3. microeconomics

igcse

Households

A group of people who share living accommodation, pool income, and consume goods/services collectively; owners of factors of production and consumers.

Utility and satisfaction

The pleasure or benefit gained from consuming goods and services.

Wealth

The value of assets owned; greater wealth usually leads to greater spending.

Consumer confidence

The optimism or pessimism of consumers about their future financial situation, affecting their willingness to spend.

Interest rates

The cost of borrowing money or the return on savings; higher rates generally reduce spending and increase saving.

Income levels

The amount of money earned by households, categorized as low, middle, or high, affecting their spending.

Inflation

The general increase in prices, which can reduce the purchasing power of money and influence spending.

Time rate

A wage payment system where employees are paid per unit of time worked, usually hourly.

Overtime rate

A higher wage rate paid for hours worked beyond the contractually agreed weekly or monthly hours.

Piece rate

A wage system where employees are paid per unit of product they produce.

Fixed annual salary

A set amount paid to an employee, distributed equally over the year.

Commission

A payment based on a percentage of the value of products or services sold.

Bonus

An additional payment for completing a contract or achieving performance targets.

Fringe benefits

Non-cash benefits provided by employers, such as medical cover, discounts, company car, or schooling subsidies.

Job satisfaction

The level of contentment employees feel about their work.

Derived demand

Demand for a factor of production that results from the demand for the final product.

Labour productivity

The efficiency of workers, measured by output per unit of input.

Capital equipment

Machinery and tools used in production.

Minimum wage

The lowest legal wage that can be paid to workers, intended to ensure a basic standard of living.

Skilled labour

Workers with specialized skills or training.

Unskilled labour

Workers with little or no specialized skills.

Elastic supply of labour

Labour supply that is responsive to wage changes.

Inelastic supply of labour

Labour supply that is unresponsive to wage changes.

Trade union

An organization of workers formed to protect and advance their interests.

Collective bargaining

Negotiation between employers and a group of employees aimed at agreements to regulate working conditions.

Internal growth

Business expansion using the firm’s own resources.

External growth

Business expansion through mergers or takeovers.

Takeover

Acquisition of one company by another, usually by purchasing a majority of shares.

Merger

The combination of two independent businesses to form a new entity.

Horizontal merger

A merger between companies at the same stage of production in the same industry.

Vertical merger

A merger between companies at different stages of production in the same industry.

Conglomerate merger

A merger between companies involved in unrelated business activities.

Short run

A period in which at least one factor of production is fixed.

Long run

A period in which all factors of production are variable.

Economies of scale

A reduction in average cost per unit as output increases.

Internal economies of scale

Cost savings that result from the growth of a firm itself.

External economies of scale

Cost savings that arise from the growth of the industry as a whole.

Diseconomies of scale

An increase in average cost per unit as output increases due to inefficiencies.

Market

A place or system where buyers and sellers exchange goods and services.

Market forces

The interaction of supply and demand that determines price and quantity in a market.

Market structure

The characteristics of a market that influence the behavior and outcomes of buyers and sellers.

Perfect competition

A market structure with many firms, identical products, no control over price, and easy entry and exit.

Monopoly

A market structure with one firm dominating the market, significant control over price, and high barriers to entry.

Price competition

Firms competing mainly by lowering prices.

Non-price competition

Firms competing through methods other than price, such as advertising, quality, or service.

Price taker

A firm that must accept the market price.

Price maker

A firm that can set its own price due to lack of competition.

Oligopoly

A market structure with a few large firms dominating the market.

Barriers to entry

Obstacles that make it difficult for new firms to enter a market.

Consumer choice

The range of competing products and services available to consumers.

Innovation

The process of creating new or improved products or methods.