Pearson Edexcel International GCSE Economics Vocabulary

Vocabulary practice flashcards generated directly from the Pearson Edexcel International GCSE (9–1) in Economics (4EC1) specification.

Problem of Scarcity

The core economic problem where there are unlimited wants and finite resources, leading to the necessity of making choices.

Opportunity Cost

The cost of the next best alternative foregone when an economic decision or choice is made by consumers, producers, or government.

Production Possibility Curve (PPC)

A diagram showing the maximum productive potential of an economy using fully employed resources, as well as opportunity cost, economic growth, and possible or unobtainable output combinations.

Consumer Maximisation Assumption

The underlying economic assumption that consumers aim to maximize their benefit, though they may fail due to difficulty calculating benefits, hard-to-break habits, or copying others' behavior.

Producer Maximisation Assumption

The underlying economic assumption that businesses aim to maximize profit, though they may instead prioritize revenue or sales growth, customer care, or charitable work.

Demand

The quantity of a good or service that consumers are willing and able to buy at a given price and time period.

Supply

The quantity of a good or service that producers are willing and able to offer for sale at a given price and time period.

Price Elasticity of Demand (PED)

A measure of the responsiveness of the quantity demanded of a good to a change in its price, calculated using percentage changes in quantity demanded and price.

Price Elasticity of Supply (PES)

A measure of the responsiveness of the quantity supplied of a good to a change in its price, calculated using percentage changes in quantity supplied and price.

Income Elasticity of Demand

A measure of the responsiveness of the quantity demanded of a good to a change in consumer income, used to classify luxury, normal, or inferior goods.

Mixed Economy

An economy in which resource allocation is shared between the private sector and the public sector to answer what, how, and for whom to produce.

Market Failure

A scenario in which the free market mechanism leads to an inefficient allocation of resources in an economy.

Public Goods

Goods characterized by non-excludability and non-rivalry, which results in the free rider problem in private markets.

Privatisation

The transfer of ownership, control, and assets of state-owned businesses from the public sector to the private sector.

External Costs

Negative impacts or costs imposed on third parties outside an economic transaction, such as pollution, congestion, and environmental damage.

External Benefits

Positive impacts or benefits enjoyed by third parties outside an economic transaction, such as education, healthcare, and vaccinations.

Social Costs Formula

The total cost of an economic activity to society, defined as $\text{social costs} = \text{private costs} + \text{external costs}$.

Social Benefits Formula

The total benefit of an economic activity to society, defined as $\text{social benefits} = \text{private benefits} + \text{external benefits}$.

Factors of Production

The primary inputs used in the production of goods and services, consisting of land, labour, capital, and enterprise.

Productivity

A measurement of production efficiency, calculated as output produced per unit of input (such as output per worker).

Division of Labour

The division of a production process into separate, specialized tasks carried out by individual workers.

Internal Economies of Scale

Reductions in long-run unit (average) costs achieved inside an individual firm as its scale of output grows, including purchasing, technical, marketing, financial, managerial, and risk-bearing types.

External Economies of Scale

Reductions in long-run average costs shared by all firms in an industry due to sector growth, such as access to skilled labour, infrastructure, and local suppliers.

Diseconomies of Scale

Increases in long-run average production costs that occur when a business grows beyond an optimal size, driven by bureaucracy, communication failures, and control issues.

Monopoly

A market structure where a single seller dominates the market, acts as a price-maker, sells unique goods, and is protected by strong entry barriers.

Oligopoly

A market structure dominated by a small number of large, interdependent businesses offering differentiated products under high barriers to entry.

Derived Demand

Demand for a factor of production, such as labour, that is directly dependent on the demand for the final goods and services it produces.

Gross Domestic Product (GDP)

The total monetary value of all final goods and services produced within a nation over a given period, used to track economic growth.

Inflation

A sustained rise in the overall price level of goods and services in an economy over time, commonly measured by the Consumer Price Index (CPI).

Deflation

A sustained fall in the overall price level of goods and services in an economy.

Current Account on the Balance of Payments

A record of a nation's trade balance in visible goods and invisible services, alongside primary income and secondary transfer payments.

Fiscal Policy

Government policy regarding direct/indirect taxation and public spending used to influence domestic macroeconomic conditions.

Monetary Policy

Central bank actions involving interest rate adjustments and asset purchasing aimed at achieving key macroeconomic goals.

Supply-Side Policy

Government measures designed to improve economic efficiency, productivity, and the total productive potential of an economy.

Globalisation

The ongoing process of growing economic integration and mutual dependence among world economies.

Multinational Corporations (MNCs)

Companies that own or manage production or delivery facilities in more than one nation, playing a central role in Foreign Direct Investment (FDI).

Foreign Direct Investment (FDI)

Cross-border investment made by an entity or business from one country into productive operational assets in another country.

Tariff

A tax placed on imported products by a government to shield home industries or earn revenue.

Quota

A strict numerical limit placed on the quantity or total value of a specific good permitted into a country.

Exchange Rate

The rate or value at which one country's national currency can be converted into another country's currency.

Linear Qualification

An educational structure in which candidates complete all required component examinations at the end of the full period of study.

Raw Marks

The exact number of marks earned by a candidate on an assessment paper prior to any scaling or grade conversions.