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ECON
economics micro stuff
143
Economics
Not Applicable
12/13/2023
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Term
Average revenue
 Definition
Average income from the sales of each individual good (total revenue/quantity).
Term
Appreciation
 Definition
When the value of one currency rises in value to another.
Term
Balance of payments
 Definition
A record of all financial transactions between the UK and the rest of the world.
Term
Balance of payments (current account) deficit
 Definition
When the value of the UK’s exports of goods and services are less than the value of imported goods and services.
Term
Balance of payments (current account) surplus
 Definition
When the UK’s exports of goods and services are greater than the values of imported goods and services.
Term
Balance of trade
 Definition
The part of the current account that records the sales and purchase of physical items between the UK and the rest of the world.
Term
Barriers to entry
 Definition
Circumstances that could prevent a firm from successfully joining a market (selling a particular good or service).
Term
Base rate
 Definition
The interest rate set by the bank of England that influences market interest rates.
Term
Budget deficit
 Definition
When government spending is greater than tax revenue (spending > tax).
Term
Budget surplus
 Definition
When government tax revenue exceeds expenditure (tax > spending).
Term
Building societies
 Definition
A financial institution which is entirely owned by its members. It offers banking and other financial services to these members.
Term
Capital
 Definition
The machinery and tools used in the creation of goods and services. This could include a factory or a coffee machine. The payment for capital is interest. (This is usually because it is purchased using borrowed money.)
Term
Claimant account
 Definition
Measures unemployment by the number of individuals claiming unemployment benefit that week.
Term
Commercial banks (also known as high street or retail banks)
 Definition
These look to make profits by selling financial services to households and businesses.
Term
Competitive market
 Definition
A market where a wide variety of producers are competing with each other to supply goods and services.
Term
Complimentary goods
 Definition
Two goods which are often consumed together. Examples could include strawberries and cream or milk and cereal.
Term
Consumers
 Definition
A person who purchase goods and services for personal use.
Term
Consumer price index (CPI)
 Definition
Measuring inflation by taking the average weighted price level of a basket of goods and comparing it between years.
Term
Cost push inflation
 Definition
When inflation is caused by an increase in the costs of production. For example
Term
Current account
 Definition
The part of the balance of payments which records the exchange of goods and services between the UK and the rest of the world.
Term
Cyclical unemployment (often called demand deficient unemployment)
 Definition
Unemployment caused by a lack of demand for goods and services (the economy is in a recession or slump).
Term
Deferred payment
 Definition
Agreement between the lender and borrower allowing the borrower to pay for goods immediately and make payments in the future.
Term
Demand
 Definition
The quantity of a good or service that consumers are willing and able to buy at a given price and a given time period.
Term
Demand curve
 Definition
A curve showing the quantity demanded for a good or service at any given price level.
Term
Demand pull inflation
 Definition
When inflation is caused by an increase in demand for goods and services within an economy (this often occurs during a recovery or boom stages of the economic cycle).
Term
De-merit goods
 Definition
Goods which are worse for the consumer than they perceive and so are over consumed by the market. An example of this would be consumption of fatty and sugary foods.
Term
Depreciation
 Definition
When the value of one currency falls in value to another.
Term
Deregulation
 Definition
The removal of regulations or restrictions on a particular business or industry.
Term
Developed countries
 Definition
A country with a relatively high level of economic growth and mature institutions and infrastructure.
Term
Direct taxation
 Definition
Taxes based on income such as income tax or national insurance contributions.
Term
Diseconomies of scale
 Definition
Where an increase in a firm’s output results in an increase in its average costs.
Term
Division of labour
 Definition
When production of a good or service is split into a number of smaller tasks and employees then specialise in completing each of these tasks with the intention of increasing productivity.
Term
Economic activity
 Definition
The making
Term
Economic resource
 Definition
Resources which are scarce. Due to them being limited decisions will have to be made about how they are used within an economy.
Term
Economies of scale
 Definition
Where an increase in a firm’s output results in a fall in average costs. Note there is not requirement for students to know the relevant diagram for Economies of scale but teachers may choose to use this in order to aid teaching.
Term
Enterprise/entrepreneurship
 Definition
Individuals who take the factors of production and convert them into goods and services which can be sold for profit. The payment for enterprise is profit.
Term
Equilibrium price
 Definition
When demand for a good or service is equal to supply. When a market is in equilibrium then the price is likely to be stable.
Term
EU single market
 Definition
Refers to the European Union (EU) as one territory without any internal borders or other regulatory obstacles to the free movement of goods and services.
Term
Excess demand
 Definition
Where quantity demanded of a good or service exceeds supply
Term
Excess supply
 Definition
Where quantity supplied of a good or service exceeds demand
Term
Exchange
 Definition
Where buyers and sellers come together in a market place to negotiate prices.
Term
Exchanges rates
 Definition
The value of a currency in terms of another. For example
Term
Exports
 Definition
Goods which are produced within a country and then sold abroad.
Term
Factor markets
 Definition
The market for the factors of production; land
Term
Financial economies of scale
 Definition
Firms being able to take advantage of lower interest rates as a result of their increased size. (Large firms can often borrow at a lower interest rate than smaller firms as they are considered a lower risk for lenders.)
Term
Fiscal policy
 Definition
The use of government spending and taxation in order to influences the level of demand within the Economy.
Term
Fixed costs
 Definition
Costs which do not change with output for example rent for a shop would be the same regardless of how many shoes it sold over the course of the month.
Term
Free trade
 Definition
Trade that takes place without tariffs or other barriers.
Term
Frictional unemployment
 Definition
This is caused by imperfect information where workers are unable to find work for their skill set.
Term
Full employment
 Definition
When all those who are fit
Term
Geographical immobility
 Definition
When workers are unable to move to new locations for work.
Term
Globalisation
 Definition
The process of growing economic integration between the world’s economies. Goods can be produced anywhere
Term
Goods
 Definition
Tangible or physical products.
Term
Government
 Definition
The organisation regulating consumers and producers.
Term
Government intervention
 Definition
When government attempts to influence markets in order to correct market failure.
Term
Government provision
 Definition
Where the government choses to provide a good or service for free. For example
Term
Gross domestic product
 Definition
The value of all goods and services produced within an economy within one year
Term
Gross domestic product per capita
 Definition
The value of goods and services produced within and an economy within one year divided by the country’s population.
Term
Gross pay
 Definition
The pay given to an employee before taxes are deducted. It is the sum of all pay.
Term
Imports
 Definition
Goods which are produced abroad and then purchased in this country.
Term
Income inequality
 Definition
An unequal distribution of income across the economy.
Term
Incomes
 Definition
A flow of money. These can be from salaries
Term
Indirect taxation
 Definition
Taxes on spending
Term
Inequality
 Definition
The differences between those with higher levels of wealth/income and those with lower.
Term
Inflation
 Definition
The natural tendency for the average price level within the economy to rise over time.
Term
Interest rates
 Definition
The cost of money which are set via the base rate by the Monetary Policy Committee of the Bank of England. Also the reward for saving.
Term
Interdependence
 Definition
The reliance of countries on each other resulting from specialization and free trade.
Term
Labour
 Definition
The human elements involved in the production of goods and services. For example
Term
Labour force survey
 Definition
A survey conducted in order to measure unemployment. It asks if individuals without work
Term
Land
 Definition
The natural resources available to an economy. It includes both the physical space which production may take place on (such as the site of a factory) or the resources that come from the land such as Timber or coal. The payment for land is rent.
Term
Less developed countries
 Definition
A country that has lower economic growth and income and weaker institutions and infrastructure.
Term
Managerial economies of scale
 Definition
Firms benefiting from greater use of division of labour and specialisation with managers employed to increase the efficiency of each stage (or department) within the production process.
Term
Markets
 Definition
A place where consumers and producers meet to exchanges goods and services. Buys and sellers will interact with each other in order to establish the price of goods and services. It does not need to be a physical location.
Term
Market failure
 Definition
Where the market system fails to allocate resources efficiently.
Term
Market structures
 Definition
How markets operate to enable buyers and sellers to come together.
Term
Medium of exchange
 Definition
Usually money that is used to exchange goods and services.
Term
Merits goods
 Definition
Goods which are better for then consumer than they perceive and so there is under consumption within the market. An example of this would be eating health food or exercise.
Term
Misallocation of resources
 Definition
When there is an incorrect resource allocation to the creation of a good or service that results in welfare loss to society.
Term
Monetary policy
 Definition
The use of interest rates and other monetary tools to influence the level of demand within and economy.
Term
Money
 Definition
An asset that can be used as a medium of exchange.
Term
Monopoly
 Definition
Where a single firm dominates the market. A firm is said to have a legal monopoly if it has more than 25% of the market share.
Term
Multinational companies
 Definition
Have operations in at least one country other than its home country.
Term
Needs
 Definition
A need is an item which is essential for survival. For example
Term
Negative externality
 Definition
A cost to a third party outside of an economic transaction. For example
Term
Net pay
 Definition
The pay given to an individual after tax has been deducted. It is calculated by: gross pay - tax
Term
Occupational immobility
 Definition
Where workers are unable or unwilling to develop the skills to switch to a new industry to find employment.
Term
Oligopoly
 Definition
Where a small number of firms dominate the market.
Term
Opportunity cost
 Definition
The next best alternative foregone when an economic decision is made. For example if you choose to buy an apple you may not have enough money to buy a banana. The opportunity cost of buying the apple is not buying the banana.
Term
Positive externality
 Definition
A benefit to a third party outside of an economic transaction. For example
Term
Price elastic demand
 Definition
PED greater than -1. This means that the % change in quantity sold will be greater than the percentage change in price.
Term
Price elastic supply (PES)
 Definition
Goods which have a PES value of 1 or greater are consider to have price elastic supply. The % change in price will be less than the % change in quantity.
Term
Price elasticity of demand (PED)
 Definition
How responsive a quantity sold is to a change in the price of that good. It is calculated by:

% change in quantity sold
% change in price
Term
Price elasticity of supply
 Definition
How responsive a quantity supplied is to a change in price. It is calculated by:

% change in quantity supplied
% change in price
Term
Price inelastic demand
 Definition
A PED value between 0 and -1. This means that the % change in price will be greater than the % change in quantity.
Term
Price inelastic supply
 Definition
Price inelasticity supply means that the % change in price will be greater than the % change in quantity supplied. It will have a value of between 0 and 1.
Term
Price stability
 Definition
Where inflation is within the government’s target of 1% to 3%.
Term
Primary sector
 Definition
The sector of the economy which focuses on the extraction of raw materials such as coal or timber.
Term
Private benefit
 Definition
The benefit to a consumer of using a good.
Term
Private costs
 Definition
The cost to the producer or the consumer of the creation and consumption of a good.
Term
Privatisation
 Definition
The process of transferring public sector organisations to the private sector.
Term
Producer
 Definition
A person or company that supplies goods or services for sale.
Term
Product differentiation
 Definition
How firms make a product or service different to those of its competitors.
Term
Product markets
 Definition
The market for final goods and services.
Term
Production
 Definition
The processes used to convert inputs into goods or services.
Term
Productivity
 Definition
Output
Input
This could be used to measure the output in relation to the number of workers that a firm employed in a given time period (boxes made/workers employed).
Term
Profits
 Definition
Profit: total revenue – total costs = profit

Profit is the reward for entrepreneurship.
Term
Progressive taxation
 Definition
Taxation which increases as a proportion of the citizens total income as their income increases. Regressive tax.
Term
Purchasing economies of scale
 Definition
Using bulk discounts and increased purchasing power to reduce costs as output increases.
Term
Rate of inflation
 Definition
The increase in the average price level within the economy expressed as a % rate.
Term
Real gross domestic product
 Definition
The value of all goods and services produced within an economy within one year taking into account inflation.
Term
Revenue
 Definition
The inflow of cash from the sale of a product. It is calculated by: price x quantity.
Term
Risk bearing economies of scale
 Definition
Larger firms can reduce the risks that they carry by selling variety of goods or selling to a variety of markets (perhaps internationally). This makes them less vulnerable to changes in demand and supply.
Term
Scarcity
 Definition
Scarce means limited. As resources in economics are often limited decisions must be made by economic agents on how they are used.
Term
Seasonal unemployment
 Definition
Unemployment caused by changes in the demand for seasonal workers.
Term
Secondary sector
 Definition
The sector of the economy which focuses on turning raw materials into finished products.
Term
Services
 Definition
Intangible or none physical products which are bought and sold.
Term
Social benefit
 Definition
The benefit to society of a good being created and consumed. This includes the private benefit and the external benefit.
Term
Social costs
 Definition
The costs to society of producing a good. It includes the private costs and the external costs.
Term
Specialisation
 Definition
When a person
Term
Store of value
 Definition
The function of an asset that can be saved
Term
Substitute goods
 Definition
Goods or services that can be used to replace one another.
Term
Supply
 Definition
The amount of a product that firms are willing to produce and sell at a particular price during a specific time period.
Term
Supply curve
 Definition
A curve showing the amount of a good that a firm with willing to supply at any given price level.
Term
Supply-side policies
 Definition
Government policies used to enable an increase the supply of goods and services within the economy.
Term
Sustainability
 Definition
Development that meets the needs of the present without compromising the ability of future generations to meet their own needs.
Term
Sustainable economic growth
 Definition
Economic growth that does not compromise the economic growth of future generations.
Term
Structural unemployment
 Definition
Unemployment that is caused by changes in the structure of an economy. It means that the skills which workers possess are no longer in demand.
Term
Technical economies of scale
 Definition
Cost saving generated through changes in the productive process’ as the scale of production and output increase. These could include better technology and capital being more cost effective as output increases.
Term
Tertiary sector
 Definition
The sector of the economy focused on providing services or none tangible goods.
Term
The Bank of England
 Definition
The institution that implements monetary policy on behalf of the government.
Term
The basic economic problem
 Definition
How best to satisfy unlimited wants with only limited resources.
Term
The financial sector
 Definition
Firms that provide financial services to customers
Term
The current account on the balance of payments
 Definition
The record of all of a countries exports and imports of goods and services with the rest of the world.
Term
Total costs
 Definition
The sum of all costs for the business (fixed + variable costs).
Term
Total revenue
 Definition
The sum of all revenue coming into the business.
Term
Trade unions
 Definition
An organised association of workers formed to protect and further their rights and welfare.
Term
Unit of account
 Definition
Unit by which value of a good or service is accounted and compared.
Term
Unemployment
 Definition
Those who are willing
Term
Variable costs
 Definition
Cost which change with output. For example
Term
Wants
 Definition
Items which are desirable but not essential. For example
Term
Wealth
 Definition
A stock of money these can include cash in a bank account or valuable assets such as a house.
Term
Wealth inequality
 Definition
An unequal distribution of assets across the economy.
Term
World Trade Organisation (WTO)
 Definition
Deals with the global rules of trade between nations. Its main function is to ensure that trade flows smoothly
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