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Edexcel A Level Economics shtuff > all theme vocab > Flashcards

all theme vocab Flashcards

1
Q

normal profit

A

excess profit earned by a firm over and above its opportunity cost of capital

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2
Q

absolute advantage

A

when a country’s output of a product is greater per unit of resource used than any other country

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3
Q

absolute poverty

A

this is when someone doesnt have the income or wealth to meet their basic needs like food, shelter, and water

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4
Q

accelerator process

A

this is where any change in demand for goods and services beyond current capacity will lead to a greater percentage increase in the demand for the capital goods that firms need to produce those goods/services

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5
Q

aggregate demand

A

the total demand or total spending in an economy at a given price level over a given period
C + I + G + (X - M)

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6
Q

aggregate supply

A

the total amount of goods and services which can be supplied in an economy at a given price level over a given period of time

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7
Q

aid

A

the transfer of resources from one country to another

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8
Q

allocative efficiency

A

this is when the price of a good is equal to the price of that consumers are happy to pay for it. this will happen when all resources are allocated efficiently

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9
Q

asymmetric information

A

this is when buyers have more information than sellers (or the opposite) in a market

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10
Q

automatic stabilizers

A

these are parts of fiscal policies that will automatically react to changes in the economic cycle. for example, during a recession government spending is likely to increase because the government will automatically pay out more unemployment benefits which may reduce the problems the recession causes

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11
Q

average costs

A

the cost of production per unit of output - i.e. a firms total revenue for a given period of time divided by the quantity sold

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12
Q

average revenue

A

the revenue per unit sold - i.e. a firm’s total revenue for a given period of time, divided by the quantity sold

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13
Q

backward vertical integration

A

business strategy in which a company acquires or merges with a supplier or producer of inputs or raw materials that are required in the production process of the company’s goods or services

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14
Q

balance of payments

A

a record of a countrys international transactions i.e. flows of money into and out of a country

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15
Q

bank rate

A

the official rate of interest set by the Monetary Policy Committee of the Bank of England

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16
Q

barriers to entry

A

barriers to entry are any potential difficulties that make it hard for a firm to enter the market

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17
Q

barriers to exit

A

are any potential difficulties that make it hard for a firm to leave the market

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18
Q

black market

A

economic activity that occurs without taxation and government regulation

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19
Q

budget deficit

A

when government spending is greater than its revenue

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20
Q

budget surplus

A

when government spending is less than its revenue

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21
Q

capital account on the balance of payments

A

a part of the record of a country’s international flows of money. this includes transfers of non-monetary and fixed assets, such as through emigration and immigration

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22
Q

cartel

A

a group of producers that agree to limit production in order to keep the price of goods or services high

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23
Q

central bank

A

the institution responsible for issuing a country’s banknotes acting as a lender of last resort for other banks, and implementing monetary policy e.g. setting interest rates

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24
Q

circular flow of income

A

the flow of national output, income, and expenditure between households and firms
national output = national income = national expenditure

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25
Q

command economy

A

an economy where governments, not markets, determine how to allocate resources

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26
Q

comparative advantage

A

a country has a comparative advantage if the opportunity cost of it producing a good is lower than the opportunity cost for other countries

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27
Q

competition policy

A

government policy aimed at reducing monopoly power in order to increase efficiency and ensure fairness for consumers

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28
Q

concentration ratio

A

this shows how dominant firms are in a market e.g. if three firms in a market have 90% market share then the three-firm concentration ratio is 90%

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29
Q

conglomerate integration

A

mergers or takeovers between firms that operate in completely different markets

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30
Q

consumer surplus

A

when a consumer pays less for good than they were prepared to, this difference is the consumer surplus

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31
Q

consumption

A

the purchase/use of goods and services

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32
Q

contestability

A

a market is contestable if tis easy for new firms to enter the market i.e. if barriers to entry are low

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33
Q

cost-push inflation

A

inflation caused by the rising costs of inputs to production

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34
Q

creative destruction

A

his occurs when the innovation and invention of new products and production methods causes the destruction of existing markets and creates new ones

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35
Q

cross elasticity of demand (XED)

A

measure of how the quantity demanded of one good/service responds to a change in the price of another good/service

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36
Q

current account on the balance of payments

A

a part of the record of a country’s international flows of money. it consists of trade in goods, trade in services, international flows of income (salaries, interest, profit, and dividends), and transfers

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37
Q

cyclical unemployment

A

unemployment caused by a shortage of demand in an economy e.g. when there’s a slump

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38
Q

demand-pull inflation

A

inflation caused by excessive growth in aggregate demand in an economy

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39
Q

demand side policy

A

government policy that aims to increase aggregate demand in an economy. for example, a policy to increase consumer spending in an economy

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40
Q

demerger

A

a firm selling off part(s) of its business to create a separate firm or firms

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41
Q

demerit goods

A

a good or service which ahs greater social costs when its consumed than private costs. demerit goods tend to be overconsumed

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42
Q

dependency ratio

A

how many people are either too young or too old to work relative to the number of people of working age

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43
Q

deregulation

A

removing rules imposed by a government that can restrict the level of competition in a market

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44
Q

derived demand

A

the demand for a good or factor of production due to ts use in making another good or providing a service

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45
Q

developed countries

A

relatively rich, industrialized countries with a high GDP per capita

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46
Q

developing countries

A

countries that rely on labor intensive industries. they have a relatively low GDP per capita

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47
Q

diminishing returns

A

the decrease in additional satisfaction/utility gained from every additional unit consumed

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48
Q

diseconomies of scale

A

a firm is experiencing diseconomies of scale when the average cost of production is rising as output rises

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49
Q

disposable income

A

income, including welfare benefits, that is available for households to spend after income tax has been paid

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50
Q

dividend

A

a share in a firm’s profit that is given to the firm’ shareholders

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51
Q

divorce of ownership from control

A

this occurs when a firm’s owners are no longer in control of the day-to-day running of the firm (e.g. because it’s run by directors). this can lead to the principal-agent problem where those in control act in their own self-interest rather the interest of the owners

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52
Q

dynamic efficiency

A

this is about firms improving efficiency in the long-term by carrying out research and development into new or improved products, or investing in new technology and training to improve the production process

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53
Q

economic cycle

A

the economic cycle (business or trade cycle) is the fluctuations in actual growth over a period of time (several years) or decades

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54
Q

economic development

A

an assessment of living standards and people’s overall welfare in a country

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55
Q

economic growth

A

an increase in an economy’s productive potential. usually measured as the rate of change of GDP or GDP per capita

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56
Q

economic integration

A

an increase in an economy’s productive potential usually measured as the rate of change of the GDP or GDP per capita

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57
Q

economic rent

A

the excess a worker is paid above the minimum required to keep them in their current occupation (this minimum payment is their transfer earning)

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58
Q

economicall active population

A

the people in an economy who are capable of and old enough to work

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59
Q

economies of scale

A

when the average cost of production falls as output rises

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60
Q

emerging countries

A

countries which are not yet developed, but which are growing quickly and are further along the development process than other developing countries

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61
Q

equity

A

fairness

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62
Q

exchange rate

A

price at which one currency buys another

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63
Q

extending property rights

A

when property rights over a resource are given to an individual or firm. this gives them control over the usage of that resource

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64
Q

external growth

A

a firm growing though mergers/takeovers

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65
Q

externalities

A

the external costs or benefits to a third party that is not involved in the making, buying/selling, and consumption of a specific good or service

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66
Q

factors of production

A

these are the four inputs needed to make the things that people want. they are land, labor, capital, and enterprise

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67
Q

financial account on the balance of payments

A

a part of the record of a country’s international flows o money. this involves the movement of financial assets (e.g. through foreign direct investment)

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68
Q

financial sector

A

firms that provide financial services (e.g. banks and insurance companies)

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69
Q

fiscal policy

A

government policy that determines the levels of government spending and taxation. often used to increase or decrease aggregate demand in an economy

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70
Q

fishers equation of exchange

A

a monetary theory that states the nominal value of money spent equals the product of the money supply, the velocity of money, and the average price level

M x V = P x Y

Where:
M = the money supply
V = the velocity of money
P = the average price level
Y = the level of real output or income in the economy

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71
Q

fixed costs

A

costs that dont vary with the level of output of a firm in the short run

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72
Q

foreign direct investment (FDI)

A

this is when a firm based in one country makes an investment in a different country

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73
Q

forward vertical integration

A

business strategy in which a company acquires or merges with a company involved in the next stage of the supply chain to gain more control over the distribution and sale of its products or services
e.g. car manufacturer acquiring car dealership

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74
Q

free market

A

a market where there is no government intervention
competition between different suppliers affects supply and demand and as a result determines price

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75
Q

free rider problem

A

this means that once a public good is provided its impossible to stop someone from benefitting from it even if they haven’t paid towards it

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76
Q

free trade

A

international trade without any restrictions from things like trade barriers

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77
Q

frictional unemployment

A

the unemployment experienced by workers between leaving one job and starting another

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78
Q

full employment

A

the situation where everyone of working age who wants a job at the current wage rate can get one

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79
Q

globalization

A

the increasing interdependence of countries globally which is making the world more like a single economy

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80
Q

government failure

A

when government intervention into a market causes misallocation of resources

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81
Q

gross domestic product (GDP)

A

the total value of all the goods and services in a year

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82
Q

hit and run tactics

A

this is when firms enter a market while supernormal profits can be made and then leave the market once prices have been driven down to normal profit levels

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83
Q

horizontal equity

A

this means that people in identical circumstances are treated fairly i.e. equally

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84
Q

horizontal integration

A

mergers or takeovers between firms that are at the same stage of the production process of similar products

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85
Q

human capital

A

the economic value of a persons skills

86
Q

human development index (HDI)

A

a measure of a countrys economic development used by the UN that combines measures of health (life expectancy), education (average and expected years in school), and the standard of living (real GNI per capita)

87
Q

imperfect information

A

a situation where buyers/sellers don’t have full knowledge regarding price, costs, benefits, and availability of a good or service

88
Q

income

A

money that a firm of person receives for providing a good or service

89
Q

income elasticity of demand (YED)

A

this is a measure of how the demand for a good or service responds to a change in real income

90
Q

inequity

A

unfairness

91
Q

inflation

A

the sustained rise in the average price of goods and services over a period of time

92
Q

infrastructure

A

the basic facilities and services needed for a country and its economy to function

93
Q

inorganic growth

A

refers to a companys expansion through mergers, acquisitions, or partnerships, rather than through its own internal development or investment

94
Q

interest

A

the money paid to the lender by someone who borrows capital. this will often be a fixed percentage rate aka interest rate

95
Q

internal growth

A

a firm growing as a result of increasing the levels of output. investment can also mean buying shares from the stock market - this is done in the hope of making a future profit or receiving dividend payments

96
Q

labor immobility

A

this occurs when labor cant easily move around to find jobs (geographic immobility) or easily switch between different occupations (occupational immobility)

97
Q

law of diminishing returns

A

the idea that if a firm increases one variable factor of production while other factors stay fixed, then the marginal returns the firm gets from the variable factor will always eventually begin to decrease

98
Q

liquidity

A

how easily an asset can be spent (converted to money)

99
Q

long run

A

a time period in which all the factors of production are variable so a firm can expand its capacity

100
Q

long run aggregate supply

A

in the long run it is assumed that because factors and costs of production can change, an economy will run at full capacity so LRAS is the productive potential of an economy

101
Q

long run philips curve

A

shows that in the long run, increasing employment doesn’t lead to lower inflation as there is no permanent relationship between the two

102
Q

macroeconomics

A

this is the part of economics as a whole.

103
Q

marginal cost

A

the cost to a firm of producing the final unit of output

104
Q

marginal product

A

the extra output thats porduced when a firm adds one more unit of one of the factors of production they’re using

105
Q

marginal propensity to consume

A

the proportion of an increase in income that people will spend (and not save)

106
Q

marginal returns

A

refers to the increase in output resulting from an additional unit of input, holding all other inputs constant

107
Q

marginal revenue

A

extra revenue received as a result of selling one more unit of output

108
Q

marginal tax rate

A

the rate of tax you pay on an ‘extra’ money you receive

109
Q

marginal utility

A

the benefit of consuming one extra unit of a good

110
Q

market failure

A

this is where the price mechanism fails to allocate resources efficiently

111
Q

merger

A

two firms uniting to form a new company

112
Q

merit good

A

a good or service which provides greater social benefits when it is consumed than private benefits

113
Q

microeconomics

A

part of economics concerned with individual people, individual firms, and individuals markets

114
Q

minimum efficient scale of production (MES)

A

lowest level of output at which a firm can achieve the lowest possible average cost of production

115
Q

monetary policy

A

government policy that involves controlling the total amount of money in an economy (the money supply) and how expensive it is to borrow that money. it involves manipulating interest rates, exchange rates, and restrictions to the money supply

116
Q

monopoly

A

a pure monopoly is a market with only one supplier. some market will be referred to as a monopoly if there is more than one supplier but one supplier dominates the market

117
Q

monopoly power

A

the ability of a firm to be a price maker and influence the price of a particular good in a market

118
Q

monopsony

A

a market with a single buyer

119
Q

multinational corporations (MNCs)

A

firms which function in at least one other country aside from their country of origin

120
Q

multiplier effect

A

the process by which an injection into the circular flow of income creates a change in the size of national income that’s greater than injection size

121
Q

national debt

A

the total debt that country has run up over time

122
Q

national minimum wage

A

a legal minimum hourly rate of pay set for different age groups. there’s a national minimum wage in the UK

123
Q

national output

A

all the foods and services produced in a country in a year

124
Q

nationalized industry

A

an industry owed by the government

125
Q

natural monopoly

A

an industry where economies of scale are so great that the lowest long-run average cost can only be achieved if the market is made up of a single provider

126
Q

natural rate of unemployment

A

the rate of unemployment when the labor market is in equilibrium

127
Q

non pure public good

A

type of public good that is partially excludable or rivalrous, meaning that it is possible to restrict access to the good or that its consumption by one individual reduces the amount available to others e.g. toll roads, ppl cant use if don’t pay and more ppl use more congested

128
Q

normal profit

A

a firm is making normal profit when its total revenue is equal to its total costs

129
Q

oligopoly

A

a market dominated by a few large firms that offer differentiated products with high barriers to entry. the firms are interdependent and may use competitive or collusive strategies

130
Q

opportunity cost

A

the benefit thats given up in order to do something else - its the cost of the choice that’s made

131
Q

organic growth

A

refers to the increase in a company’s production, sales, and profits resulting from its own internal resources and investments, rather than from mergers, acquisitions, or other external factors

132
Q

output gap

A

the gap between the trend rate of economic growth and actual economic growth - can be negative or positive

133
Q

participation rate

A

proportion of working age people in an economy that are either in work or actively seeking work

134
Q

per capita

A

another way to say per person

135
Q

perfect information

A

this is where buyers and sellers have full knowledge of prices, costs, benefits and availability of products

136
Q

philips curve (long run)

A

a curve that shows the relationship between inflation and unemployment in the long run - always a vertical line positioned at the natural rate of unemployment

137
Q

philips curve (short run)

A

a curve that shows the relationship between inflation and unemployment in the short run- as the level that a new entrant to the market cant match in order to force them out of the market

138
Q

predatory pricing

A

an aggressive pricing tactic that involves incumbent firms in a market lowering their prices to a level that a new entrant to the market cant match in order to force them out of the market

139
Q

price cap

A

a limit on price rises that makes a market fairer to consumers. a price cap also provides an incentive for firms to increase efficiency.

140
Q

price discrimination

A

occurs when a seller charges different prices to different customers for exactly the same product

141
Q

price elasticity of demand

A

measure of how the quantity demanded of a g+s responds to a change in its price

% change in qd / % change in p

142
Q

price elasticity of supply

A

measure of how the quantity supplied of a good or service responds to a change in its price

% change in qs / % change in p

143
Q

price maker

A

a firm that has some power to control the price it sells at

144
Q

price mechanism

A

this is when changes in the demand or supply of a good or service lead to changes in its price and quantity bought/sold

145
Q

price taker

A

a firm that has no power to control the price it sells at - it has to accept the market price

146
Q

price war

A

a situation where one firm in a market lowers their prices and other firms follow suit possibly triggering a series of price cuts as firms try to undercut one another

147
Q

principial-agent problem

A

refers to a situation where the goals and incentives of the principal (such as a company’s shareholders) and agent (such as its managers) may be misaligned, leading to conflicts of interest and potentially suboptimal outcomes.

148
Q

privatisation

A

when a firm or whole industry changes from being run by the public sector to the private sector

149
Q

producer surplus

A

when a producer receives more for a good than they were prepared to accept this difference is the producer surplus

150
Q

production possibility frontier

A

a curve which shows the maximum possible outputs of two g+s using a fixed amount of inputs

151
Q

productive efficiency

A

occurs when products are produced at a level of output where the average cost is lowest

152
Q

productivity

A

the average output produced per unit of a factor of production - for example labor productivity would be the average output per worker (or per work-hour)

153
Q

profit

A

a firms total revenue minus its total costs

154
Q

progressive taxation

A

a tax system whre an individuals tax rises (as a percentage of their income) as their income rises

155
Q

proportional taxation

A

a tax system pay the same proportion of tax regardless of their income level

156
Q

protectionism

A

when a government uses policies to control the level of international trade and protect its own economy, industries, and firms

157
Q

public good

A

a good which people cant be stopped form consuming even if theyve not paid for it and the consumption of it doesnt prevent others from benefitting from it

158
Q

public sector

A

a part of the economy that is owned or run by the government

159
Q

purchasing power parity

A

an adjustment of an exchange rate to reflect the real purchasing power of the two currencies

160
Q

quantitative easing

A

involves a central bank ‘creating new money’ and using it to buy assets owned by financial instituitions and other firms. it increases the money supply which will enable individuals and firms to spend more ro lend it to other people to spend

161
Q

quantity theory of money

A

this theory is based on the idea that changes in the money supply will cause changes to the price level. it uses the formula MV = PT which is knows as the Fishers equation of exchange

162
Q

quasi-public good

A

a good which appears to have the characteristics of a public good but doesnt exhibit them fully

163
Q

quota

A

a limit on the amount of a good that is allowed to be used, produced, or imported

164
Q

real income

A

a measure of the amount of g+s that a consumer can afford to purchase with their income, adjusted for inflation

165
Q

real wage development

A

unemployment caused by real wages being pushed above the equilibrium level of employment. it can be caused by trade unions negotiating for higher wages or the introduction of a national minimum wage

166
Q

recession

A

this occurs when theres negative economic growth for at least two consecutive quarters. typically theres falling demand, low levels of investment, and rising unemployment during a recession

167
Q

regressive taxation

A

a tax system where an individuals tax falls (as a percentage of their income) as their income rises

168
Q

relative poverty

A

this is where someone has a low income relative to other incomes in their country

169
Q

returns to scale

A

how much a firms output changes as they increase input (ie increase all factors of production). returns to scale are increasing if output increases more than proportionally with input, constant if output increases proportionally with input, and decreasing if output increases less than proportionally with input

170
Q

revenue

A

the total value of sales within a time period

171
Q

satisficing

A

running a firm in a way that does just enough to satisfy important stakeholders in the firm rather than trying to maximise something like profit or revenue

172
Q

seasonal unemployment

A

unemployment due to uneven economic activity during the year

173
Q

shadow banking system

A

firms (or part of firms) that provide credit but which are not regulated

174
Q

share

A

a share represents a portion of a company’s value - giving the shares owner a right to a portion of the company’s profits

175
Q

shareholders

A

individuals or firms that own shares in a company

176
Q

short run

A

a time period in which at least one of a firms factors of production is fixed

177
Q

short run aggregate supply

A

aggregate supply when the factors of production are fixed

178
Q

short run philips curve

A

a graphical representation of the inverse relationship between unemployment and inflation in the short term.

179
Q

specialisation

A

means people or countries doing only the theyre best or most efficient at

180
Q

speculation

A

when things are bought (e.g. shares) in the hope that they will increase in value and can be sold for a profit at a later date

181
Q

static efficiency

A

this occurs when allocative and productive efficiency are both achieved at a particular time

182
Q

structural unemployment

A

unemployment caused by the decline of a major industry which is made worse by labor immobility

183
Q

subsidy

A

an amount of money paid by a government to the producer of a g+s to lower the price and increase demand for the good/service

184
Q

sunk cost

A

this is an unrecoverable cost of entering a market e.g. advertising. it can act as a barrier to exit

185
Q

supernormal profit

A

a firm is making supernormal profit when its total revenue exceeds its total costs

186
Q

supply side policy

A

government policy that aims to increase aggregate supply in an economy. for example a policy to increase the productive capacity of the economy

187
Q

sustainability

A

this is about meeting the needs of people now, without making it more difficult for people in the future to meet their own needs

188
Q

systemic risk

A

this is when a problem in one part of the financial sector can cause the whole financial system to collapse

189
Q

takeover

A

one firm buying another firm which then becomes part of the first firm

190
Q

tariff

A

a form of tax placed on certain imports to make them more expensive and discourage their consumption

191
Q

tax

A

an amount of money paid to a government. it’s paid directly e.g. income tax or indirectly e.g. excise duty

192
Q

terms of trade

A

a measure of the relative price of a countrys exports compared to its imports

193
Q

total cost

A

all the costs for a firm involved in producing a particular amount of output

194
Q

total revenue

A

the total amount of money a firm receives from its its sales in a particular time period

195
Q

trade creation

A

the removal of trade barriers within a trading bloc allowing members to buy from the cheapest source

196
Q

trade diversion

A

when trade barriers are imposed on non-members of a trading bloc so trade is diverted away from any cheaper non-members

197
Q

trade liberalisation

A

the reduction or removal of tariffs and other restriction on international trade i.e. reducing protectionism

198
Q

trade union

A

an organisation of workers that acts to represent their interests, e.g. to improve their pay

199
Q

trading blocs

A

these are associations between the governments of different countries that promote and manage trade between those countries

200
Q

transfer earnings

A

the minimum pay that will stop a worker from switching to their next best paid occupation

201
Q

unemployment

A

the level of unemployment is the number of people who are looking for a job but cannot find one. the rate of unemployment is just the percentage figure

202
Q

utility

A

the benefit or well being gained from an action

203
Q

variable costs

A

costs that vary with the level of output of a firm

204
Q

vertical equity

A

this means people with different circumstances are treated differently but fairly

205
Q

vertical integration

A

mergers or takeovers between firms at different stages of production process of the same product. if a firm takes over another firm thats further forward in the production process it is forward vertical and if further back then its backwards vertical

206
Q

wage differentials

A

the differences that exist in wages between different groups of workers or between workers in the same occupation

207
Q

wage rate

A

price of labor

208
Q

wealth

A

the value of somebodys assets

209
Q

working population

A

refers to individuals who are of working age and are either employed or seeking employment.

210
Q

world trade organisation

A

international orgaisation with provides a forum for its member governments to discuss trade agreements and settle disputes using a set of trade rules. it aims to help trade ot be as free as possible.

211
Q

x-inefficiency

A

inefficiency caused by unnecessary costs and waste (i.e. organizational slack)

Edexcel A Level Economics shtuff (2 decks)

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