Economics IGCSE EDEXCEL Glossary

absolute poverty

where people do not have enough resources to meet all of their basic human needs

administration

an activity involved with managing and organising the work of a company or organisation

Aggregate Demand

total demand in the economy including consumption, investment, government expenditure and exports minus imports

Aggregate Supply

the total amount of goods and services in the economy available at all possible price levels in a given time period

Anti-competitive practices

Attempts by firms to prevent or restrict competition

appreciate

(of a currency) where the value of a currency rises due to market forces-the exchange rate increases as a result

assembly plants

factory where parts are put together to make a final product

Assets

things or resources belonging to an individual or a business that has value or the power to earn money

austerity

official action taken by a government in order to reduce the amount of money that it spends or the amount that people spend

Balance of payments

A record of all transactions relating to international trade.

Balance of trade or visible balance

The difference between visible exports and visible imports.

Barriers to entry

Obstacles that might discourage a firm from entering a market.

Base rate

The rate of interest set by the MPC which influences all other rates in the economy.

Basic economic problem

Allocation of a nation's scarce resources between competing uses that represent infinite wants.

Bi-lateral trade agreement

trade deal between only two countries

Boom

The peak of the economic cycle where GDP is growing at its fastest; time when business activity increases rapidly, so that the demand for goods increases, prices and wages go up, and unemployment falls

boom and bust

when an economy regularly becomes more active and successful and then suddenly fails

Budget

The government's spending and revenue plans for the next year.

Budget deficit

The amount by which government spending exceeds government revenue.

bulk buying

buying goods in large quantities, which is usually cheaper than buying in small quantities

capital and financial account

that part of the balance of payments where flows of savings, investment and currencies are recorded

capital goods

those purchased by firms and used to produce other goods such as factories machinery, tools and equipment

Capital intensive

Where production relies more heavily on machinery relative to labour.

Cartel

Where a group of firms or countries join together and to agree on pricing or output levels in the market.

closed shop

company or factory where all the workers must belong to a particular trade union

Commodities

product that can be sold to make a profit, especially one in its basic form before it has been used or changed in an industrial process; examples of commodities are farm products and metals

Competition

The rivalry that exists between firms when trying to sell goods to the same group of customers.

Complementary goods

Goods purchased together because they are consumed together.

consumer goods

those purchased by households such as food, confectionary, cars, tablets and furniture

Consumer price index (CPI)

A measure of the general price level; used in the UK and across the Eurozone.

consumption

amount of goods, services, energy or natrual materials used in a particular period of time

Contractionary fiscal policy

Fiscal measures designed to dampen demand in the economy.

Cost-push inflation

Inflation caused by rising business costs.

Costs

The expenses incurred when producing goods and services.

Current account

Part of the balance of payments where all exports and imports are recorded.

Current account deficit

when the value of imports exceeds the value of exports

current account surplus

when the value of exports exceeds the value of imports

Current balance

difference between total exports and total imports (visible and invisible)

Cyclical or demand deficient unemployment

Unemployment caused by falling demand as result of a downturn in the economic cycle.

De-industrialisation

The decline in manufacturing.

Deflation

A period where the level of aggregate demand is falling.

Demand curve

Line drawn on a graph which shows how much of a good will be bought at different prices.

demand schedule

a table of the quantity demanded of a good at different price levels- can be used to calculate the expected quantity demanded

Demand-pull inflation

Inflation caused by too much demand in the economy relative to supply.

depreciate (of a currency)

where the value of a currency falls owing to market forces - the exchange rate falls as a result

Depression or slump

The bottom of the economic cycle where GDP starts to fall with significant increases in unemployment.

Derived demand

Demand that arises because there is demand for another good.

Devalued (of a currency)

when a government fixes a new lower exchange rate

Direct taxes

taxes levied on the income earned by firms and individuals

Discretionary expenditure

Non-essential spending or spending that is not automatic.

Diseconomies of scale

Rising average costs when a firm becomes too big.

disposable income

income that is available to someone over a period of time to spend; it includes state benefits but excludes direct taxes

diversified

if a company or economy diversifies, it increases the range of goods or services it produces

dividend

a part of a company's profit that is divided among the people with shares in the company

Division of labour

The breaking down of the production process into small parts with each worker allocated to a specific task.

Downturn

A period in the economic cycle where GDP grows, but more slowly.

Dumping

Where an overseas firm sells large quantities of a product below cost in the domestic market.

Economic growth

The increase in national income over time.

Economic policy

The range of actions taken by the government to help achieve its macroeconomic objectives.

Economies of scale

Falling average costs due to expansion.

Economy

System that attempts to solve the basic economic problem.

Effective demand

The amount people are willing to pay for a good at given prices over a given period of time backed by the ability to pay.

elastic demand

change in price results in a greater change in the quantity demanded (alternative term: Price elastic)

Elastic Supply

change in price results in a proportionately greater change in the quantity supplied (alternative term: price elastic)

Embargo

official order to stop trade with another country

enterprises

companies, organisations or businesses

Entrepreneur

An individual who organises the other factors of production and risks their own money in a business venture.

Equilibrium price

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 another.

excise duty

government tax on certain goods, such as cigarettes, alcoholic drinks and petrol that are sold in the country

Expansionary fiscal policy

Fiscal measures designed to stimulate demand in the economy.

expenditure

spending by a government, usually a national government

Exporter

Firms that sell overseas.

Exports

Goods and services sold overseas.

external benefits

positive spillover effects of consumption or production - they bring benefits to third parties

external costs

negative spillover effects of consumption or production - they affect third parties in a negative way

External economies of scale

The cost benefits that all firms in the industry can enjoy when the industry expands.

Factors of production

The resources used to produce goods and services. They include land, labour, capital and enterprise.

fast-moving consumer good (FMCG)

goods, especially food, that sell very quickly and in large amounts

finite

having an end or limit

Fiscal deficit

amount by which government spending exceeds government revenue

Fiscal policy

Decisions about government spending, taxation and levels of borrowing which affect aggregate demand in the economy.

Fiscal surplus

amount by which government revenue exceeds government spending

fit for purpose

usable (by a consumer) for the purpose for which it was intended

Fixed capital

The stock of 'man-made' resources such as machines and tools used to help make goods and services.

Fixed costs

Costs that do not vary with the level of output.

free rider

individual who enjoys the benefit of a good but allows others to pay for it

Foreign exchange market

The markets where foreign currencies can be bought and sold.

Free trade

Trade between nations that is completely without government restrictions.

Frictional unemployment

When workers are unemployed for a short period of time as they move from one job to another.

Globalisation

The growing integration of the world's economies.

Gross domestic product (GDP)

An internationally recognised measure of national income.

hostile takeover

takeover that the company being taken over does not want or agree to

Human capital

The value of the workforce or an individual worker.

Hyperinflation

very high levels of inflation; rising prices get out of control

Imports

Goods and services bought from overseas.

Income elasticity of demand

The responsiveness of demand to a change in income.

income inequality

differences in income that exist between the different groups of earners in society, that is, the gap between the rich and the poor