Definitions Flashcards
(30 cards)
Absolute advantage
A country will have an absolute advantage when its output of a product is greater per unit of resource used than any other country
Absolute poverty
This is when someone doesn’t have the income or wealth to meet their basic needs, such as food, shelter and water
Accelerator process
This is where any change in demand for goods/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
Aggregate demand
The total demand, or total spending, in an economy at a given price level over a given period of time.
It’s made up of consumption, investment, government spending and net imports
AD = C+I+G+(X-M)
Aggregate supply
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
Aid
The transfer of resources from one country to another
Allocative efficiency
This is when the price of a food is equal to the price that consumers are happy to pay for it. This will happen when all resources are allocated efficiently.
Asymmetric information
This is when the buyers have more information than seller (or the opposite) in a market
Automatic stabilisers
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 will reduce the problems the recession caused.
Average cost
The cost of production per unit of output
I.e. a firms total cost for a given period of time divided by the quantity produced
Average revenue
The revenue sold per unit
I.e. a firms total revenue over a given period of time, divided by the quantity sold
What is meant by the term exchange rate?
The price of one currency in terms of another
Opportunity cost
Is the value of the next best alternative given up when a choice is made
Enterprise/entrepreneurship
The ability and willingness to organise, coordinate, and take risks in the production process
Microeconomics
Is a branch of economics that studies the behaviour of individuals and firms in the market
Macroeconomics
Considers the economy as a whole
Factor mobility
Occurs when factors of production can easily be moved from one use to another
Occupational mobility
Resources can move easily between different types of work
Occupational immobility of labour
Can occur because of insufficient education and training, a lack of transferable skills, inability to afford training.
Specialisation
The concentration of individuals, firms or nations on producing a limited range of goods and services.
The division of labour
A form of specialisation where the tasks needed to produce an item are divided among workers
Backward vertical integration
If a firm takes over another firm that’s further back in the production process
Balance of payments
A record of the countries international transactions I.E the flows of money into and out of the country
Bank rate
The official rate of interest rates set by monetary policy committee of the Bank of England
