IGCSE Economics Lecture Vocabulary

Vocabulary flashcards covering key economic concepts from the lecture notes, providing clear definitions for study and revision.

Perfectly Inelastic Supply

A situation where the quantity supplied does not change at all when price changes.

Market Economic System

An economy in which resources are allocated mainly through the price mechanism with limited government intervention.

Private Sector

The part of the economy owned and controlled by individuals or shareholders, motivated by profit.

Public Sector

The part of the economy owned and controlled by the government, aiming to promote social welfare.

Price Mechanism

The system by which demand and supply interact to determine prices and the allocation of resources.

Consumer Sovereignty

The power of consumers to determine what goods and services are produced through their purchasing decisions.

Allocative Efficiency

When resources are used to produce the products most desired by consumers in the right quantities.

Productive Efficiency

A situation where goods are produced at the lowest possible average cost.

Dynamic Efficiency

Efficiency gained over time through innovation and investment that improves products and production methods.

Market Failure

When market forces result in an inefficient allocation of resources and fail to maximize social welfare.

Social Cost

The total cost to society of an economic activity, including both private and external costs.

External Cost (Negative Externality)

A cost imposed on third parties not involved in an economic transaction.

Social Benefit

The total benefit to society from an economic activity, including both private and external benefits.

External Benefit (Positive Externality)

A benefit received by third parties who are not directly involved in the economic activity.

Merit Good

A product that is more beneficial to consumers than they realize and generates positive externalities; under-consumed if left to the market.

Demerit Good

A product that is more harmful to consumers than they realize and generates negative externalities; over-consumed if left to the market.

Public Good

A good that is non-rival and non-excludable, such as national defence, needing to be financed by taxation.

Private Good

A good that is excludable and rival in consumption, typically provided by the market.

Free Rider

Someone who benefits from a good or service without paying for it.

Information Failure

When economic agents make wrong decisions because they lack accurate or complete information.

Monopoly

A market structure with a single seller that controls supply and can influence price.

Price Fixing

An illegal agreement between firms to charge the same price and restrict competition.

Factor Immobility

The difficulty of moving resources between locations or occupations.

Mixed Economy

An economic system in which both the private sector and the public sector play important roles in resource allocation.

Maximum (Ceiling) Price

A legally imposed upper limit on a price, set below equilibrium to keep prices low.

Minimum (Floor) Price

A legally imposed lower limit on a price, set above equilibrium to encourage production or incomes.

Subsidy

A payment by the government to producers or consumers to lower costs and increase output or consumption.

Indirect Tax

A tax on expenditure, such as VAT or excise duties, that raises producers' costs.

Nationalisation

Transfer of ownership of a firm or industry from the private sector to the state.

Privatisation

Transfer of ownership of a firm or industry from the public sector to the private sector.

Cost-Benefit Analysis (CBA)

A method of assessing investment projects by comparing total social costs with total social benefits.

Money

Anything that is generally accepted as a means of payment.

Medium of Exchange

The function of money that allows goods and services to be traded without barter.

Store of Value

The function of money that allows value to be saved and retrieved in the future.

Unit of Account

The function of money that provides a common measure to compare the value of goods and services.

Standard of Deferred Payments

The function of money that allows debts to be expressed and settled over time.

Commercial Bank

A profit-seeking financial institution that accepts deposits, lends money, and offers payment services.

Liquidity

The ease with which an asset can be converted into cash without loss.

Central Bank

A government-owned bank that acts as banker to the government and commercial banks, controls the money supply, and implements monetary policy.

Disposable Income

Household income after taxes have been deducted and state benefits added.

Average Propensity to Consume (APC)

The proportion of disposable income that is spent: consumption divided by income.

Savings Ratio (Average Propensity to Save)

The proportion of disposable income that is saved rather than spent.

Mortgage

A long-term loan secured on property, usually used to buy a house.

Wage Rate

Payment for labour per unit of time or per unit of output.

Piece Rate

A payment system where workers are paid according to the amount they produce.

Overtime Pay

Higher wage rate paid for hours worked beyond the standard working week.

Bonus

An extra payment to workers for achieving targets or high performance.

Fringe Benefits

Non-wage benefits provided to employees, such as company cars or health insurance.

Trade Union

An organisation of workers that seeks to protect and advance its members’ interests.

Collective Bargaining

Negotiations between trade union representatives and employers over wages and working conditions.

Strike

Industrial action in which workers stop working to press for demands.

Industry

A group of firms producing similar products.

Primary Sector

Industries involved in extraction and cultivation of natural resources.

Secondary Sector

Industries engaged in manufacturing and construction.

Tertiary Sector

Industries that provide services rather than goods.

Internal Economy of Scale

A cost advantage that a firm gains by increasing its own scale of production, leading to lower average costs.

External Economy of Scale

Cost advantages enjoyed by all firms in an industry when the industry grows.

Internal Diseconomy of Scale

Higher average costs experienced by a firm when it becomes too large and inefficient.

Horizontal Merger

The joining of two firms in the same industry and at the same stage of production.

Vertical Merger

The joining of two firms at different stages of production of the same product.

Conglomerate Merger

A merger between firms producing unrelated products.

Fixed Cost (FC)

A cost that does not change with the level of output in the short run.

Variable Cost (VC)

A cost that varies directly with the level of output.

Average Fixed Cost (AFC)

Fixed cost divided by output.

Average Variable Cost (AVC)

Variable cost divided by output.

Total Revenue (TR)

The total income a firm receives from selling its output; price × quantity sold.

Average Revenue (AR)

Revenue per unit sold; equal to price when all units are sold at the same price.

Profit Maximisation

The objective of producing the level of output where the difference between total revenue and total cost is greatest.

Sales Revenue Maximisation

An objective of firms to maximise total income from sales rather than profit.

Growth Objective

A firm’s aim to increase its size, market share, or range of products.

Survival Objective

A short-term goal of firms to continue operating, particularly during difficult economic conditions.

Corporate Social Responsibility (CSR)

A firm’s consideration of social, ethical, and environmental issues in its operations beyond profit.

Capital-Intensive Production

A production method that uses a high proportion of capital relative to labour.

Labour-Intensive Production

A production method that uses a high proportion of labour relative to capital.

Productivity

Output per unit of input, typically measured as output per worker per period.

Opportunity Cost of Capital

The foregone interest or return that a firm sacrifices by investing funds in capital goods rather than saving them.

Corporation Tax

A tax on the profits of companies.

Cost-Push Inflation

A rise in the general price level caused by an increase in the costs of production.

Demand-Pull Inflation

A rise in the general price level caused by an increase in aggregate demand.

Liquidity Ratio (Banking)

The proportion of a bank’s assets held in the form of liquid assets to meet withdrawals.

Lender of Last Resort

The role of the central bank in providing funds to banks that are short of cash to prevent bank failure.

Asymmetric Information

A situation in which one party to a transaction has more or better information than the other.

Tradable Pollution Permit

A government-issued allowance to emit a certain amount of pollution that can be bought and sold.

Cost Benefit Analysis (CBA)

A systematic approach to estimating the strengths and weaknesses of alternatives used in investment decisions.