Unit 1 – The Capitalist Revolution (CORE Econ)

Key vocabulary from CORE Econ Unit 1 covering measures of income, economic systems, institutions, growth concepts, trade theory, and the relationship between the economy and the environment.

Gross Domestic Product (GDP)

The total market value of all final goods and services produced within a country during a given period.

GDP per capita

GDP divided by a country’s population; often used as a rough proxy for average income or living standards.

Disposable income

An individual’s income from wages, profits, rent, interest and transfers minus taxes and other transfers paid; the maximum amount available for spending without borrowing.

Nominal GDP

GDP measured using current‐year prices; reflects both changes in quantities and changes in prices.

Real GDP

GDP adjusted for price changes by valuing output at constant base-year prices; measures changes in actual quantities produced.

Purchasing Power Parity (PPP)

A method of comparing incomes across countries by using a common set of international prices to equalise the buying power of different currencies.

Growth rate

The percentage change in a variable—such as GDP per capita—over a specified period.

Ratio scale

A graph scale that marks equal proportional (percentage) changes as equal vertical distances, useful for comparing growth rates.

Hockey-stick curve

A time series pattern showing long periods of little or no growth followed by a sharp and sustained upturn.

Labour productivity

Output (or another performance measure such as lumen-hours of light) produced per unit of labour input, often per hour worked.

Inequality

Unequal distribution of income, wealth or other economic outcomes within or between groups, often measured by statistics like the rich/poor ratio.

Rich/Poor ratio

Average income of the richest 10 % of a population divided by the average income of the poorest 10 % in the same country.

Capitalism

An economic system in which private property, markets and firms play central roles in organising production and distribution.

Capitalist revolution

The rapid transformation in technology, productivity and living standards that began alongside the emergence and spread of capitalism from the 18th century onward.

Institution (economic)

A set of laws, social norms or conventions that structure economic interactions, such as property rights or contract enforcement.

Private property

Legally protected rights that allow owners to use, exclude others from, and transfer assets, including capital goods.

Market

A system in which mutually beneficial, voluntary exchanges of goods or services occur, usually mediated by prices.

Firm

A privately owned organisation that hires labour, buys inputs, directs production and sells outputs with the aim of making profit.

Capital goods

Durable inputs such as buildings, machines and equipment used to produce other goods and services.

Industrial Revolution

The wave of mechanisation and technological innovations—initially in Britain in the late 18th century—that dramatically raised productivity.

Permanent technological revolution

The continuing, cumulative process of technological advance that persistently reduces the labour time needed to produce goods and services.

Division of labour (specialization)

The allocation of different tasks to different workers or firms, allowing each to focus on a limited range of activities to raise efficiency.

Absolute advantage

The ability of a producer to generate more output with the same inputs than another producer.

Comparative advantage

The ability of a producer to make a good at a lower opportunity cost than another producer, forming the basis for mutually beneficial trade.

Natural experiment

A situation in which differing institutional or policy environments arise without deliberate design, allowing researchers to study causal effects—e.g. West vs East Germany after WWII.

Centrally planned economy

An economic system in which government agencies make decisions about production and distribution rather than private markets and firms.

Developmental state

A government that deliberately guides and promotes industrial and economic development, often through targeted policies and coordination with large firms.

Political system

The set of institutions that determine how governments are chosen and how they make and enforce decisions—examples include democracy and dictatorship.

Democracy

A political system in which the government is accountable to citizens through free and fair elections with broad suffrage.

Rule of law

The principle that laws are publicly known, equally enforced and protect contractual and property rights, providing security for economic activity.

Market competition

Rivalry among sellers aiming to attract buyers by offering better terms, which incentivises cost-reducing innovation and disciplines inefficient firms.

Too big to fail

A situation where large firms—often banks—are considered so important to the economy that governments are expected to prevent their bankruptcy.

Biosphere

The global ecological system integrating all living beings and their relationships with the atmosphere, hydrosphere and lithosphere.

Environment (economic context)

The natural resources and ecological conditions that support economic activity and are affected by production and consumption, including issues like climate change.