Theme 3 Definitions

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Purchasing Power Parity
Refers to figures that have been calculated to reflect the purchasing power of incomes. A measure of average standards of living.
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Technology transfer
Occurs when MNCs locate in developing countries. The foriegn company trains people in the skills needed to implement the new technologies.
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Current Prices, Real value + constant prices
Current prices apply to data given at the price levels in the year concerned.... Real value is a measure of money value with the effect on inflation removed.... Constant prices are measured from a base year.
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Reshoring
Occurs when some manufacturing processes that were outsourced to low wage economies are brought back to the economies where their parent companies or markets are located
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Intermediate goods + supply chains
Are manufactured inputs to the production process.... A supply chain is a sequence of different processes required to make a finished product.
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Non-tariff barriers
include quotas (restrictions on the volume of imports of certain products) and technical restrictions. Governments can set specific safety or other regulations that exportwers must comply with, increasing their production costs.
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Free trade areas
Groups of countries that trade completely freely with eachother, with no trade barriers, but each member country retains its own independent trade policies in relation to the rest of the world.
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Customs Unions
have international free trade and agree common policies covering trade with the rest of the world.
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Common markets
Have completely free trade internally and a single unified trade policy covering all member countries trade with the rest of the world. Theres also free movement of capital and people.
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Single markets
go one stage beyond a common market, they remove all trade barriers to movement of land, labour and capital between member countries. They also aim to facilitate trade in services.
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Dumping
means exporting at a price that is less than the true cost of production.
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Global marketing
refers to the marketing strategies used by businesses when opperating in global markets. The element of marketing mix may be the same or varied to suit a particular part of the global market.
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Geocentric approach
sees the whole world as a potential market with both simularities and differences in domestic and foriegn markets. An effort is made to develop integrated world market strategies to gain the best from both of these strands
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Reverse innovation
means designing a product less complex than existing models so that it can be sold in mass markets where incomes are lower than they are in developed countires.
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Multiplier effect
A multiplier effect is a bigger change in overall economic activity stimulated by an initial injection. Investment can often have a multiplier effec.
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Subsidiary
A subsidiary is a company that is partly or completely owned by another company
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Underemployment
Occus when people work but do not haveenough oppertunities to work full time
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The knowledge economy
An economy with the combination of knowledge,skills and innovative technology, driving economic activity and creating competitive advantage
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Derived demand
refers to employers demand for labour, because they don't want labour for its own sake but for what it may be able to produce. The demand is derived from demand for the final product.
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Monopsony power
occurs when there is a single buyer, just as a single seller has a monopoly
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Countervailing power
The idea that imperfections in markets can produce better outcomes where there is both monopoly power and monopsony power. Reducing the power of one side could make such markets opperate less well.
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Absolute poverty
means severe deprivation which makes it a struggle to survive
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Relative poverty
means not being able to live the lifestyle which is normal for the society.
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The Lorenz curve
A visual indicator of inequality of incomes (or wealth), showing households ranked by income level plotted against cumulative share of total income (or wealth). The more equal the distribution of income, the closer the curve will be to the line.
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The Gini coefficient
measures inequality using the shape of the Lorenz curve. A more even distribution produces a lower coefficient. The coefficient will be a ratio between zero and one.
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Primary Production
Involves aquiring raw materials eg metals or oil
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Secondary production
Manufacturing and assembly process - converting raw materials into components eg plastics into oil, building houses ect
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Tertiary production
Refers to the commercial services that support the production and distribution process eg insurance, transport, healthcare ect
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Nominal wages and real wages
Nominal wages are the wages received by a worker in the form of money, whereas real wages can be defined as the amount of goods and services that a worker purchases from his/her nominal wages
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Transfer pricing
the setting of prices for transactions betwen legally seperate businesses which have the same ownership or control. It can be used to manipulate profit sharing and tax liability.
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Pressure groups
gather together people with a shared interst or concern, in order to influence public opinion, governments or businesses.
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Dynamic economies
Has many changing factors which influence wage rates eg during a boom labour is likely to be scarce so wages may increase.
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The Poverty Trap
Occurs when a person is worse off working than on benifits because the impact of lost benifits plus income tax reduces their earned income to less than the benifits
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Tax Credits
A tax credit is an amount of money a taxpayer is able to subtract from taxes owed to the government. Tax credits are given to working families whose pay is low.
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Tax evasion and avoidance
Both are ways of paying less tax. Evasion means using illegal means and risking punishment. Avoidance is legal without always being ethical.
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Stock and flow
Anything measured over a period of time, such as income, is measured as a flow. Stock measurements count something, such as wealth, at one specified time.
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Dysfunctional Society
is a society without shared values and code of conduct to function effectively in the pursuit of its objectives.
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Austerity
difficult economic conditions created by government measures to reduce public expenditure
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Proportional Tax
A fixed tax rate
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Regressive Tax
Impossed in such a manner that the tax rate decreases as the taxable amount increases.
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Progressive Tax
Increases as the taxable amount increases.
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Marginal tax rates
A marginal tax rate is the tax rate an individual would pay on one additional pound of income. Thus, the marginal tax rate is the tax percentage on the last pound earned
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Interdependence
a consequence of specialization or the division of labour. The participants in any economic system must be part of a trading network to obtain the products they cannot produce efficiently for themselves.
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Diversifying
Means selling more than one product, or the same product in more than one market. If one market shrinks, profits can still be made with other products in different markets.
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Economic growth
Refers to the rate of growth of output, real incomes and GDP.
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Ethnocentric model
An approach to marketing based on the tendency to look at the world primarily from the perspective of ones own culture. A business may simply do the same everywhere as it does in its own home market
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Glocalisation
Combines the word globalisation with local, to emphasise the idea that a global product or service is more likely to succeed if its adapted to the specific requirements of local practises and cultural expectations
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Inequality
Refers to big differences in incomes and wealth within societies.
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Market saturation
occurs when it becomes impossible to expand sales further in that particular market.
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Polycentric model
an approach that considers each target market to be unique. Each of its subsidiary business develop unique business and marketing strategies that suit the relevant location
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Protectionism
any government policy aimed at protecting the domestic economy from competing imports.
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Purchasing power parity (PPP)
is a way of adjusting monetary values to allow differences in prices between countires.
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Quotas
Physical limits on the level of specific imports in any one year
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Rationalisation
means closing down parts of a firm that duplicate some functions. It may happen after a merger.
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Non price competiton
Refers to any competitive activity that doesn't involve cutting prices.
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The Current account
the sum of the balance of trade (goods and services exports less imports), net income from abroad and net current transfers.
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Other cards in this set

Card 2

Front

Technology transfer

Back

Occurs when MNCs locate in developing countries. The foriegn company trains people in the skills needed to implement the new technologies.

Card 3

Front

Current Prices, Real value + constant prices

Back

Preview of the front of card 3

Card 4

Front

Reshoring

Back

Preview of the front of card 4

Card 5

Front

Intermediate goods + supply chains

Back

Preview of the front of card 5
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