

Spending minimal money to produce a good creating a higher value-to-cost ratio.

Borrowing money to make a purchase.

An open-ended loan that allows you to borrow money up to a specific limit and carry over an unpaid balance from month to month. There is no fixed time to repay the loan if you make the minimum payment due each month. You pay interest on any outstanding credit card loan balance.

A detailed, written summary of how you’ve used your credit card for a billing period.

A boundary set by the credit issuer on how much you can charge on credit issued.

Numbers created by mathematical algorithms that use your credit history to calculate a score at a moment in time.

A cooperative bank chartered by the National Credit Union Administration or a state government that its members own.

The percentage of the total amount of credit a person has available compared with the amount they’ve used. If you have one 1,000-dollar credit card and carry a Five-Hundred-dollar balance, you have a 50% credit utilization.

A measure of a consumer’s ability to obtain and pay back extended credit.

Often referred to as just crypto. It is encrypted digital currency, meaning there is no physical coin or bill. However, you can use a service that allows you to cash in cryptocurrency for a physical token. You usually exchange cryptocurrency online without using an intermediary like a bank, as crypto is not government-backed. Cryptocurrency values change constantly.