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Terminology
Absolute
Advantage
Absolute poverty
Ad Valorem Tax
Aggregate
Demand (AD)
Aggregate Supply
(AS)
Aid
Assets
Average Cost
Definition
Absolute Advantage occurs when one country can produce more of a
good or service with the same or resources and more cheaply than
another country
Absolute poverty describes the amount of people living on less than
$1.50 a day
Ad Valorem Tax is levied as a percentage of the price of a good or
service. Currently in England, the Value-Added Tax is 20% of the price
of goods and services. It is an indirect tax collected by a third party,
usually the seller, who in turn add the tax to the cost of the goods.
AD is the total demand for goods and services in the economy: AD=
C+I+G+(X-M).
C= Total consumption /Expenditure in the economy
I= Total investment
G= Total government expenditure
X-M= The net trade is Exports minus Imports
AS is the total supply of goods and services within the economy
Aid is a gift given to companies or countries by a donor. Aid can be
classified as financial, technical, short-term, long-term, humanitarian
and multi-lateral or bi-lateral aid.
Assets are stores of wealth in the form of property, antiques, works of
art or gold.
The average cost of production is calculated by dividing the total
production cost, fixed and variable, by the quantity produced:
AC=
Average Revenue
Balance of
Payment
Balance of Trade
Barriers to entry
Budget deficit
Budget Surplus
Business Cycle
Capital
Capital Account
Cartel
Ceteris Paribus
Choice
Collective
Bargaining
Command
Economy
Commodities
Comparative
Advantage
Complementary
Goods
Consumer Price
Index
goods and services produced over time. Peaks refer to the height of
the economic boom and troughs refer to the lowest point of the
production curve. A recession exists if production falls below zero, i.e.
negative GDP.
Capital is a factor of production that helps land to be turned into goods
and services, such as buildings and machineries.
Capital Account in the Balance of Payment measures all the total value
of transactions involving the ownership of capital, acquisition and
disposal of non-produced, non-financial assets and the forgiveness of
debt between one country and other countries.
A cartel is a group of companies that works together to fix the market
price and or output level to dominate their share of the market to
increase or sustain their profits.
The phrase Ceteris Paribus is Latin for all things remaining equal. It
is used to describe the demand or supply curve showing how changes
in price affects quantity demanded or supplied with other factors
remaining unchanged.
Choice refers to the decision we have to make on what we do and
what goods and services we have, given that economic resources are
scarce and our wants are unlimited.
Collective bargaining refers to the process whereby trade unions
together with their managers negotiate the pay and conditions on
behalf of their workers.
A command economy, such as North Korea, is one where the
government controls and owns all factors of production. The
government controls the allocation and distribution of resources.
Commodities are natural resources such as gold, silver, oil, rice and
wheat. International markets, commodity exchange determine their
prices.
Comparative Advantage describes the ability of the country to produce
a good with the least opportunity cost.
A complementary good is one that is purchased with another good,
such as petrol and cars.
The Consumer Price Index is used as an indicator of inflation. It
measured the changes in the average price over a period of time of a
basket of 650 goods a typical household will purchase. The rate of
inflation can be calculated by comparing the current CPI of the current
period with the previous period.
Feb Inflation Rate = CPIFeb CPIjan x 100
CPIjan
Corporate Tax
Cost-push
inflation
Cross-price
elasticity of
demand
Current Account
Cyclical
Changes in Qd for A
Changes in price of B
Deflation
Demand
Demand-pull
inflation
Demand-side
Policies
Demerit Goods
Dependent
population
Derived Demand
Direct Investment
Diminishing
returns
Diseconomies of
scale
= Young dependants
+
old aged dependants
under 16 years of age
over 60 years of age
Total Population
Diseconomies of scale describe the rise in the long run average cost of
production despite using larger machinery or expanding the size of the
firm.
Division of labour
Division of labour describes the organization of workers into specific
areas of production, often so they can specialize in a specific task.
Dumping
Dumping refers to the release of cheap exports by multinational
Companies that dominate over the sales of domestic goods, causing
local firms to lose profits or close down because they cannot compete
with the cheaper goods sold by the multinational companies.
Economics
Economics is the study of how scarce resources can be allocated to
meet unlimited wants and needs of the population. Microeconomics
SHATIN COLLEGE 2011-2012 (MLT)
Economies of
scale
Economic Growth
Effective Demand
Efficiency
Elastic
Employment
Entrepreneur
Equilibrium
ECB
EU
Eurozone
Excess Demand
Excess Supply
Exercise Duties
External
Economies of
scales
Externalities
Exchange Rates
Expansionary
policies
Exports
Export-orientated
policies
Factors of
Production
Fair-Trade
Financial Account
Finite
Fiscal policies
Fixed Costs
Fixed Exchange
Rates
Flexible working
hours
Free Floating
Exchange Rates
Free Market
Free Resources
Free-Trade
Frictional
unemployment
Geographic
immobility
Gross Domestic
Product
Government
Budget
Government
Policies
HDI
HIPC
Immobility of
labour
Imperfect
competition
Income elasticity
of demand
A free-market exists where buyers and sellers can enter and leave an
industry. There are no barriers to entry or exit. The allocation of
resources is determined by the equilibrium price where demand equals
supply.
Free resources, such as air and sunshine, have no opportunity cost in
their consumption.
Free-trade exists when exports and imports are able to move between
countries without restrictions such as tariffs or quotas.
Frictional unemployment exists when workers are waiting to take up
employment, such as a University graduates waiting to take up their
first employment.
Geographic immobility describes the restriction some workers face in
finding work because they are unable to take up work in another area.
This may be due to the high cost of housing in large cities, family ties
in his home area or the need for work permit or visas in another
country.
Gross Domestic Product measures the total value of goods and
services produced within the country including those owned by foreign
owners and exclude production by domestic firms overseas. GDP is
often used as an indicator of economic growth.
The government budget is an annual summary of the planned
government expenditure and projection of government revenue for the
forthcoming financial year.
Government policies are instruments such as fiscal policies, monetary
policies and laws and regulations, used to influence the
macroeconomic objectives such as economic growth, inflation and
levels of unemployment.
The United Nation Human Development Index is a measure of
development of a country consisting of three composite economic and
social indicators: GDP per capita (PPP), life expectancy and literacy
rate. The HDI has a value between 0 to 1. The zero value represents
the lowest level of development and 1 represents the highest level of
development.
The IMF identified thirty-eight Heavily indebted Poor Countries as
those with such high national debt and extreme absolute poverty that
they cannot manage their debt burden themselves, e.g. Eritrea and
Somalia.
Immobility of labour refers to the difficulties workers have in going
from one job to another. This may be due to a lack of skills:
occupational immobility, or difficulties in moving to another area:
geographic immobility.
Imperfect competition refers to market that have some form of
barriers to entry that stops new firms from entering the market. The
start-up cost, customer threshold needed to meet the break even point
and the need for a license for an airline business restricts the number
of airline companies from setting up.
Income elasticity of demand measures the responsiveness of quantity
demanded with changes in income.
Income elasticity of demand (YED) = % change in quantity demanded
% change in income
+ positive YED= a normal good: as income rises demand also rise
- negative YED = inferior good: as income rises demand falls
Income Tax
Managed
Exchange rates
Market Failure
Maximum
working hour
Money Supply
Merit Goods
Microeconomics
Minimum Wage
Mixed Economies
Monetary Policies
Monopolies
Monopsony
MNCs
Multiplier Effect
National Debt
Opportunity Cost
Price Ceiling
Price elasticity of
demand
Price elasticity of
supply
Price Floor
Price Taker
Rent
Price taker occurs when a firm is forced to accept the prevailing price
for the sale of its product.
Production possibility frontier shows the maximum potential level of
output of goods and services within a country. It is often drawn as a
curve. Areas inside the curve represent inefficient use of resources in a
country.
Profit is the difference between sales revenue and total costs of
production.
Protectionism policies limit imports into the country, such as tariffs and
quotas.
Preferential trade agreements between countries set out rules for
liberalizing trade, so countries can import and export more freely.
Preferential trade agreements can be signed by members of a trading
bloc such as the EU, members of the WTO, bilaterally between two
countries or multilaterally between several countries.
Public goods are those provided by the government because they are
under-consumed and difficult to supply. Public goods tend to be nonrivalrous: more than one person can use it at the same time and nonexcludable: difficult to prevent individuals from benefiting from it, e.g.
street lighting and country parks.
Quotas are maximum amount of goods/imports to be sold in the
country.
Rationing is the controlled supply of goods and services during a time
of shortages, such as food rations during a famine.
Relative poverty is defined as the percentage of population living
below 60% of the median income of a country.
Rent is payment for the use of land.
Resources
Non-price
competition
Non-renewable
NGOs
Oligopolies
Occupational
immobility
Production
Possibility
Frontier/curve
Profit
Protectionism
Preferential
trade
agreements
Public goods
Quotas
Rationing
Relative Poverty
Risk-bearing
economies
Scarcity
Short-run
Specialization
Specific Tax
Subsidies
Substitutes
Supply
Supply-side
policies
Substitutional
Effect
Tariffs
Taxes
Technical
economies of
scale
Terms of Trade
A large firm sells in more markets and has a wider product range than
a smaller company. The rapid expansion of multi product businesses is
part of a process of diversification. This helps spread business risks so
that if one market does badly the company has other markets to sell
into.
Scarcity exists because there is a lack of supply or an excess demand
for a resource.
Short-run refers to a period of time where at least one factor of
production must be fixed, such as capital.
Specialization refers to the specific work or task done by a worker,
such as a welder in the construction industry.
Specific tax is an indirect tax levied on a volume of goods such as $5
on a packet of cigarette or $10 on petrol.
Subsidies are government payment to firms to help increase output
and reduce their costs so that prices for consumers can be lowered.
Substitutes are goods that can be replaced by another, for example
Pepsi is a substitute for Coke Cola.
Supply is the quantity a firm is able and willing to produce at any given
price.
Supply-side economic policies are mainly micro-economic policies
designed to improve the supply-side potential of an economy, make
markets and industries operate more efficiently and thereby contribute
to a faster rate of growth of real national output.
Substitutional effect describes the consumers changing willingness to
swap one good for another as the price change or the buyers income
change.
Tariffs are taxes on imports.
Taxes are payments to the government or local authorities as revenue
needed to finance its expenditure.
Technical economies of scale refer to the declining average cost as the
result of new technologies, such as introduction of robots making
production faster and cheaper than lots of workers.
Terms of trade refers to the ratio of a countrys average price of
exports to the countrys average price of imports.
Terms of trade= average values of exports
average values of imports
Terms of trade is favourable if exports is greater than imports
Terms of trade is unfavourable if exports is less than imports
Total costs
Total cost is the sum of variable cost and fixed cost of production.
Total revenue
Total revenue is the total receipt of sales: TR= Quantity sold x price.
Trade
Trade Union
Trading-blocs
1
Y11 IGCSE ECONOMICS GLOSSARY 1
Unemployment
Unitary elasticity
Variable costs
Voluntary
unemployment
Wages
Want
Wealth
Wealth effect