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Y11 IGCSE ECONOMICS GLOSSARY 1

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

The average revenue is calculated by dividing the total sales revenue


by the quantity produced:
AR=

Balance of
Payment
Balance of Trade

Total production cost


Total Quantity

Total Sales Revenue


Total Quantity

The balance of payment is a record of international trading


transactions between one country and other countries. It consists of a
Current Account, Capital Account and the Financial Account.
The balance of trade measures the differences in value between the
countrys exports of goods and services and the import of goods and
services.
Balance of Trade = Exports Imports

Barriers to entry
Budget deficit

Budget Surplus

Business Cycle

Barriers of entry refer to factors that restrict the introduction of a


company or the sale of a good in a country.
A budget deficit to the minus value in the actual government budget.
The deficit could exist because government expenditure is higher than
government revenue or government revenue has fallen more than the
planned government expenditure. In a recession, government
expenditure may rise and at the same time the government revenue
falls, creating a large budget deficit.
A budget surplus refers to the positive value in the actual government
budget. The budget surplus could exist because government revenue
is higher than government expenditure or government expenditure
has fallen more than the planned government revenue income. During
an economic boom the government is likely receive more revenue
income in the form of taxes and at the same time able to reduce its
government expenditure because less people require their help.
The business or trade cycle refers to the fluctuations of national
income from the rise (booms) or fall (slumps) in the total value of

SHATIN COLLEGE 2011-2012 (MLT)

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

Corporate tax is levied on the profits of companies at the end of their


financial accounting year.
Cost-push inflation refers to the rise in prices caused by factors caused
by the cost of production such as higher wages, rise in the cost of raw
materials or the increasing cost of rent and elasticity.
Cross-price elasticity of demand measures the responsiveness of in the
quantity demanded of a good with changes in the price of another
good.
Cross Elasticity of Demand (XED)=

Current Account

Cyclical

Changes in Qd for A
Changes in price of B

+ A positive XED value = a substitute good


- A negative XED value = a complementary good
The current account in the balance of payment records the total value
of the balance trade in goods and services, (exports minus imports)
and the net transfer of income between countries and official
government transfers.
Cyclical unemployment is the results of people being made

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Y11 IGCSE ECONOMICS GLOSSARY 3


unemployment
Debt

Deflation
Demand
Demand-pull
inflation
Demand-side
Policies

Demerit Goods

Dependent
population

unemployed due to a fall in the aggregate demand as the result of a


slump or a recession in the economy.
Debt is the money owed by a borrower. A countrys national debt is the
total the government owes from borrowing to cover its excess
government spending that could not be covered from the revenue
income.
Deflation is negative inflation rate, from a persistent decline in the
average price of goods and services over a period of time, usually
following a recession.
Demand is quantity consumers are willing and able to buy at any given
price.
Demand-pull inflation is the increase in price caused by excess
demand resulting from high national income during a period of boom;
tax or interest rate cuts resulting in higher purchasing power or a
substantial increase in government spending.
Government policies are designed to affect the aggregate demand in
the economy to influence the economic growth, inflation or
unemployment is referred to as demand-side policies, Expansionary
demand-side policies such as tax cuts, lower interest rates and
increase government spending will increase aggregate demand. This
will increase the purchasing power of consumers and firms, create
economic growth and create employment, but may cause inflation.
Contractionary demand-side policies such as higher and new taxes,
higher interest rates and cuts in government spending will reduce
aggregate demand and lower economic growth, lower rates of inflation
but may increase unemployment as AD falls.
Demerit goods such as cigarettes and alcohol are goods that the
government would like the public to consume less of as the social cost
of these goods generally are greater than private cost of consuming
that product.
Dependent population consists of young defendants under the age of
16 and old aged defendants over the age of 60. To calculate the
dependent population you add the young and old-aged dependant
population and divide the sum by the total population.
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

The production of a good or exists because there is a demand for it, is


referred to as derived demand. Labour has a derived demand because
workers are only demanded because demand for the good or service
they produce exists.
Direct Investment refers to the direct purchase or sale in the
ownership of a property or company rather than through a third party.
Diminishing returns exists when the additional production of a good
falls despite an increase in an additional input of a factor of
production. This could be due to the impact of overcrowding in the
workplace, difficulties with managing a larger workforce or overseeing
mass production.

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

focuses on the study of individuals and firms in their decision making


as consumers, as labour and as businesses. Macroeconomics focuses
on the study of how individuals, firms and the government interact in
the whole economy and the impact they have on economic growth,
inflation, employment, government spending and revenue and trade.
Economies of scale describe the fall in the long-run average cost of
production as greater inputs are put into production or machineries are
introduced to increase output. There are marketing economies of
scale, financial economies of scale, technical economies of scale and
risk
Economic growth exists as the total output of an economy increases.
The Gross Domestic Product is usually used to measure the total value
of a countrys output of goods and services within the country.
Effective demand for a good or service is one backed up by the money
to purchase it.
Efficency refers to how well we use resources. Allocative efficiency is
achieved if demand is equal to the supply of the good or services; the
market can produce what consumers want and needs. Productive
efficiency is when the firm can produce at the lowest average costs.
Elastic demand or elastic supply occurs when a small percentage
change in price results in a larger percentage change in the quantity
demanded or supplied.
Employment refers to the labour force that is actually working who is
able and willing to work. This does not include the voluntary
unemployed or those willing and able to work, but is not currently
working.
Entrepreneur is the risk-taker and decision maker in organizing the
factors of production.
Equilibrium exists when the quantity demanded is equal to the
quantity supplied.
The European Central Bank in charge of monitoring and governing the
Euro currency within the Eurozone countries. It is responsible for the
setting of interest rates in the Eurozone.
The European Union is a trading bloc consisting of twenty-seven
European countries that share a common economic union ad social
charter to promote free trade and high social welfare between
member countries, whilst protecting themselves against non-EU
countries.
Seventeen countries currently make up the Eurozone that uses the
Euro as their currency. These countries have to follow the interest rate
set by the ECB and agree to restrict their inflation rate to 2% p.a. and
limit their national debt to 60% of their GDP. However, during the
recent recession it has been very difficult for some Eurozone countries
to keep inflation rate to 2% and keeping their national debts to 60% of
the GDP.
Excess demand exists when demand is greater than supply. This may
be the result of higher national income and usually results in higher
prices as consumers are willing to bid higher prices to get the goods
and services they need.
Excess supply exists when supply is greater than demand. This may be
the result of a change in the taste of consumers or a superior
substitute coming into the market. To clear the extra stock, suppliers
have to reduce the price of their goods or services to attract more
customers.
Exercise duties are indirect taxes on specific products such as wine
and cigarettes. They are intended to reduce the import of the good
and also to raise revenue for the government.
External economies of scale exists when the firm benefits from lower
average costs as the result of factors outside the company such as the
building of a new motorway and the expansion of an airport that will

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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

help to lower their long run average transport cost.


Externalities occur when the action of an individual or firm affects third
parties. Positive externalities are impacts that are good to society as
the result of individuals consuming a product or services; e.g. more
patients get treated as the result of the government sponsoring more
students to medical school. Negative externalities are impacts that are
bad on society as the result of individuals consuming the product or
service; e.g. a smoker can cause his children to suffer from asthma or
lung cancer.
Exchange rate is the price of a currency against another currency. For
example, it costs HK$7.8 to buy US $1. The exchange rate is
determined by the demand and supply of the currency.
Expansionary policies are aimed to promote economic growth in the
economy either through expansionary demand-side policies or
expansionary supply-side policies. It can be a combination of fiscal,
monetary or changes to laws and regulations.
Exports are goods or service sold to oversea countries.
Export-orientated policies are government policies that target export
industries to promote economic growth. The UK government subsidies
companies in the defence industry, during the recent recession it was
the only industry showing positive growth in the economy.
Factors of production are resources needed in production; capital,
enterprise, land and labour.
Fair-trade refers to the preferential treatment of the supplier, usually
from a less economically developed country that will be given a price
that will ensure a good standard of living and a sustainable demand for
their product. Commodities such as coffee, cocoa and cotton have
successfully implemented fair-trade agreements.
Financial Accounts in the Balance of Payment account measures the
total value of transactions in the ownership of financial and real
assets. A Hong Kong businessmen buying a London company in
England; an American getting a mortgage from a foreign bank such as
the HSBC, a Spanish millionaire buying a famous water colour painting
from China or an Australian buying shares in the Indian Stock
Exchange are all examples of transactions that will appear in the
financial account.
Finite is the fixed limit to the amount of resources available. The
supply of oil, gas and coal are finite as they cannot be replaced once
they have been consumed, as there is only a limited supply of them in
the world.
Fiscal policies are concerned with the control of government
expenditure of government revenue. The government trying to cut the
national debt has a choice of cutting government expenditure or
raising government revenue. The UK government is currently doing
both by withdrawing troops from Afghanistan t cut government
expenditure and increasing government revenue by introducing a 50%
tax rate for those earning over 100,000p.a..
Fixed costs are factors of production that does not change with
changes in the quantity produced, such as rent, fire insurance and
salary of workers.
Fixed Exchange Rate refers to the set price of one currency against
another. The exchange rate of the Hong Kong currency is fixed at $7.8
against one US dollar.
Flexible working hours is an agreement between workers and their
employer on the hours worked that can be changed when workers
need to change the hours they work. This permits more students and
female workers, especially mothers with children to work.
The United Kingdom operates a free-floating exchange rate where the
price of the sterling is determined by the demand and supply of the
pound.

SHATIN COLLEGE 2011-2012 (MLT)

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

Income tax is a direct tax paid by individuals on their income from


work or investments. The income tax rate is 20% for those earning
above HK$100,000. This minimum amount of income without tax is
known as the tax threshold. The tax band refers to the range of
income a tax percentage is taxable on. In England a progressive

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system of income tax exist whereby higher tax rates are charged for
those earning higher income.
Indirect Taxes
Indirect taxes such as VAT or GST are charged on goods or services
purchased by consumers or firms, but paid to the government through
a third party, usually the seller.
Inelastic
Inelastic demand or inelastic supply exists when a change in the price
of a good or service results in a smaller change in quantity demanded
or quantity supplied.
Inferior goods
Demand for inferior goods will fall as income rises because consumers
have more money; income effect, and can substitute the good for a
more expensive brand; substitutional effect. Sweet potatoes is an
inferior good as Chinese people will buy more rice when their income
rises.
Inflation
Inflation is the sustained rise in the average price of goods and
services over time. The Consumer Price Index or the Retail Price Index
usually measures inflation.
Infinite
Infinite resources are those that are not scare or unlimited in supply,
such as air and sunshine.
Informal sector
The Informal sector refers to the illegal businesses operating in the
economy such as illegal hawkers, unlicensed mini-cabs, cottage
industries and unlicensed tourist guides.
IMF
The International Monetary Fund has 185 members to promote
international monetary cooperation, exchange rate stability, economic
growth and temporary financial assistance to countries to with balance
of payment problems,
Interest rates
Interest rate is the percentage charged: borrowing rate, or paid: saving
rate, for the use of money.
Joint-supply
The sale of different goods derived from the same product is said to
have joint-supply. For example, a cow provides different cuts of meat
to the butchers, the skin is used by the leather industry and the bones
are used in the fertilizing industry.
JSA
Job Seekers Allowance (JSA) is a welfare payment to unemployed
workers seeking but unable to find work or working less than 16 hours
a week.
Keynesian
Economists following John Maynard Keynes ideas that a mixed
Economics
economy with a predominantly private sector, but a strong public
sector where government can help to over some of the shortages in
the private sector and help promote full employment and economic
growth through government expenditure, expansionary monetary
policies and expansionary demand-side and expansionary supply-side
policies especially during a time of recession or depression. He argued
the initial government expenditure would stimulate the economy
through the multiplier effect and in turn generate economic growth. If
excess demand causes inflation then the government can fine-tune
the economy by implementing a series of contractionary policies.
Labour
Labour is a factor of production involving the physical and mental
ability of the workforce.
Labour Force
The Labour force consists of the total number of people in the
population able to work in the economy. However, amongst the labour
force there will be people unable to work or who are voluntarily
unemployed.
Labour Market
The Labour market can be for one particular industry or for the region
or the whole country. It consists of workers willing and able to work
and companies willing and able to employ workers.
Land
Land is a factor of production consisting of natural resources including
the fields, coal, oil and water.
Long run
Long run refers to the period of time when all factors of production can
be changed.
Macroeconomics
Macroeconomics studies the interaction of individuals, firms and the
government in the whole economy. It focuses on how they affect the
level of Employment, Growth, Government expenditure and revenue,
SHATIN COLLEGE 2011-2012 (MLT)

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

Inflation, Trade and Standard of living.


Managed exchange rate refers to the government control of the
exchanged rates through interest rates, changes in the money supply
and changes in laws and regulations. It usually allows the currency to
fluctuate between a floor and a ceiling, so there is only a need to
intervene when the currency float outside these levels.
Market failure exists when the free market fails to allocate resources
efficiently, demand is not equal to supply; marginal benefits is not
equal to marginal costs.
Some countries such as France introduced a maximum working hour,
35 hours in France, as an expansionary supply-side policy in the hope
that firms will employ more workers to meet their production needs
and in so doing reduce the unemployment rate.
Money supply is the combined value of the currency and demand
deposit of a country.
Merit goods are goods that are usually under-consumed by society, but
the government would like the public to consume more of, such as
education and sporting facilities. They are underprovided by the
private sector because they are not profitable.
Microeconomics is the study of individuals and firms behavior and
their decision-making in the use of resources in the economy.
Minimum wage is the legal lowest value payable to workers set by the
government. Hong Kongs minimum wage is $28 per hour.
Mixed economies consist of private enterprises and public sector
enterprises.
Monetary policies are government instruments such as changes to the
interest rates, money supply or financial regulations that will affect the
demand and supply of the countrys money supply. An expansionary
monetary policy will increase money supply, lower interest rates and
relax financial regulations such as the amount of reserves in a bank. A
contractionary policy will reduce money supply, raise interest rates
and increase financial regulations such as compulsory credit checks on
mortgage borrowers.
A monopoly is where one company such as Microsoft or Google
dominates the share of the industries market, usually 20% share of
the market sales. A pure monopoly is where only one industry exists in
the economy such as the water companies in a region.
A monopsony is where the industry is dominated by one buyer in the
market such as Del Monte in the buying of pineapples in Kenya. A pure
monopsony is where there is only one buyer for the products produced
such as the US government on the purchase of the space shuttle.
Multinational national companies are businesses that operate in more
than one country, such as McDonalds and Coca Cola. They usually
consists of a headquarter in their home country, branch-plants making
goods world-wide; sometimes in less economically developed
countries where the factors of production is cheaper, and the Research
and Development centers in more economically developed countries.
MNCs are responsible for over a quarter of all world trade and a third
of global direct investment and over a third of employed workforce.
The multiplier effect describes the additional output, expenditure and
income generated from an initial investment in the economy. For
example the government investment in the expansion of the airport
will create jobs for thousands of people in construction and supporting
services, these workers and companies in turn demand more goods
and resources from businesses not directly related to the airport,
higher demand generate higher revenue and encourage higher output
and higher employment, thus generating more income, expenditure
and output in the economy that causes economic growth.
National debt is the total value of debt owed by the government over
time.

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Y11 IGCSE ECONOMICS GLOSSARY 9


Needs

Opportunity Cost

Needs are resources we need to survive, such as food, water and


shelter.
Non-price competition refers to incentives businesses introduce to
encourage customers to buy more of its product other than cutting
price, e.g. competitions, preferential treatment for loyal customers,
differential location for rooms in hotels with a view, etc.
Non-renewable resources are those that cannot be replaced once it is
consumed, such as oil, gas and coal.
Non-governmental organisations such as Red cross and Oxfam help
countries to develop for humanitarian reasons rather than for profit.
Oligopolies are groups of companies in an industry that tries to
influence the price and output in the market. The mobile phone
industry is dominated by well-known brands that set similar prices and
release new technologies around the same time to sustain their share
of the market and make it more difficult for new companies to enter
the market.
Occupational immobility refers to the difficulties workers have
changing jobs due to the lack of skills. A miner will have to retrain as a
hairdresser as the two jobs require very different skills.
Opportunity cost is the next best alternative foregone.

Price Ceiling

Price ceiling is the maximum price chargeable.

Price elasticity of
demand
Price elasticity of
supply
Price Floor

Price elasticity of demand measures the responsiveness in the


quantity demanded to changes in the price of goods and services.
Price elasticity of supply measures the responsiveness in the quantity
supplied to changes in the price of goods and services.
Price floor is the minimum price chargeable.

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

Resources are things that are useful to individuals or for production.

Non-price
competition
Non-renewable
NGOs
Oligopolies

Occupational
immobility

Production
Possibility
Frontier/curve
Profit
Protectionism
Preferential
trade
agreements
Public goods

Quotas
Rationing
Relative Poverty

SHATIN COLLEGE 2011-2012 (MLT)

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 is the exchange of goods or services. Trade improves consumer


choice and total welfare. Individual have different skills. Regions or
countries have different factor endowments egg climate, skilled labor
force, and natural resources vary between nations. Therefore
individuals, regions and countries are better placed in the production
of certain goods than others
Trade Unions such as the NUTS (National Union of Teachers) represent
groups of workers to collectively bargain for better pay and working
conditions.
Trading blocs are group of countries within a region with trading
agreements to promote free trade between countries and protect their
local industries from competition outside member states.

Trade Union
Trading-blocs

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Y11 IGCSE ECONOMICS GLOSSARY 1
Unemployment
Unitary elasticity

Variable costs
Voluntary
unemployment
Wages
Want
Wealth
Wealth effect

Unemployment is the total number in the workforce willing and able to


work, but unable to find work.
Unitary elasticity in demand or supply refers to the same percentage
change in demand and supply to the percentage change in price, so if
price increases by 10%, the quantity demanded or supplied will also
increase by 10%.
Variable costs are inputs such as raw materials or electricity that
varies with the level of output.
Voluntary unemployment refers to the workforce who is able but not
willing to work, such as a banker who chooses to return to university
for further study or a nurse who is on a one year sabbatical.
Wages are payment for work usually per unit or per hour.
Want are things individuals desire to have but are not necessary to
survive. Wants are always greater to needs because a rational man will
always maximize what he can have.
Wealth is the stock of assets owned by individuals including your
property, shares, works of art and antiques.
Wealth effect describes the changing ability of consumers to purchase
a good or services as the price or their income changes. As the price of
a good falls the consumer has more money left in their pockets so they
can buy more of that product especially if the product is relatively
cheap.

SHATIN COLLEGE 2011-2012 (MLT)