Revision Guide - Economic Glossary Flashcards
Aggregate demand
total demand in an economy: consumption, investment, government expenditure, and exports minus imports
Anti-competitive or restrictive trade practices
attempts by firms to restrict or prevent competition
Average costs
the cost per unit of output; it is equal to total cost divided by the number of units of output
Balance of payments
record of all of the transactions resulting from international trade
Barriers to entry
obstacles that migh discourage a firm from entering a market
Capital intensive
where production relies more heavily on machinery relative to labour
Cartel
a group of firms or countries join together to agree on pricing or output levels in an industry;
collusion
is where informal agreeements between firms restrict competition
Complementary goods
goods purchased together because they are consumed together
Consumer price index
used in United Kingdom and the Eurozone, it is a measure of the general price level excluding housing costs
Demand deficient (cyclical) unemployment
unemployment caused by falling demand in the economic cycle
Demand
the amount of a good bought at given prices over a period of time; a Demand Curve is a line on a graph which shows how much of a good will be bought at different prices; Derived demand is the demand that arises because there is demand for another good
Depression or slump
the bottom of an economic cycle, when GDP falls with significant increases in unemployment; Recession a less severe form of depression
Diseconomies of scale
rising average costs when output rises
Division of labour
the breaking down of the production process into small parts with each worker allocated a part of the process
Dumping
where an overseas firm sells large quantities of a product below cost in the domestic market
Economic policy instruments
economic variables such as interest rates, taxation rates and government expenditure that governments can adjust in managing the economy
Economies of scale
falling average costs due to expansion
Effective demand
the amount of a good people can afford to buy, and would buy, at any given price over a period of time
Efficiency
minimising costs and the use of resources
Entrepreneur
an individual who organises the other factors of producion and risks their own money in a business venture
Equilibrium price
the price where supply and demand are equal
Excess demand
where demand is greater than supply and there are shortages in the market
Excess supply
where supply is greater than demand and there are unsold goods in the market
Exchange rate
the price of one currency in terms of the currency of another country; a devaluation is the fall in the value of a currency; an appreciation is when the exchange rate rises
Exports
are goods and services sold overseas; imports are goods and services bought from overseas
Externalities
the spillover effects of consumption or production; they affect others and may be positive or negative
Factors of production
the resources used to produce goods and services. They include land, labour, capital and enterprise
Fixed capital
the stock of ‘man-made’ resources such as machines and tools used to hlep make goods and services
Fixed costs
costs that do not vary with the level of output
Foreign direct investment
business investment undertaken by a firm in another country, such as building a factory
Frictional unemployment
workers are unemployed briefly while they move from one job to another
Gross Domestic Product (GDP)
is an internationally recognised measure of a country’s national income
Human capital
the value of the workforce or of an individual worker
Income elasticity of demand
the responsiveness of demand to a change in income
Inferior good
a good for which demand will fall if income rises or will increase if income falls
Inflation
is a general and persistent rise in prices; deflation is period where the level of aggregate demand is falling
Inverse relationship between price and quantity demanded
where price rises quantity demanded falls; when price falls the quantity demanded rises
Labour intensive
where production relies more heavily on labour relative to machinery
labour
the people used in the production of goods and servies
Macroeconomics
the study of the whole economy; microeconomics is the study of individual parts of an economy
Market failure
where markets lead to inefficiency
Market system or price mechanism
the automatic determination of prices and the allocation of resources through markets operating in the economy
Market-clearing price
the price in a market where the amount supplied exactly equals the amount demanded
Minimum wage
a minimum amount per hour which most workers are entitled to be paid
Mixed economy
an economy where goods and services are provided by both the priblic and private sectors
Monetarists
economists who believe that there is a srong link between growth in the money supply and inflation
Monetary policy
the use of interest rates and the money supply to control aggregate demand in the economy
Monopoly
a situaion where there is one seller in a market; a natural monopoly is where it is less costly in an industry for one firm, rather than many, to produce a good or servide and supply the whole market
Multinationals
are companies that have significant production or service operations in at least two countries
National income
the value of income, outputor expenditure over a period of time
Normal good
a good for which demand will rise if income rises or fall if income falls
Oligopoly
is a market dominated by a few large firms
Opportunity cost
where choosing between different alternatives it is the benefit lost from the next best alternative
Price elastic demand
a change in the price results in a more than proporionate change in demand
Price elasticity of demand
the responsiveness of demand to a change in price
Price elasticity of supply
the responsiveness of supply to a change in price
Price inelastic demand
a change in the price results in a proportionately smaller change in demand
Primary industry
production involving extraction of materials from the earth including mining, forestry, fishing and agriculture
Primary sector
the provision of goods and services by business that are owned by individuals or groups of individuals
Privatisation
the transfer of public sector resources to the private sector
Product differentiation
an attempt by a firm to make its product distinct from that of its competitor
Production
a process which involves converting resources ino goods and services; a Production possibility curve(PPC) is a line which shows the different combinations of two goods an economy can produce when all available resources are used
Productivity
the amount of output per unit of input
Profit maximisation
making the largest amount of profit possible in a period of time
Public goods
goods that are not likely to be provided by the private sector
Public sector
government organisations that provide goods and services in the economy
Secondary industry
production involving the conversion of raw materials ino finished and semi-finished goods
Social benefits and costs
the benefits and costs of an economic activity to sociey as well as to the individual or firm
Specialistaion
the production of a limited range of goods by individuals, firms, regions or countries
Structural unemployment
caused by changes in the structure of an economy such as a decline in an industry
Subsidy
a grant given to producers, usually to encourage the production of a certain good
Substitute goods
goods bought as an alternative to another good that performs the same function
Supply
is the amount sellers are prepared to sell at given prices over a period of time; a supply curve is a line on a graph that shows how much of a good sellers are willing to supply at different prices
Tariffs or customs duies
a tax on imports to make hem more expensive to sell
Tertiary industry
production of services in the economy
Total costs
fixed cost and variable cost added together
Total revenue
the amount of money generated from the sale of goods that is calculated by multiplying price by quantity
Trading bloc
a group of counries situated in the same region that join together and enjoy trade free from tariffs, quotas and other trade barriers
Variable costs
costs that rise or fall as output levels are increased or decreased, respectively
Voluntary unemployment
resulting from people choosing not to work
