econs definitions

National income

measures the monetary value of the flow of output of final goods and services produced in an economy over a period of time

externality

and externality is a cost or benefit arising from an economic activity(consumption /production of a g&s) that falls on a third party that is not taken into account by those who directly participate in the economic activity

ad

is thhe total demand by hh, firms, gvt and foreign sectors for final G&S that is domestically produced in the economy at various price levels. it is the total value of G&S demanded in an economy at a given price

as

is the total output that firms in the economy are willing and able to supply at different price levels in a given time period. it is the total value of G&S produced in an economy at a given price level.

actual growth

occurs when there is an increase in the equilibrium level of rny

potential growth

rate at which the economy can grow if it were to use all its resources

sustaINED growth

occurs when an economy experiences non inflationary rate of growth that can be maintained over time

bop

a comprehensive record of the country’s international receipts a d international payments between the residents and gvt of a country and the rest of the world, over a period of time usually a calendar year

current acc

records receipts and payments from exports and imports of g&s and income flows and transfers btwn countries over a year

capital and financial ac

records the flow of funds into and out of the country and is associated with changes in ownership of assets.

equity

is concerned with how resources are distributed throughout society. equity is an outcome where society considers the distribution of resources to be fair

gvt failure

the situation where gvt intervention causes outcomes to be even more inefficient or inequitable as compared to no intervention

gross domestic product

measures the total money value of all final goods and services produced within the geographical boundary of a country within a period of time, regardless of who produces it.

deflation

economic situation where there is a persistent decrease in gpl of an economy

labour dd

amt of labour that firms are able and willing to employ at the given wage, cp

gross national product

measures the total money value of all final goods and services produced by the residents of a country during a given time period, usually a year

mat sol

measures the quantity and quality of goods and services accruing to each person in the country

non material SOL

it is the qualitative aspect of living. e.g. life expectancy, exposure to crime, literacy rates, stress levels

comparative advantage

a country enjoys comparative advantage over another when it can produce a good with a lower opportunity cost in terms of other goods forgone

principle of CA

it states that trade can benefit all countries , if each country specialises in the production of goods in which it has the lowest opportunity cost or CA

globalisation

it refers to the phenomenon where economies aare becoming increasingly integrated and more interdependent. this is achieved by increased economic cooperation between countries

scarcity

scarcity occurs when there is an excess of human wants over what can actually be produced to fulfil these wants

oppcost

opp cost refers to the value of the next best alternative forgone as a result of a decision made

production possibility curve

the PPC shows the maximum possible combinations of 2 goods a country can produce given a constant state of technology and that its limited resources are fully employed

sunk cost fallacy

it refers to a phenomenon whereby a person is reluctant to abandon a course of action because they invested heavily in it, even when it is clear that abandonment would be more beneficial

loss aversion bias

it refers to the tendency for people to prefer avoiding a loss over making an equivalent or greater gain

salience bias

itt refers to the tendency for people to focus on information that is more prominent(salient) over other less prominent but equally relevant pieces of information

consumer surplus

it is the difference between what the consumer is willing and able to pay for a good and the actual price paid for it

producer surplus

it is difference between what the producer is willing and able to accept for supplying a good and the actual price received for it

price elasticity of demand

PED measures the responsiveness of quantity demanded of a good due to a change in its price, ceteris paribus

price elasticity of supply

PES measures the responsiveness of quantity supplied of a good due to a change in price of the good itself, ceteris paribus

income elasticity of demand

YED measures the responsiveness of demand for a good due to a change in consumer’s income, ceteris paribus

cross elasticity of demand

XED measures the responsiveness of the demand for a good due to changes in the price of another good, ceteris paribus

DW loss

deadweight loss refers to the loss of social welfare when a socially optimal level of output is not reached

market failure

market failure occurs when the workings of the free market result in an inefficient allocation of resources from the perspective of society

public goods

public goods have the characteristics of non rivalry in consumption, non excludable in consumption and non rejectability in consumption

slow growth

slow growth is a period where real national income is rising at a slower rate

negative growth /recession

recession is a period where real national income falls over a period of a year

sustainable ecknomic growth

sustainable growth is achieved when the economy grows at a strong and stable rate without resulting in significant environmental degradation, and resource depletion for future generations

inclusive economic growth

inclusive growth is achieved when the economy grows at a strong and stable rate without resulting in significant worsening of income or wealth inequality

unemployment

unemployment is defined as the situation in which labour who are willing and able to work cannot find work

inflation

inflation is defined as an economic situation where there is a sustained increase in the overall general price level in an economu

economic integration

economic integration involves agreements between countries that usually include the elimination of trade barriers and the increased flow of labour and investments

dpi

occurs when gpl rise due to persistent incr in ad in the economy that is not matched by the output of gds & services(as)

cpi

occurs when gpl rise due to rising cop

marginalist principle

in making rational decisions, economic agents should be focused on comparing the incremental cost and benefit of the decision. incremental cost and benefit is the marginal cost and benefit. economic agents should increase the vel of ativity if their MB exceeds MC.

marginal private costs

change in total private cost as a result of undertaking an additional unit of an economic activity

marginal private benefit

measures the change in total private benefit as a result of undertaking an additional unit of an economic activity

marginal social cost

measures the change in total social cost as a result of undertaking an additional unit of an economic activity

marginal external cost

measures the change in total external cost as a result of undertaking an additional unit of an economic activity

MSB

measures the change in total social benefit as a result of undertaking an additional unit of an economic activity

MEB

measures the change in total external benefit as a result of undertaking an additional unit of an economic activity

demand

defined as the amount of goods that consumers are willing and able to buy at various prices over a given period of time, cp

law of demand

law of demand states that in a given time period, the quntity demanded of a good is inversely related to its price, cp

law off diminishing marginal utility

explains that incremental units of satisfaction diminishes as an individual consumes more units of a good

supply

refers to the amount of a good that producers are willing and able to sell at various prices over a given period of time, cp

law of supply

the law of supply states that in a given time period, the quantity supplied of a good is directly related to its price, cp

fixed FOP

inputs whose quantities cannt be easily changed even if the producer wants to increase production

variable FOP

inputs whose quantities can be quite easily changed even if the producer wants to change the qty of output pdced

TFC

payments to those inputs which are fixed in the SR

TVC

payments to those inputs wich are variable in the SR

AC

total cost per unit of output

MC

measures the change in total cost when an additional output is produced

IEOS

reductions in long run average costs enjoyed by a firm as a result of expanding its output

IdisEOS

cost disadvantages accruing to a firm as a result of the expansion of the firm

EEOS

cost savings that accrue to individual firms in an industry as a result of the expansion of the industry

EdisEOS

cost disadvantages accruing to the firm bc of the expansion of the industry

market structure

refers to the diff characteristics of a mkt that may affect the decisions and strategies and performance of firms in the mkt

static efficiency

concerned with the most efficient combination of resources at a given point in time

dynamic efficiency

occurs when a firm is able to improve its productivity and product quality over time

bte

obstacles that prevent new competitors from competing on an equal basis with established firms in an industry. can be naturally existing or artificially created by firms or the gvt

sunk cost

costs that cannot be recovered if firms decide to leave an industry

supernormal

occurs when the firm earns a profit that is in excess of the amt necessary to induce the firm to remain in the industry

normal

level of profit that is just sufficient to induce the firm to stay in the industry and to keep the plant and machinery in its present use

subnormal

occurs when the firm earns an amt less than necessary to induce it to remain in the industry

contestable markets

occurs when a firm can be challenged by potential entrants looking to enter an industry

price discrimination

practice of seling the same good or service at diff prices to diff grps of consumers for reasons unrelated to costs

collusion

situation where firms in a market cooperate to jointly fix prices or output

explicit collusion

when a grp of firms directly communicate with each other with the intention of controlling price and output in the market

tacit collusion

competitors reach an unspoken agreement with each other with regards to coordinating price and output in the mkt

price leadership

one firm takes on the leadership role and establishes a price that the other firms eventually accept as the market price

price war

occurs when firms in an industry undertake several rounds of price reduction against rival firms in order to gain mkt share

dd def unn

arises from insufficient AD may be caused by business cycles or economic shocks

struct unN

arises from the mismatch of skills btwn the unemployed and employers. this mismatch arises due to changes in the structure of the economy, which changes due to changes in the method of pdtion or changes in the type of goods being pdced

occup immobility

inability of lab to switch between diff occup. is affected by the level of transferable skills and educational requirements of jobs

geog immobility

the unwillingness or inability of labour to move ard an area,region,or country in order to work

fric unn

arises as time is required for job seekers to look for suitable jobs and employers to look for suitable workers bc of info imperfections in the labour market

labour supply

amt of labour that ppl are able and willing to provide at the given wage cp

wed

measures the responsiveness of qty dd for labour due to a change in wage rate,cp

wes

measures the responsiveness of qty supplied of labour due to a change in wage rate cp