IB Economics HL Vocab A-G

A collection of vocabulary flashcards from the lecture notes on economics concepts, terms, and definitions.

abnormal profit

Arises when total revenue of a firm is greater than its total costs.

absolute advantage

The ability of a country to produce a good using fewer resources than another country.

absolute poverty

The inability of an individual or family to afford a basic standard of goods and services.

abuse of market power

Occurs when firms engage in activities that restrict competition.

actual growth

Growth due to reduction of unemployment or improvement in efficiency of resource use.

Adam Smith

Scottish philosopher known as the 'Father of economics' for his ideas on self-interested behavior in markets.

administrative barriers

Trade protection measures in the form of administrative procedures that limit imports.

adverse selection

A type of asymmetric information where one party has more information than the other.

aggregate demand

The total quantity of goods and services that all buyers in an economy want to buy.

aggregate demand curve

A curve showing the relationship between real output demanded and the economy's price level.

aggregate supply

The total quantity of goods and services produced in an economy over a particular time period.

allocative efficiency

An allocation of resources that results in producing the quantity of goods preferred by consumers.

allocative inefficiency

The absence of allocative efficiency; when marginal social benefit does not equal marginal social cost.

anchoring

A behavioural economics concept where irrelevant information influences decision making.

anti-dumping

Justification for trade protections against partners suspected of selling below production cost.

appreciation (of a currency)

An increase in the value of a currency in a floating exchange rate system.

appropriate technology

Technologies that suit a country's specific economic and ecological conditions.

asymmetric information

Market failure where buyers and sellers do not have equal access to information.

automatic stabilisers

Factors that stabilize the economy without government intervention.

availability

Refers to reliance on the most recently available information in decision making.

average costs

Costs per unit of output, calculated by dividing total cost by the number of units produced.

average revenue

Revenue per unit of output sold; total revenue divided by units produced.

average tax rate

Tax paid divided by total income, expressed as a percentage.

balance of payments

A record of all transactions between residents of a country and other countries.

balance of trade in goods

Value of exports of goods minus the value of imports of goods.

balance of trade in services

Value of exports of services minus the value of imports of services.

barriers to entry

Anything preventing a firm from entering an industry.

base rate

See minimum lending rate.

behavioural economics

A branch of economics influenced by psychology, focusing on human behavior complexity.

biases

Systematic errors in thinking or evaluating based on psychological tendencies.

bilateral trade agreement

A trade agreement between two trading partners.

bounded rationality

Consumers are rational within limits due to insufficient information.

bounded self-control

Individuals exercise self-control only within limits.

bounded selfishness

People are selfish only within limits.

budget deficit

When government tax revenues are less than government expenditures.

budget surplus

When government tax revenues exceed government expenditures.

business confidence

A measure of optimism among firms regarding future economic performance.

business cycle

Fluctuations in real output growth consisting of periods of expansion and contraction.

capital

One of the factors of production, including machinery, tools, and buildings.

capital account

In the balance of payments, refers to inflows minus outflows of capital transfers.

capital expenditures

Government spending on public investments.

capital flight

Transfer of financial capital to another country due to fear of domestic assets.

capital gains tax

A tax on profits from financial investments.

capital transfers

Inflows minus outflows for items like debt forgiveness in the capital account.

carbon tax

A tax per unit of carbon emissions aimed at addressing climate change.

central bank

Responsible for regulating a country's financial system and carrying out monetary policy.

ceteris paribus

Latin for 'other things being equal'.

change

An important concept in economics referring to shifts in economic conditions.

choice

The study of selecting alternatives due to resource scarcity.

choice architecture

Design of ways in which choices are presented to consumers.

circular economy

Goods produced to be repaired and reused, minimizing waste.

circular flow of income

The flow of income where total output value equals total income generated.

classical economics

Economic ideas suggesting markets can solve all major problems through supply and demand.

collective self-governance

Users control common resources sustainably, countering the tragedy of the commons.

collusion

An agreement among firms to limit competition and maximize profits.

collusive oligopoly

A type of oligopoly where firms restrict output or fix prices.

command and control

Government regulations everyone must follow.

commercial bank

A financial institution holding deposits, making loans, and buying government bonds.

common market

Trading bloc eliminating tariffs and allowing free movement of factors of production.

common pool resources

Resources not owned by anyone, available to all without payment.

community surplus

See social surplus.

comparative advantage

When a country has a lower opportunity cost in producing a good.

competition

Many buyers and sellers act independently, influencing the market price.

competitive market

A market with many buyers and sellers with no price influence.

competitive market equilibrium

Emerges where the demand curve intersects the supply curve.

competitive supply

When a firm produces either of two competing goods.

complements

Goods that are used together; demand for one affects the other.

composite indicator

A measure of multiple indicators, such as the Human Development Index.

concentration ratio

Measures how much an industry's output is concentrated among its largest firms.

consumer confidence

A measure of optimism among consumers regarding future financial conditions.

consumer price index

Measures cost of living by comparing value of goods over time.

consumer surplus

The difference between what consumers are willing to pay and what they actually pay.

consumption

Spending by households on goods and services.

contracting out

When the government outsources activities to private firms.

contractionary fiscal policy

Policy involving decreases in government spending or increases in taxes.

contractionary monetary policy

Policy involving increases in interest rates to lower spending.

corporate income tax

Tax on profits of corporations.

corporate indebtedness

The degree of debt held by corporations.

corporate social responsibility

Corporate practices to avoid harmful activities and promote social good.

cost-push inflation

Inflation caused by increases in production costs.

costs of production

Payments to obtain and use factors of production.

credit items

Payments received from other countries, entering with a plus sign in balance of payments.

credit rating

Assessment of a borrower's ability to repay loans.

crowding out

Reduction of private investment due to increased government spending.

current account balance

Sum of credits and debits in the current account of the balance of payments.

current account deficit

When debits exceed credits in the current account.

current account

Includes balance of trade, services, income, and transfers.

current account surplus

When credits exceed debits in the current account.

current expenditures

Government spending on recurring daily items.

current transfers

Inflows and outflows for gifts, foreign aid, and pensions.

customs union

A trading bloc with eliminated barriers and common policies towards non-members.

cyclical unemployment

Unemployment occurring during economic downturns.

debit items

Payments made to other countries, entering with a minus sign in balance of payments.

debt relief

Cancellation or forgiveness of a portion of a country's debt.

debt servicing

Payments made to repay principal and interest on debt.

default choice

A selection made by not actively making a choice.

deferred consumption

Postponing spending in expectation of lower prices.

deficit

A deficiency of inflows compared to outflows.

deflation

A continuous decrease in the general price level.

deflationary gap

See recessionary gap.