IGCSE Economics - Definitions

Exports

The sale of goods or services to another country

Fiscal surplus

When government revenue if greater than government expenditureRecover

Recover

A phase in the economic cycle (1) where GDP starts to rise again/when consumers start to regain confidence/economic activity is on the increase (1)

Imports

The purchase of goods or services (1) from another country (1)

Production

Converting resources into goods or servicesLowest legal amount paid to employees

Minumum wageI

Lowest legal amount paid to employees

Inferior Product

Goods for which demand will increase (1) as incomes decrease

Supply

The quantity of goods or services producers are willing and able to sell (1) at a given price/at a given time (1)

Trade Union

An organisation for employees (1) that aims to protect the interests of its members (1)

Unique product

A good/service for which there is no substitute

Economics of scale

Falling average costs (1) due to expansion of the firm (1)

Privatisation

The act of selling a company/activity controlled by the government (1) to private investors (1)

Deregulation

The removal (1) of government controls (1)

Pollution pemit

They give firms the legal right (1) to discharge a certain amount of polluting material (1)

Normal Good

Goods for which demand will increase (1) as incomes increase (1)

Niche market

A specialised market for a particular product

Takeover

• One firm buying out another firm

• Obtaining control of a firm by buying over 50% of its shares

Division of labour

When a firm breaks up the production process (1) so that employees perform only one task (1)

Barrier to entry

These are obstacles (1) that make it difficult for a new firm to enter a market (1)

Public sector

Government provision of goods/services

Recession

A fall in GDP (1) for two successive quarters (1).

Dumping

A firm sells goods in another country (1) below the cost of production (1).

Free Trade

Goods/services coming into or going out of a country (1) which are not controlled/taxed (1)

Economies of Scale

Average costs of production fall (1) as the level of output rises (1)

Monopoly

One dominant seller in a market

Fine

A financial penalty

Downturn

A period where GDP is still growing (1) but more slowly (1)

Infant industries

New/fledgling industries (1) that have yet to establish themselves (1)

Fiscal Policy

Decisions about government spending, taxation and borrowing (1) that affect (aggregate) demand in the economy (1)p

Productivity

The amount of output produced (1) in relation to the resources used (1)

Producer

A person/company/country that supplies goods and services

Price Maker

A dominant firm sets the price in the market

Central Bank

The monetary authority that manages a country’s money supply (1) and interest rates/banking system (1)

Infrastructure

The systems/structures such as the transport network (1) needed for the operation of an economy (1)

GDP

GDP is the market value of all goods and services (1) produced in a year (1)

Exchange rate

The price of one currency (1) in terms of another currency (1)

External benefit

A benefit to a third party

Total Revenue

The amount of money a firm receives (1) from selling its output (1)

Demand

The quantity of goods/services consumers are willing and able to buy (1) at a given price (1)

Wants

The desire for goods and services

External costs

A negative effect (1) imposed on a third party (1

Mixed Economy

The public and private sectors (1) provide goods and services between them (1)

Labour

The people used in the production of goods and services

Finance

Funding for a firm

Supply

The quantity of goods or services producers are willing and able to sell (1) at a given price/at a given time (1)

Boom

A phase in the economic cycle (1) with the highest levels of economic activity/with the highest levels of employment (1).

Shoe-Leather Costs

The costs to firms and consumers of searching for the lowest prices (1) when inflation is high/prices are rising rapidly (1).

Revaluation

When the price of a currency in a fixed exchange rate system (1) is officially increased against other currencies (1)

Or

When a government fixes (1) new higher exchange rate (1)

Unemployment

People are willing and able to work/actively seeking work (1) but cannot find employment (1).

Trade-Off

The choice between two objectives (1), where for one objective to increase the other must decrease (1).

Relative Poverty

The standard of living is below (1) the typical living standards in that society (1).

Substitute good

Goods which are used as an alternative to another good

Free Rider

A person who takes advantage of a common resource without paying for it

Luxury Good

A good for which income elasticity of demand is greater than 1 (1) the proportionate change in demand is greater than the proportionate change in income (1)

Tertiary Sector

The provision of services in the economy

Innovation

An idea which leads to a new product/process

Multinational Corporation

An enterprise/company/firm (1) that produces/sells/operates in more than one country/many countries (1)

Absolute Poverty

A condition where household income is below a necessary level (1) to provide the basic needs for survival (1)

Interest Rate

The cost of borrowing (1) and the reward for lending/saving (1)

Supply Side Policy

Policies designed to increase the productive capacity of the economy (1) by influencing aggregate supply (1)

Opportunity Cost

Cost of the next best alternative given up

Consumer

an individual or business that purchases another company's goods or services

Market Equilibrium

a market state where the supply in the market is equal to the demand in the market

PED

Responsiveness of demand to a change in price

PES

responsiveness of supply to a change in price

YED

responsiveness of demand to a change in income

complimentary goods

goods purchased together because they are consumed together

Factors of production

resources used to produce goods and services, which include land, labour, capital and enterprise

capital

capital refers to the assets—physical tools, plants, and equipment—that allow for increased work productivity

Entrepreneurship

 individuals who organise the other factors of production and risk their own money in a business venture

Capital Good

those purchased by firms and used to produce other goods such as factories machinery, tools and equipment

Consumer Good

any good purchased for consumption

Land

Natural resources used during production

Private Sector

provision of goods and services by firms that are owned by individuals or groups of individuals

Primary Sector

production involving the extraction of raw materials from the earth

Secondary sector

production involving the processing of raw materials into finished and semi-finished goods

Diseconomies of scale

rising average costs when a firm becomes too big

scarcity

unlimited wants, limited resources

compeition

rivalry that exists between firms when trying to sell goods to the same group of customers

oligopoly

market dominated by a few large firms

regulation

a form of government intervention in markets that involves rules and their enforcement

Economic Growth

increase in the level output by a nation

Inflation

the rise of the general price level in a country over a certain period of time

Demand-Pull Inflation

1. inflation caused by too much demand in the economy relative to supply

cost-push inflation

inflation caused by rising business costs costs expenses that must be met when setting up and running a business

Cyclical Unemployment

unemployment caused by falling demand as a result of a downturn in the economic cycle

Seasonal Unemployment

unemployment caused when seasonal workers, such as those in the holiday industry, are laid off because the season has ended

Structural Unemployment

unemployment caused by changes in the structure of the economy such as the decline in an industry

Voluntary Unemployment

unemployment resulting from people choosing not to work

Frictional Unepmloyment

when workers are unemployed for a short period of time as they move from one job to another

Current Account

part of the balance of payments where all exports and imports are recorded

Balance of Payments

record of all transactions relating to international trade

Quota

physical limit on the quantity of imports allowed into a country

Tariff

tax on imports to make them more expensive

Trading bloc

 groups of countries situated in the same region that join together and enjoy trade free of tariffs, quotas and other forms of trade barrier

Subsidy

money that is paid by a government or organisation to make prices lower, reduce the cost of producing goods or providing a service, usually to encourage production of a certain good

Monetary Policy

use of interest rates and the money supply to control aggregate demand in the economy

Income inequality

differences in income that exist between the different groups of earners in society, that is, the gap between the rich and the poor

Direct tax

Taxed levied on income

Indirect tax

taxes levied on spending, such as VAT