Economics

Absolute Poverty

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

Administration

Activities 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

Total amount of goods and services produced in a country at a given price level in a given time period.

Anti-competitive Practices

Attempts by firms to prevent or restrict competition.

Appreciate (of a currency)

When the value of a currency rises due to market forces.

Assembly Plants

Factories where parts are put together to make a final product.

Assets

Things or resources belonging to an individual or a business that have value.

Austerity

Official action taken by a government to reduce the amount of money that it spends.

Balance of Payments

Record of all transactions relating to international trade.

Balance of Trade

Difference between visible exports and visible imports.

Barriers to Entry

Obstacles that might discourage a firm from entering a market.

Base Rate

Rate of interest set by government or regional central banks for lending to other banks.

Basic Economic Problem

Allocation of a nation’s scarce resources between competing uses.

Bi-lateral Trade Agreement

Trade deal between only two countries.

Boom

Peak of the economic cycle where GDP is growing at its fastest.

Budget

Government’s spending and revenue plans for the next year.

Budget Deficit

Amount by which government spending is greater than government revenue.

Bulk Buying

Buying goods in large quantities, which is usually cheaper.

Capital Goods

Those purchased by firms and used to produce other goods.

Capital Intensive

Production that relies more heavily on machinery relative to labour.

Cartel

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

Closed Shop

Company where all the workers must belong to a particular trade union.

Commodities

Products that can be sold to make a profit, especially in basic form.

Competition

Rivalry that exists between firms trying to sell goods to the same customers.

Complementary Goods

Goods purchased together because they are consumed together.

Consumer Goods

Goods purchased by households.

Consumer Price Index (CPI)

Measure of the general price level excluding housing costs.

Contractionary Fiscal Policy

Fiscal measures designed to reduce demand in the economy.

Cost-push Inflation

Inflation caused by rising business costs.

Current Account

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

Current Account Deficit

When value of imports exceeds the value of exports.

Current Account Surplus

When value of exports exceeds the value of imports.

Cyclical Unemployment

Unemployment caused by falling demand as a result of a downturn.

Deflation

Period where the level of aggregate demand is falling.

Demand Curve

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

Demand Schedule

Table of the quantity demanded of a good at different price levels.

Demand-pull Inflation

Inflation caused by too much demand in the economy.

Depreciate (of a currency)

When the value of a currency falls due to market forces.

Depression

Bottom of the economic cycle where GDP starts to fall.

Derived Demand

Demand that arises because of demand for another good.

Direct Taxes

Taxes levied on the income earned by firms and individuals.

Discretionary Expenditure

Non-essential spending.

Diseconomies of Scale

Rising average costs when a firm becomes too big.

Disposable Income

Income available to spend excluding direct taxes.

Diversified

When a company increases the range of goods or services it produces.

Dividend

Part of a company’s profit divided among shareholders.

Division of Labour

Breaking down the production process into small parts.

Economic Growth

Increase in the level output by a nation.

Economies of Scale

Falling average costs due to expansion.

Effective Demand

Amount of a good people are willing to buy at given prices supported by the ability to pay.

Elastic Demand

Change in price results in a greater change in the quantity demanded.

Elastic Supply

Change in price results in a proportionately greater change in the quantity supplied.

Embargo

Official order to stop trade with another country.

Enterprises

Companies or businesses.

Entrepreneurs

Individuals who organise other factors of production and risk their own money.

Equilibrium Price

Price at which supply and demand are equal.

Excess Demand

When demand is greater than supply.

Exchange Rate

Price of one currency in terms of another.

Excise Duty

Government tax on certain goods sold in the country.

Expansionary Fiscal Policy

Fiscal measures designed to stimulate demand in the economy.

Exports

Goods and services sold overseas.

External Benefits

Positive spillover effects of consumption or production.

External Costs

Negative spillover effects of consumption or production.

Fixed Costs

Costs that do not vary with the level of output.

Fiscal Deficit

Amount by which government spending exceeds revenue.

Fiscal Policy

Decisions about government spending, taxation and levels of borrowing.

Fiscal Surplus

Amount by which government revenue exceeds spending.

Fixed Capital

Stock of man-made resources used to help make goods.

Foreign Exchange Market

Market where foreign currencies are bought and sold.

Free Rider

Individual who enjoys the benefit of a good without paying.

Globalisation

Growing interconnection of the world’s economies.

Gross Domestic Product (GDP)

Market value of all final goods and services produced in a period.

Hostile Takeover

Takeover that the company being taken over does not want.

Human Capital

Value of the workforce or an individual worker.

Hyperinflation

Very high levels of inflation.

Imports

Goods and services bought from overseas.

Income Inequality

Differences in income between different groups of earners.

Indirect Taxes

Taxes levied on spending, such as VAT.

Inelastic Demand

Change in price results in a proportionately smaller change in quantity demanded.

Infant Industries

New industries yet to establish themselves.

Inferior Goods

Goods for which demand will fall if income rises.

Inflation

Rate at which prices rise.

Interdependence

Where the actions of one country or firm affect others.

Internal Economies of Scale

Cost benefits that an individual firm can enjoy when it expands.

Job Rotation

Practice of regularly changing the person who does a particular job.

Labour Intensive

Production that relies more heavily on labour relative to machinery.

Labour Mobility

Ease with which workers can move between different jobs.

Liabilities

Amount of debt that is owed.

Macroeconomics

Study of large economic systems.

Market Clearing Price

Price at which the amount supplied matches the amount demanded.

Market Failure

Where markets lead to inefficiency.

Monopolies

Situation where a business activity is controlled by only one company.

Mortgage

Legal arrangement where you borrow money to buy land or a house.

Multinational Corporations (MNCs)

Companies that operate in many different countries.

National Debt

Total amount of money owed by a country.

Opportunity Cost

Cost of the next best alternative given up.

Patents

Licenses that grant permission to operate as a sole producer.

Perfectly Elastic (Demand)

Where PED = ∞.

Price Elasticity of Demand

Responsiveness of demand to a change in price.