Definitions Flashcards
0
Q
Household
A
Group of people whose spending decisions are connected
1
Q
Economics
A
The study of How to allocate scarce resource between unlimited and competing wants.
2
Q
Microeconomics
A
The study of how households and firms make decisions in markets
3
Q
Macroeconomics
A
The study of issues that affect economies as a whole
4
Q
Model
A
A simplified view of reality that is used by economists as a means of explaining economic relationships.
5
Q
Factor of production
A
The resource inputs that are available in an economy for the production of goods and services
6
Q
Goods
A
Tangible products. Products that can be seen and touched.
7
Q
Services
A
Intangible products, products that cannot be seen or touched.
8
Q
Land
A
Natural resources in an economy
9
Q
Factor endowment
A
Amount of factors of production that can be exploited within a country. Countries with higher factor endowments tend to be more prosperous.
10
Q
Want
A
Anyone you would like. Irrespective of whether you have the money to purchase it.
11
Q
Scarcity
A
A situation where there are insufficient resources to meet all wants
12
Q
Opportunity cost
A
The cost of the next best alternative. Which is usually gone when a choice is made.
13
Q
The 3 questions of economics
A
What to produce? (what to use resources for?)
How to produce? (large businesses, small businesses, gov. Etc)
For whom to produce? (who gets it?)
14
Q
Labour
A
Human resource in any economy. Quality and quantity are both very important.
15
Q
Capital
A
Physical resource that covers anything regarded as a man made aid for production. Such as machinery
16
Q
Enterprise/entrepreneurship
A
Refers to enterprise where factors of production are organized in order to produce goods and services. And refers to ability and inventiveness of individuals who take risks. I.e Richard Branson
17
Q
Economic problem
A
Resources are scarce, in relation to this desires are unlimited, leading to choices having to be made.
18
Q
Economic activity
A
The process of combining resources to add value and produce goods and services of use to consumers.
19
Q
Production possibility curve
A
This shows the maximum quantities of different combinations of output of two products, given current resources and the state of technology.
20
Q
Developed economy
A
Economy with a high level of income per head
21
Q
Developing economy
A
Economy with a relatively low level of income per head
22
Q
Trade off
A
A calculation involved in deciding on whether to give up on good for another
23
Q
Economic growth (short run)
A
An increase in real GDP
24
Productive potential
The maximum output that an economy is capable of achieving
25
Market
Where buyers and sellers meet to trade or exchange products
26
Consumer confidence:
How optimistic consumers are about future economic prospects.
27
Aggregate Demand (AD)
The total demand for a country's good and services at a given price level and in a given time period.
28
Aggregate supply (AS)
The total amount that producers in an economy are willing and able to supply at a given price level in a given time period
29
Allocative efficiency
Where consumer satisfaction is maximised.
30
Arithmetic mean
The sum of the items divided by the number of items
31
Asymmetric information
Information not equally shared between two parties
32
Automatic stabilisers
Forms of government spending and taxation that change automatically to offset fluctuations in economic activity
33
Average propensity to consumer (APC)
The proportion of disposable income spent. It is consumer expenditure divided by disposable income.
34
Average Propensity to Save (APS)
The proportion of disposable income saved. It is saving divided by disposable income.
35
Balance of payments
A record of money coming in and going out of a country.
36
Capacity utilisation
The extent to which firms are using their capital goods
37
Capital
Man made aids to production
38
Choice
The selection of appropriate alternatives
39
Circular flow of income
The movement of spending and income throughout the economy
40
Claimant amount
A measure of unemployment that includes those receiving unemployment-related benefits.
41
Command economy
An economic system in which resources are state owned and also allocated centrally
42
Consumer confidence
How optimistic consumers are about future economic prospects
43
Consumer expenditure
Spending by households on consumer products
44
Consumer price index
A measure of changes in the price of a representative basket of consumer goods and services.
45
Corporation tax
A tax on firm's profits.
46
Cost push inflation
Increase in the price level caused by increases in the costs of production
47
Cross elasticity of demand (XED)
The responsiveness of demand for one product in relation to a change in the price of another
48
Current account deficit
When more money is leaving the country than is coming in, as a result of sales of its exports, income and current transfers from abroad being less than imports, income and current transfers going abroad.
49
Cyclical unemployment.
Unemployment rising from a lack of aggregate demand
50
Deflation
A sustained fall in the general price level
51
Demand
The quantity of a product that consumers are willing and able to buy at a specified market price over a given period of time.
52
Demand curve
A curve that shows the relationship between quantity demanded and the price of a product.
53
Demand pull inflation
Increases in the price level caused by increases in aggregate demand.
54
Demand schedule
The data that is used to draw the demand curve for a product
55
Demerit goods
Their consumption is more harmful than actually realised
56
Developed economy
An economy with a high level of income per head
57
Developing economy
An economy with a low level of income per head
58
Direct tax
One that taxes income Of people and firms and that cannot be avoided
59
Disposable income
Income after taxes on income have been deducted and state benefits have been added
60
Dissave
Spending more than disposable income
61
Distribution of income
How income is shared out between households in a country
62
Division of labour
The specialisation of labour where the production process is broken down into different parts
63
Economic cycle
The the tendency for economic activity to fluctuate outside its trend growth rate, moving from high level of economic activity (boom) to negative economic activity (recession)
64
Economic efficiency
Where both allocative and productive efficiency are achieved.
65
Economic growth in the short run
An increase in real GDP
66
Long run economic growth
An increase in productive capacity ( the maximum output that the economy can produce)
67
Economically inactive
People of working age who are neither employed nor unemployed
68
Economic problem
How to allocate scarce resources among unlimited and competing wants
69
Economics
The study of how to allocate scarce resources in the most effective way
70
Economic Growth (Long run)
An increase in productive capacity, that is, the maximum output that an economy can produce
71
Economic system
The way in which production is organised in a country or countries
72
Effective demand
The willingness and ability to buy a product
73
Efficiency
Where the best use of resources is made for the benefit of consumers
74
Elastic
Responsive to a change in market conditions
75
Elasticity
The extent to which buyers and sellers respond to a change in market conditions
76
Entrepreneur
Someone who bears the risks of the business and who organises production
77
Entrepreneurship
The willingness of an entrepreneur to take risks and organise production
78
Equilibrium price
The price where demand and supply are equal
79
Equilibrium quantity
The quantity that is demanded and supplied at the equilibrium price
80
Exchange
The process by which goods and services are traded
81
Exchange rate
The price of one currency in terms of another currency or currencies
82
Exports
Products sold abroad
83
External benefits
The benefits that accrue as a consequence of externalities to third parties
84
External costs
The costs that are a consequence of externalities to third parties
85
Externality
Spillover effects on third parties arising from production or consumption
86
Deflationary
Policy measures designed to reduce aggregate demand
87
Discretionary fiscal policy
Deliberate changes in government spending and taxation designed to influence aggregate demand
88
Disequilibrium
Any position in the market where demand and supply are not equal
89
Factor endowment
The stock of factors of production
90
Factor of production
The resource inputs that are available in an economy for the production of goods and services
91
Factor services
The services provided by the factors or production
92
Fiscal drag
People's income being dragged into higher tax bands as a result of tax brackets not being adjusted in line with inflation
93
Fiscal policy
The taxation and spending decisions of a government
94
Specialisation
The concentration by a worker or workers, region or whole economy on a narrow range of goods and services.
96
Frictional unemployment
Short term unemployment occurring when workers are in between jobs
97
Full employment
A situation where those who wanting and able to find work can find employment at the going wage rate.
98
Goods
Tangible products e.g products that can be seen or touched. Such as cars, food and ovens.
99
Government bond
A financial asset issued by the government.
100
Government spending
Spending by the central bank and local government on goods and services.
101
Gross domestic product
The total value of goods and services produced in an economy in a given time
102
Household
A group of people whose spending decisions are connected.
103
Human capital
Education, training and experience that a worker, or group of workers, possesses.
104
Hyperinflation
Inflation rate above 50%
105
Hysteresis
Unemployment causing unemployment
106
Imports
Products bought from abroad.
107
Income elastic
Goods for which a change in income produces a greater proportionate change in demand.
108
Income elasticity of demand
The responsiveness of demand to a change in income.
109
Income inelastic
Goods for which a change in income produces less than a proportionate change in demand.
110
Index number
A number showing the variation in, for example wages or price, as compared with a chosen base period or date.
111
Indirect tax
Tax levied on goods and services
112
Inefficiency
Any situation where economic efficiency is not achieved.
113
Inferior goods
Goods for which an increase in income leads to a fall in demand
114
Inflation
A general and persistent rise in the price level;
| The percentage increase in the price level over a period of time
115
Inflationary noise
The distortion of price signals caused by inflation
116
Informal economy
Economic activity that is not recorded or registered with the authorities in order to avoid paying tax or complying with regulations, or because the activity is illegal.
117
Information failure
A lack of information resulting in consumers and/ or consumers making decisions that do not maximize their own welfare
118
Injections
Additions of extra spending into the circular flow of income
119
International labour organisation (ILO)
A member organisation of the united nations that collects statistics on labour market conditions and seeks to improve working conditions.
120
International monetary fund (IMF)
An international organisation that helps co-ordinate the international monetary system.
121
Investment
Spending on capital goods (usually by firms)
122
Labour
The quantity and quality of human resources
123
Labour force
The people who are employed and unemployed, that is, those who are economically active
124
Labour force survey
A measure of unemployment based on a survey using the ILO definition of unemployment
125
Labour productivity
Output of a good or service per worker in a given time period
126
Land
Natural resources in an economy
127
Leakages
Withdrawals of possible spending from the circular flow of income
128
Long term unemployment
Unemployment lasting for more than a year
129
Macro economic equilibrium
A situation where aggregate demand equals aggregate supply and real GDP is not changing
130
Macro economics
The study of issues that affect an economy as a whole
131
Market
A place where buyers and sellers meet to exchange goods and services
132
Market economy
An economic system whereby resources are allocated through the free market mechanism
133
Market failure
Where the free market mechanism fails to achieve economic efficiency
134
Menu costs
Costs of changing prices due to inflation
135
Merit goods
Goods/services that actually have more private benefits that their consumers actually realize
136
Micro economics
The study of how households and firms make decisions in markets
137
Mixed economy
An economics system in which resources are allocated through a mixture of the market and direct public sector involvement
138
Monetary policy
Government actions to control the amount of money in an economy and therefore the levels of C and I (and X and M)
139
Monetary policy committee
Monetary policy committee a committee of the Bank of England with responsibility for setting the interest rate in order to meet the government's inflation target
140
Movement along the demand curve
This is in response to a change in the price of a product
141
Multiplier effect
The process by which any change in a component of aggregate demand results in a greater final change in real GDP
142
Negative externality
Where the social cost of an activity is greater than the private cost
143
Net exports
The value of exports minus the value of imports
144
Net savers
People who save more than they borrow
145
Nominal GDP
Output measured in current prices and so not adjusted for inflation
146
Non-excludability
Situation existing where individual consumers cannot be excluded from consumption
147
Non-rivalry
Situation existing where consumption by one person does not affect the consumption of all others
148
Normal goods
Goods for which an increase in income leads to an increase in demand. Goods with a positive income elasticity of demand
149
Notional demand
The desire for a product
150
Occupational immobility of labour
Difficulty in moving from one type of job to another
151
Opportunity cost
The cost of a decision in terms of the next best alternative. Which is usually forgone when a decision is made.
152
Output gap
The difference between an economy's actual and potential real GDP
153
Overheating
The growth in aggregate demand outstripping the growth in aggregate supply, resulting in inflation.
154
Polluter pays principle
Any measure, such as a green tax, whereby the polluter pays explicitly for the pollution involved
155
Positive externality
Where the social benefits of an activity exceed the private benefits
156
Price
The amount of money that is paid for a given amount of a good or service
157
Price elastic (or price sensitive)
Where the percentage change in quantity demanded is sensitive to a change in price
158
Price elasticity of demand (PED)
The responsiveness of the quantity demanded of a product, relative to a change in price
159
Price inelastic (or price insensitive)
Where the percentage change in the quantity demanded is insensitive to a change in price
160
Price level
The average of the prices of all the products produced in an economy
161
Price system
A method of allocating resources by the free movement of prices
226
Free market mechanism
The system by which the market forces of demand and supply determine prices and the decisions made by consumers and firms.
227
Free rider
Someone who directly benefits from the consumption of a public good but who does not contribute towards its provision.
228
Real GDP
The country's output measured in constant prices and so adjusted for inflation
229
Real interest rate
The nominal interest rate - the inflation rate
230
Recession
A fall in real GDP over a period of 6 months or more
231
Reflationary
Of policy measures designed to increase aggregate demand
232
Private benefits
The benefits directly accruing to those taking a particular action (consuming the good or service)
233
Private costs
Costs incurred by those taking a particular action
| the cost to the firms producing the good or service
234
Privatization
Transfer of assets from public to private sector
235
Producer surplus
The difference between the price a firm/producer is willing to accept and what is actually paid
236
Production
The output of goods and services
237
Production possibility curve
Shows the maximum output combinations of two goods/services, given current resources and state of technology
238
Productive efficiency
Where production takes place using the least amount of scarce resources
239
Productive potential
The maximum output that an economy is capable of producing
240
Productivity
Output, or production of a good or service per worker
241
Profit
Revenue - costs
| The difference between the total revenue (sales revenue) of a producer and total cost
242
Progressive tax
A tax that takes a higher percentage of income from the rich
243
Protectionism
The protection of domestic industries from foreign competition
244
Public goods
Goods that are collectively consumers and have the characteristics of non-excludability and non-rivalry
245
Quasi-public goods
Goods having some but not all the characteristics of a public good
246
Quota
A limit on imports
247
Rate of interest
The charge for borrowing money and the amount paid for lending money
248
Real disposable income
Income after taxes on income have been deducted and state benefits have been added. The result has been adjusted to take into account changes in the price level
249
Real GDP
The country's output measured in constant prices and so adjusted for inflation
250
Real interest rate
The nominal interest rate minus the inflation rate
251
Recession
A fall in real GDP over a period of 6 months
252
Reflationary
A policy of measures designed to increase aggregate demand
253
Regressive tax
Tex that takes a great percentage of income from the poor
254
Retained profits
Profit kept by firms to finance investment
255
Saving
Real disposable income minus spending
256
Savings ratio
Savings as a proportion of disposable income
257
Scarcity
A situation where there are insufficient resources to meet all the wants
258
Services
Intangible products, products that cannot be seen or touched such as banking, therapy and insurance
259
Shoe leather costs
Costs in terms of the extra time and effort involved in reducing money holdings
260
Shortage
An excess of demand over supply
261
Social benefits
The total benefits of a particular action
262
Social costs
The total costs of a particular action
263
Specialisation
The concentration of a worker, firm, region or country on a narrow range of goods and services
264
Structural unemployment
Unemployment caused by the decline of certain industries and occupations due to changes in demand and supply
265
Sub market
A recognized or distinguishable part of a market, also known as a sub market.
266
Subsidy
A payment, usually from the government, to encourage production or consumption of a product
267
Substitute
A competing good
268
Supply
The quantity of a product that producers and willing and able to provide at different market prices over a given period of time
269
Supply curve
Shows the relationship between the quantity supplied of a product and it's price.
270
Supply schedule
The data used to draw up a supply curve
271
Supply-side policies
Policies designed to increase aggregate supply by improving the efficiency of labour and product markets.
272
Surplus
An excess of supply over demand
273
Sustainable economic growth
Economic growth that can continue over time and does not endanger future generations ability to expand productive capacity
274
Target savers
People who save with a target figure in mind
275
Tariff
A tax on imports
276
Third party
Those not directly involved in making a decision
277
Time series
Information shown at successive points or intervals of time
278
Tradable permit
A permit that allows the owner to emit a certain amount of pollution and that, if unused or only partially used, can be sold to another polluter.
279
Trade off
The calculation involved in deciding on whether to give up one good for another
280
Trade deficit
The value of imports exceeding the value of exports
281
Trade surplus
The value of imports exceeding the value or exports
282
Trend growth
The expected increase in potential output over time. It is a measure of how fast the economy can grow without generating inflation
283
Unemployment
A situation where people are out of work but are willing and able to work
284
Unemployment rate
The percentage of the labour force who are out of work
285
Unit cost
Average cost per unit of output
286
Voluntary export restraint
Limit placed on imports from a country with the agreement of that country's government
287
Want
Anything you would like,regardless of whether or not you have the resources to purchase it
288
Wealth
A stock of assets e.g property, shares and money held in a savings account
289
Weighted average
Am average that takes into account the relative importance of the different items
290
World trade organisation
An international organisation that promotes free international trade and rules on international trade disputes
