Need to Know Economics
Definitions
William Martin
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© 2011 William Martin
Table of Contents
Absolute Advantage
Absolute Poverty
Accelerator Effect
Affordable Housing
Aggregate Demand
Aggregate Supply
Allocative Efficiency
Asymmetric Information
Automatic Stabiliser
Average Cost
Average Revenue
Balance of Payments
Balance of Payments Current Account
Balance of Payments Disequilibrium
Bank of England
Base Interest Rate
Base Year
Budget
Budget Surplus
Budget Deficit
Buffer Stocks
Capital
Capitalist Economy
Cash Crop
Ceteris Paribus
Circular Flow of Income
Claimant Count
Cobweb Theory
Collusion
Common Agriculture Policy (CAP)
Common External Tariff
Common Market
Comparative Advantage
Complementary Goods
Competition Policy
Competitiveness
Composite Demand
Compulsive Competitive Tendering (CCT)
Concentration Ratio
Consumer Sovereignty
Consumer Surplus
Consumption
Contestable Market
Convergence Criteria
Correlation
Cost Benefit Analysis
Cost plus Pricing
Cost-Push Inflation
Cross-Price Elasticity of Demand (XED)
Current Prices
Customs Union
Cyclical Unemployment
Dead weight Loss
Decile
Deflationary Policy
Deflation
Demand
Demand for Labour
Demand Management
Demand-Pull Inflation
Demerit Goods
Demographic Time Bomb
Depreciation
Deregulation
Derived Demand
Derived Demand for Labour
Devaluation
Direct Tax
Discretionary Fiscal Policy
Discounting
Discrimination
Diseconomies of Scale
Disequilibrium
Disposable Income
Division of Labour
Dumping
Duopoly
“Dutch Disease”
Dynamic Efficiency
Economic and Monetary Union
Economic Growth
Economic System
Economically Active
Economically Inactive
Economic Performance
Economy of Scale
Effective Exchange Rate
Elasticity
Elasticity of Demand
Elasticity of Demand for Labour
Elasticity of Supply
Elasticity of Supply for Labour
Enterprise
Equilibrium
EU Enlargement
European Commission
European Union
Exchange Rate
Exchange Rate System
Exports
Export Subsides
Externalities
External Benefits
External Costs
Factor Immobility
Factor of Production
Fiscal Boost
Fiscal Policy
Fiscal Drag
Fixed Cost
Fixed Exchange Rate System
Fixed Rate Mortgage
Flexible Labour Market
Floating Exchange Rate
Foreign Direct Investment
Free-Riders
Free Trade Area
Frictional Unemployment
Game Theory
Geographical Mobility
Globalisation
Golden Rule
Government Economic Objectives
Government Failure
Government Intervention
Green Belt
Gross Domestic Product (GDP)
Gross National Product (GNP)
Home Production
Horizontal Equity
Horizontal Integration
“Hot Money”
Human Capital
Human Development Index
Hyperinflation
Income
Income Distribution
Income Effect
Income Elasticity of Demand
Income Tax
Incentives
Indirect Tax
Index Numbers
Inequality
Infant Industry Argument
Inferior Good
Inflation
Inflation Target
Injection
Innovation
Internal Growth
Internal Markets
Interest Rates
Interventionist
Investment
Inverse Relationship
Invisible Hand
Imperfect Information
Immobility of Resources
Imports
Joint Demand
Joint Supply
Job seekers Allowance
Keynesianism
Kinked Demand Curve
Labour Immobility
Labour Force Survey
Labour Market
Laffer Curve
Laissez-Faire
Law of Diminishing Returns
Leakages
Limit Pricing
Liquidity
Loan able Funds Theory
Local Authority Housing
Long Run
Lorenz Curve
Macro Economics
Marginal Cost
Marginal External Benefit
Marginal External Cost
Marginal Private Benefit
Marginal Private Cost
Marginal Rate of Tax
Marginal Revenue
Marginal Social Benefit
Marginal Social Cost
Market
Market Failure
Market for Corporate Control
Marshall Lerver Condition
Maximum Prices
Means Tested Benefits
Merger
Merit Good
Micro Economics
Minimum Efficient Scale
Minimum Prices
Mixed Economy
Monetarism
Monetary Policy
Money
Money Supply
Monopoly
Monopoly Power
Monopsony
Mortgage
Multinational
Multiplier Effect
National Debt
National Minimum Wage
Natural Environment
National Income
Natural Rate of Unemployment
Negative Equity
Negative Externality
New Deal
Non-Excludability
Non-Pecuniary Benefits
Non-Price Competition
Non-Rivalry
Non-Tariff Barriers
Normal Good
Normal Profit
Normative Economics
Occupational Immobility
Oligopoly
Open Economy
Opportunity Cost
Optimal Tax
Organic Growth
Output Gap
Overproduction
Paradox of Thrift
Participation Rate
Partial Market Failure
Per Capita Income
Pollution Permit
Positive Economics
Positive Externalities
Positive Relationship
Poverty Trap
Price Controls
Price Discrimination
Price Elasticity
Price Elasticity of Demand
Price Elasticity of Supply
Price Index
Price Leadership
Price Wars
Private Benefits
Private Costs
Privatisation
Producer Surplus
Product Differentiation
Production Possibility Frontier
Productive Efficiency
Productivity
Profit
Profit Maximisation
Profit-Signalling Mechanism
Progressive Tax
Property Rights
Protectionism
Poverty
Public Goods
Public Private Partnership
Public Sector Net Cash Requirement
Purchasing Power Parity
Quality Of Life
Quantity Theory
Quasi Public Goods
Quintile
Rationing
Real Exchange Rate
Real Growth
Real Wage
Recession
Regressive Tax
Regulation
Regulator
Regulator Capture
Relative Poverty
Replacement Ratio
Retail Price Index (RPI)
Revenue Maximisation
Sales Maximisation
Satisfying
Scarcity
Seasonal Unemployment
Shadow Economy
Short Run
Social Chapter
Social Costs
Socially Optimal Production
Specialisation
Standard of Living
Starter Home Initiative
Structure Unemployment
Subsidy
Substitute Goods
Substitution Effect
Sunk Cost
Super Normal Profit
Supply
Supply of Labour
Supply Side Policies
Sustainable Development
Sustainable Investment Rule
Tariff
Technological Unemployment
Terms of Trade
Tradable Permit
Trade Creation
Trade-Off
Trade Union
Trading Bloc
Underlying Inflation
Unemployment
Unit Cost
Unit Labour Cost
Variable Cost
Vertical Equity
Vertical Integration
Wage Inflation
Wealth
Wealth Distribution
Wealth Effect
Weights
Weighted Index Number
Withdrawal
Workforce
Working Time Directive
World Trade Organization
X-inefficiency
A
Absolute Advantage
Where the producer is able to make the largest amount of a certain product using its factors of production.
Absolute Poverty
Where a person cannot purchase the basic needs to have a good quality of life.
Accelerator Effect
The theory when investment by firms changes according to demand.
Affordable Housing
Government rules which give a quote for houses in a new development which have to be affordable to purchase.
Aggregate Demand
The total of all planned spending, at a given price level and over a period of time, on domestic output.
Aggregate Supply
The total of all planned domestic production at a price level over a certain period.
Allocative Efficiency
When resources are used to produce what consumers demand.
Asymmetric Information
Where a buyer knows more about the value of a certain product than the seller (vice versa)
Automatic Stabiliser
This helps keep AD stable in economic growth and decline without a deliberate attempt by the government.
Average Cost
The cost of a unit of output.
Average Revenue
The revenue per a unit of output.
B
Balance of Payments
The financial transactions between households of one country and the residents of those living abroad in a year.
Balance of Payments Current Account
A countries net inflow of money from imports/exports, investment income and transfers.
Balance of Payments Disequilibrium
When the Balance of Payments current account has a large, on-going and rising deficit/surplus over time.
Bank of England
The central bank of the UK, it maintains the responsibility of the issuing of notes and coins and for controlling interest rates.
Base Interest Rate
The rate of interest that the Bank of England charges.
Base Year
The reference year that is chosen when using index numbers.
Budget
A forward thinking financial plan that involves the expected income, expenditure and a cash flow forecast for a time period.
Budget Surplus
When the government income is greater than its spending for the year.
Budget Deficit
This is when government spending is greater than its total income over a time period.
Buffer Stocks
A scheme which tries to keep the market price of commodities (such as wheat) stable for producers.
C
Capital
Aids to production which have been man made.
Capitalist Economy
Where there is minimal regulation and the markets decide resource allocation.
Cash Crop
A crop that is produced for exports.
Ceteris Paribus
Where all factors remain constant.
Circular Flow of Income
This shows the spending and income flows between households and firms. It determines the equilibrium level of national income.
Claimant Count
The number of unemployed people who are claiming unemployment benefit.
Cobweb Theory
A theory that explains the fluctuations in market price and quantity over time.
Collusion
Where firms agree with each other not to be competitive on price.
Common Agriculture Policy (CAP)
A European Union policy which intervenes in the agriculture market when the welfare of European farmers needs increasing.
Common External Tariff
This is a tax on products which are imported into a customs union.
Common Market
This is when economic integration between counties takes place because barriers to capital and labour mobility are removed.
Comparative Advantage
When a producer has the lowest opportunity cost of production for a certain product.
Complementary Goods
Goods that go with each other, so if the demand for one went up then so would the demand for the other.
Competition Policy
Government intervention so firms cannot use monopoly power.
Competitiveness
Where firms are able to sell there product to a foreign market.