political economy key definitions

key terms, short answer questions, true or false, advanced critical thinking questions,

scarcity

fundamental phenomenon that creates a need for the science of economics, there isnt enough time or stuff to satisfy all desires so people must make choices about what to produce and consume so they if they cant have everything, they atleast have the best that was possible under the circumstances

oppurtunity cost

the value of what you have to give up to choose something else

the invisible hand

the self regulating nature of a free market where indviduals pursuing their own self interest unintentionally contribute to the overall economic well being of society

nature of a price of a comodity

the sum of all costs (materials, production)

growth rates

the percentage change of a specific variable within a specific period

the average annual growth rate/compound annual growth rate

shows and average value for the annual rate of change

year on year change

compares a value at 2 dates, generally a year apart

year to date

term covering the period between the beginning of the year and the present, it can apply to either calendar or physical years

gross domestic product (GDP)

the total value of all the goods and services produced in a country in one year, like adding up the price of everything a country produces to show how big its economy ys

purchasing power

how purchasing power changes overtime, it is calculated as the difference between changes in household income and changes in taxes and prices

price elasticity

a measure of the relationship between a change in the price of a particular good and its quantity demanded

price elasticity of demand

term used in economics when discussing price sensitivity

business firms

the producing unit in the economy, it employs labor and requires capital and other

micro-economics

the study of how households and companies make decisions

macro-economics

large scale issues resulting from the decisions of millions of individuals and economic policies

supply

seller offering several goods or services to the consumers which are buyers, profit will be maximum at the level of output at which marginal revenue is marginal cost

productivity

total amount of production, divdided by the number of hours of number of people working

bubble

price increases at a certain pace, at the end it doesn’t correspond to the actual value of a product

credit crunch

situation corresponds to a restriction of credit offered by banks, following a banking crisis

utlility

the benefits (satisfaction or happiness) consumers have from a product

fiscal years

a year as reckoned for taxing or accounting purposes

value added

the extra value at each stage of production e.g. a shirt factory adds value by turning fabric into shirts

consumption

using goods and services to satisfy needs or desires

Δ

delta/the change

monopoly

one seller without substitute

oligopoly

a small number of sellers which are interdependant

value chain

describes the series of stages involved in providing a product to the final consumer from design and raw materials through production processes with each stage adding value to the product

the primary sector

includes all activities involving the exploitation of natural resources (e.g agriculture, fishing, forestry, mining)

the secondary sector

includes all activities consisting of an elaborate transformation of raw materials (e.g manufacturing industries, construction)

the tertiary sector

defined by its complementarity with agricultrue and industrial activities

states revenue

tax revenue representing more than 95% of total revenues

taxes on consumption

the value added tax

income taxes

income tax or corporate tax

taxes on property and capital

property tax collected by local authorities or taxes on capital gains

planned economy

an economy in which investment, production and pricing choices are made by the state

exchange rate

the exchange rate of a currency is the rate or price of that currency against another currency

inflation

the loss of purchasing power of money that results in a general and permanenet increase in prices

economic growth

the increase over a period in the quantities of goods and services produced in a country measured year after year

extensive growth

is proportional to the increase in the quantities of the factors of production

intensive growth

is linked to the increase in productivity

capital productivity

calculated as the ratio between the quantities produced and the capital used to obtain this level of output

productivity gains

the notion of productivity is at the heart of the economic mechanisms

crisis

the process of the reversal of economic activity (quantities of goods and services provided)

two consecutive quarters

sometimes a simple slowdown in economic activity is called a crisis if it has negative consequences for workers in the labour market

expert promotion

developing activities that exploit a relative advantage held by the country

globalisation

growing interdependence of world economies and cultures through cross border trade, flows of people and investments

economic globalisation

international trade measured by world exports, imports and world GDP

international trade

exports (goods are produced domestically and sold abroad) and imports

foreign direct investments

cross border investment flows to establish or control businesses abroad

market seeking

to enter new foreign markets, firms need to be competitive, cost and non cost price advantages (quality of products, quality of service)

production cost seeking

could be done abroad internally through FDI by prodcing some parts of the suply chaain in owned foreign facilities

geopolitics

political relations among nation states, including rivalries to exercise soverigny or influence over one or more territories

hard power

capacity of enforcement/coercion not only with armed forces, economic sanctions, cyber influence and arrest

economic power

resources that is natrual resources capital, labour, population, innovation, productivity

soft power

ability to influence, attract through culture and political values and persuade

sub prime crisis

a financial crisis that severely affects the functioning of the financial system

housing bubble

when the price does not correspond to its fundamental value, the bubble eventually has to burt

BRIC

acryonym for 4 emerging economies, in 2009 was established as an informal group of 4 non western states

monetary policy

the ECB is responsible for the emission of the euro, and the definition of the common monetary policy of the eurozone countries

price stability

its main mission is to maintain the purchasing power of the euro and price stability in the euro zone

heterogeneity

the ECB must also respond to the growing heterogeneity of economic situations within the euro zone, which threatens the very existence of this monetary zone