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abnormal profit
Refers to positive economic profit, arising when total revenue is greater than total economic costs (implicit plus explicit costs); is also known as 'supernormal profit'. See economic profit.
absolute advantage
Refers to the ability of a country to produce a good using fewer resources than another country, or, what is the same thing, the ability of a certain amount of resources in a country to produce more than the same resources can produce in another country.
absolute poverty
The inability of an individual or a family to afford a basic standard of goods and services, where this standard is absolute and unchanging over time. Absolute poverty is defined in relation to a nationally or internationally determined 'poverty line', which determines the minimum income that can sustain a family in terms of its basic needs.
actual output
The quantity of output actually produced by an economy. In the context of the production possibilities model, it may be contrasted with production possibilities: actual output occurs somewhere inside an economy's production possibilities curve (PPC) because of the presence of unemployed resources and productive inefficiency. In the context of the AD-AS model, it may be contrasted with potential output, given by the position of an economy's long-run aggregate supply (LRAS) curve: actual output may be higher or lower than potential output (if there is an inflationary or deflationary gap) or it may be equal to potential output (if the economy is in long-run equilibrium).
ad valorem taxes
Taxes calculated as a fixed percentage of the price of the good or service; the amount of tax increases as the price of the good or service increases.
administrative barriers
Trade protection measures taking the form of administrative procedures that countries may use to prevent the free flow of imports into a country; these may include customs procedures involving inspections and valuation, controls on packaging, and others. Often considered to be a kind of 'hidden' trade protection as they don't involve obvious trade protection measures such as tariffs and quotas.
aggregate demand
The total quantity of goods and services that all buyers in an economy (consumers, firms, the government and foreigners) want to buy over a particular time period, at different possible price levels, ceteris paribus.
aggregate demand curve
The curve that shows the relationship between total quantity of goods and services that all buyers in an economy want to buy over a particular time period (aggregate demand), measured on the horizontal axis, plotted against the price level, measured on the vertical axis.
aggregate supply
The total quantity of goods and services produced in an economy over a particular time period, at different price levels, ceteris paribus.
aid
See foreign aid.
allocation of resources
See resource allocation.
allocative efficiency
An allocation of resources that results in producing the combination and quantity of goods and services mostly preferred by consumers. It is achieved when the economy allocates its resources so that no one can become better off in terms of increasing their benefit from consumption without someone else becoming worse off. The condition for allocative efficiency is given by P = MC (price is equal to marginal cost).
anti-dumping
An argument that justifies trade protection policies: if a country's trading partner is suspected of practising dumping, then the country should have the right to impose trade protection measures (tariffs or quotas) to limit quantities of the dumped good; see dumping.
appreciation (of a currency)
Refers to an increase in the value of a currency in the context of a floating (or flexible) exchange rate system or managed exchange rate system (compare with revaluation, which refers to an increase in currency value in the context of a fixed exchange rate system).
appropriate technology
Technologies that are well-suited to a country's particular economic, geographical, ecological and climate conditions. Often used in connection with labour-abundant developing countries that require labour-intensive (as opposed to capital-intensive) technologies.
asymmetric information
A type of market failure where buyers and sellers do not have equal access to information, usually resulting in an underallocation of resources to the production of goods and services, as parties to a transaction with less access to information try to protect themselves against the consequences of the information asymmetry.
automatic stabilizers
Factors that automatically, without any action by government authorities, work toward stabilising the economy by reducing the short term fluctuations of the business cycle. Two important automatic stabilizers are progressive income taxes and unemployment benefits.
average costs
Costs per unit of output, or the cost of each unit of output on average. They are calculated by dividing total cost by the number of units of output produced.
average fixed costs
Fixed cost per unit of output, or the fixed cost of each unit of output on average. They are calculated by dividing fixed cost by the number of units of output produced.
average product
The total quantity of output of a firm per unit of variable input (such as labour); shows how much output each unit of the variable input (for example, each worker) produces on average.
average revenue
Revenue per unit of output sold, calculated by dividing total revenue by the number of units of output produced.
average tax rate
Tax paid divided by total income, expressed as a percentage (i.e. tax paid divided by total income multiplied by 100).
average total costs
Total cost per unit of output, or the total cost of each unit of output on average. They are calculated by dividing total costs by the number of units of output; they are also equal to the sum of average fixed costs and average variable costs.
average variable costs
Variable cost per unit of output, or the variable cost of each unit of output on average. They are calculated by dividing variable cost by the number of units of output.
balance of payments
A record (usually for a year) of all transactions between the residents of a country and the residents of all other countries, showing all payments received from other countries (credits), and all payments made to other countries (debits). In the course of a year, the sum of all the credits must be equal to the sum of all the debits.
balance of trade in goods
Part of the balance of payments, it is the value of exports of goods minus the value of imports of goods over a specific period of time (usually a year).
balance of trade in services
Part of the balance of payments, it is the value of exports of services minus the value of imports of services over a specific period of time (usually a year)
