Economics B definitions

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added value
the difference between the price of a good or service and the cost of its material imputs
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allocation of resources
refers to the way resources are used and distributed within the economic system
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assets
anything of value that can be made to yield benefits. business assets can be physical such as buildings/ machines or they can be intangible such as brands name or the skills of the workforce or they may be purely financial
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bank loan
a fixed sum of money borrowed from a bank and repaid with regular monthly repayments plus interest over a fixed period
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bank of England
the central bank of the UK responsible for monetary policy and regulation of the banking system
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banks
channel funds from savers to borrowers as well as operating a payments system
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brand
name or symbol that is closely associated with a product for service. they add value, increase consumer loyalty and may attract a higher price
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break-even point
the level of output where neither a profit nor a loss is made. the point at which total revenue equals total costs
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cash flow
the movement of cash into (cash inflow) and out (cash outflow) of a business
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cash flow forecasts
project expected flows of cash income and cash expenditure month by month
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ceteris paribus
means all other things being equal, an approach with enables economists to consider the impact of one change at a time
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collateral
anything of value that can be seized by a lender if a loan is not repaid, often property
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competition
causes business to strive from improvements that will allow them to increase sales. this leads to an efficient allocation of resources
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competitive advantage
any feature of a business that enables it to compete effectively, it may be based on price, quality, service, reputation or innovation
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competitive pricing
a pricing strategy that consists of matching your competitors prices or slightly undercutting them
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complements
goods and services that are bought together
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consumer sovereignty
describes the role of the consumer in determining the allocation of resources by buying what they want most, consumers send a signal to producers about their preferences
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contribution
price - variable cost. this is used to calculate break even point
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corporate culture
is the set of important assumptions that are shared by people working in a particular business and influence the ways in which decisions are taken there
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corporate social responsibility
means taking decisions in a way that takes into account all stakeholders interests
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cost of sales
another way of describing variable costs or direct costs, they are subtracted from turnover to give gross profit
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creative destruction
occurs when new technologies lead to new or improved products that drive competitors out of business
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creditor
a person or company that the business owes money to, usually in exchange for materials or services
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demand
the quantity of a good or service that consumers are willing and able to buy, at a given price and given time
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demand curve
a graphical representation of the relationship between price and quantity demanded
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division of labour
involves individuals in specialising in one particular type of activity in the workplace. each employee has a specific task, repetition helps them to do well
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economic agents
include all those who take decisions buy, sell, produce, spend or in any way affect how resources are used
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efficiency
means using resources in the most economical way possible
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entry
refers to the way profit in a growing market attracts businesses to produce for it. profit acts as an incentive to enter the market
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entrepreneurs
take the risk of setting up, organising and operating a business venture
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equilibrium price
the price at which quantity demanded is the same as quantity supplied, sometimes called the market clearing price
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excess demand
occurs when the quantity demanded outstrips the quantity supplied. some people who want to buy at the current price will be unable to do so. the price is too low for the market to clear
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excess supply
occurs when the quantity supplied is greater than the quantity demanded. some suppliers will be unable to sell their goods at the current price. the price is too high for the market to clear
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exchange rate
the price of one currency expressed in terms of another. it is determined by the interaction of demand for and the supple of the currency
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exit
from the market means closing down production because of losses or low profits
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exports
are goods and services produced domestically and sold in a foreign economy
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external benefits
are benefits or positive side-effects imposed on a third party who is neither the producer or a consumer
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externalities
positive or negative side-effects cause by a product that affects third parties who are neither buyers nor consumers
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factors of production
are inputs; land, labour, capital , enterprise
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fixed costs
do not change with the level of output of the business. such as rent, interest payments, managers salaries and business rates
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free market economy
where there is no interference from outside agencies such as the government
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government expenditure
the money spent in the economy over a period of time on publicly provided goods and services such as education, healthcare, social welfare and the civil service
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government failure
occurs when governments try to deal with market failure, but in doing so create other problems
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gross domestic product (GDP)
a measure of the total value of all goods and services produced such as total income created within the economy in one year
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gross profit
turnover minus cost of sales. overheads, interest rates and tax have not yet been taken into account
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gross profit margin
a measure of profitability. gross profit is shown as a percentage of turnover
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imports
goods and services bought by buyers in one country from sellers in another country
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inferior goods
sell better when incomes are falling. their income elasticity of demand is negative
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inflation
a sustained rise in the general price level or fall in the value of money
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infrastructure
includes transport facilities, communications and access to energy and water
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interest rate
a payment in percentage terms for the use of a sum of borrowed money. it can be seen as the price of money
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leasing
a long-term rental agreement that allows businesses to use assets without having to pay for them outright, thereby freeing up funds for other uses. often vehicles or machinery
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liability
means responsibility for the financial debts of a business. a liability is a legal claim for payment
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limited liability
in the event of financial problems and the closure of a business, the responsibility for any outstanding debts is limited to the owners original investment
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loan
the use of someone elses money for a period of time. usually involves regular repayments and payment of investment
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margin of safety
the difference between the actual level of output and the breakeven level of output
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market
any medium in which buyers and sellers interact and agree to trade at a price
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market clearing
means there is no excess supply and no excess demand
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market failure
occurs when social costs exceed social benefits. this frequently happens when there are negative externalities
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market forces
are the forces of demand and supply as they operate freely and interact to determine the allocation of resources
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market growth
an expansion of the market based on increasing sales
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market mapping
using a grid showing 2 features of a market such as price and consumer age. individual brands are added to the grid to show potential niches or gaps in the market
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market niche
a small part of an overall market which has certain special characteristics
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market orientation
where the needs of the consumer are the overriding priority in the production and marketing of products and services
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market positioning
shows how individual products or brands are seen in relation to their competitors by consumers
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market research
any kind of activity that gives a business information about its product or service, its customers, its competitors or the market it operates in
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market segmentation
the splitting up of the market into groups of consumers with similar characteristics. products and services can be designed specifically for and targeted at a specific segment
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market share
the percentage of the total market buying one firms product
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mass market
a large market which includes the majority of the relevant population
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negative externalities
are external costs that have a detrimental effect on the lives of people who neither bought nor sold the product
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niche market
a small part of the overall market that has certain special characteristics
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normal goods
sell better when income are rising the have a positive income elasticity of demand
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operating profit
the most commonly used measure of business profit, calculated by subtracting overheads from gross profit
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operating profit margin
operating profit shown as a percentage of turnover
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opportunity cost
represents cost in terms of an alternative to the item actively chosen. every spending decision has an opportunity cost which is what was foregone to get the preferred product
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ordinary capital share
the money raised by selling the ordinary shares of a plc business. these are stakes in the business and the shareholders receive a divided if the company is profitable
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over-consumption
occurs when social costs are greater than private costs because of externalities
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overdraft
a facility that allows a business or an individual to borrow up to an agreed limit. a flexible and useful form of finance it is particularly suited to dealing with cash flow problems
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positive externalities
are external benefits that are experienced by third parties but paid for by someone else
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public limited company (PLC)
a form of company organisation with limited liability but its shares are available to the public and are quoted on the stock exchange
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primary research
gathering original information about the market from first hand sources also known as field research
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private limited companies
have limited liability but cannot raise share capital from the public
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private sector
that part of the economy which is run for private profit and is not controlled by the state, it is owned by individuals
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product differentiation
means giving each product specific design features that will distinguish it from competing products. branding is an important part of this
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profit
the difference between total sales revenue and total costs
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profit margin
is profit as a percentage of turnover
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profit maximisation
is an important business objective but more important to some than others
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profit-signalling mechanism
the means by which the incentive of profit induces business to produce what consumers want
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public limited companies
have limited liability and can raise finance by selling shares to anyone
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public sector
industries or services provided or funded by the government and not owned by private individuals
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qualitative research
a market research method that involves finding out about the motivation and preferences of consumers
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quantitive research
a market research method that involves numerical measurement
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retained profit
an importance source of finance for business expansion. it is the profit left after interest, tax and dividends have been deducted from operating profit
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revenue
the income of a business raised by selling its good or services
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risk
measures the likelihood that a particular event may or may no occur
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sales maximising
means selling as much as possible
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sampling
during market research a small section or sample of the market is chosen as being representative of the whole
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satisficing
occurs when a business earns enough profit to keep the owners happy but no attempt is made to maximise profit
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scarcity
describes the way peoples wants and needs always exceed the resources available to satisfy them
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secondary research
the use of information about the market that already exists also known as desk research
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shareholders
are part-owners of the business. they have played a part in financing the business directly or have bought shares from someone else or on the stock exchange
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skill shortages
occur when demand for people with scarce skills exceeds the supply of people who have them
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Adam Smith
the eighteenth century economist who explained the importance of specialisation
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social benefits
the total benefits of producing goods and services calculated by adding together the private and external costs
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social costs
the total costs of producing goods and services calculated by adding together the private and external costs
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sole trader
simplest form of business organisation that is owned and operated by an individual the owner has unlimited liability
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specialisation
refers to the way in which people organisations and economies concentrate on specific economic activities often because they have some advantage in that field
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stakeholder
any individual or group with an interest in the actions of a business such as employees owners shareholders customers suppliers and the local community
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statement of comprehensive income
shows a companys net profit or loss over a given period of time
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structural change
when patterns of demand change some industries grow while others shrink and some businesses will exit the market
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substitute
a good or service that can be used in place of another such as different brands of the same product
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supply
the amount of a good or service that producers are willing and able to pay at a given price at a given time
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supply curve
a graphical representation of the relationship between price and quantity supplied
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taxation
payments made to the government by individuals and businesses to provide revenue for government spending such as income tax corporation tax and excise duty
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trade credit
the time allowed by a supplier a supplier before a business must make payment, commonly 30-60 days, it helps the customers cash flow at the expense of that of the seller
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trade off
a situation where having more of one thing leads to less of another. it is linked to the concept of opportunity costs
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turnover
sales revenue, total income generated by a business selling its goods or services over a period of time
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unemployment
occurs when people who are able and willing to work cannot find a paying job
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under-consumption
occurs when products that are socially desirable are too expensive for everyone to cover the costs themselves
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unique selling point
a single feature that is noticeably different from those of all competing products
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unlimited liability
the owner of a business is responsible for all the debts of the business should it fail, this applies to sole traders and partnerships
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variable costs
costs of production that vary with the level of output such as raw materials and distribution costs
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venture capital
a form of business finance unsecured funding provided by individuals or specialist firms in return for a proportion of the companys shares
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working capital
is finance to cover business costs when sales revenue is slow to come in
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aggregate demand
is the sum of demand from all sources in the economy
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aggregate supply
is the total output supplied from all sources in the economy
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appreciation
occurs when the exchange rate rises, making imports cheaper and raising the price of exports
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balance of trade
the difference in value between visible exports and visible imports
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base rates
is set by the bank of England and influences interest rate across the country
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boom
a time of rapid growth and expansion in the economy
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BRICS
Brazil, Russia, india, china and South Africa
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capacity utilisation
measures actual output as a percentage of the theoretical maximum possible output
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capital
includes all assets that can generate income and includes premises, equipment and financial assets
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capital intensive production
uses large amount of capital and relatively little labour
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common markets
have completely free trade internally and a common external trade policy covering the rest of the world
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comparative advantage
refers to the theory that if 2 countries specialise in the product which for them has the lowest opportunity cost and then trade real incomes will increase
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conglomerate integration
occurs when 2 businesses that have nothing in common join together
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constant prices
value every years output at the price levels of a base year removing the effects of inflation
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consumptions
is total household spending on goods and services
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cost-push inflation
is caused by rising cost of production
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contractionary polices
slow down economic activity by increasing leakages and reducing injections into the circular flow of money
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cyclical unemployment
is caused by a downturn in the economic cycle. spending is falling so output falls and fewer employees are needed
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demand pull inflation
is cased by excess aggregate demand. quantity demanded exceeds total output
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depreciation
is a fall in in the exchange rate that makes imports dearer and exports cheaper
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diseconomies of scale
happen when further increases in size begin to increase average costs and inefficiencies develop
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disposable income
the amount of income a person can actually spend on goods and services. it measures consumers spending power after tax
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downturn
the stage of the economic cycle when the boom slows and the rate of growth of GDP decreases
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economic cycle
the fluctuations in the levels of and rates of growth of GDP overtime, it is sometimes referred to as the trade or business cycle
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emerging economies
have fast growing manufacturing sectors. some are still poor but others such as Mexico might be soon described as developed
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employment
refers to all those people of working age who have jobs
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expansionary polices
stimulate the level of economic activity by reducing leakages and increasing injections into the circular flow of money
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extension strategies
are ways of lengthening the maturity stage of the product lifecycle
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external economies of scale
reduce production costs for all businesses in the economy
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fiscal policy
adjusts taxation and government expenditure either to stimulate or to cool down the economy
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foreign direct investment
refers to funds invested in other economies
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free trade areas
are groups of countries that trade completely freely with each other 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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globalisation
refers to increasing independence of trading economies with increased imports, exports and capital movements
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horizontal integration
means 2 businesses in the same industry have joined together
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human capital
is the knowledge experience and skills of individuals or of the workforce
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income elastic
applies to products for which an income change causes a proportionately bigger change in quantity demanded
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income inelastic
applies to products for which an income change causes a proportionately smaller change in quantity demanded
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income elasticity of demand
measures the proportionate change in quantity demanded following a change in income
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injections
investment, government expenditure and exports , increase demand for domestically produced goods and services
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inorganic growth
the arm grows by joining with another firm by merger or take over
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internal economies of scale
are those that benefit the individual business
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investment
is spending now on capital assets that will generate income in the future
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invisible
exports and imports cannot be touched or handled; they are services such as insurance banking and tourism
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just-in-time
is a stock control system that does away with the need to hold large quantities of stocks or component inputs
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kaizen
is the Japanese word for continuous improvement. it summarises a whole company approach to quality control
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J.M.Keynes
the highly influential economist who in the 1930s explained the importance of maintaining levels of aggregate demand during recessions
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labour intensive production
uses large amount of capital of labour and relatively little capital
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lead time
the time taken from having an idea to selling the product to a customer
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leakages
reduce the demand for domestically produced goods and services by diverting part of peoples incomes into savings taxes and spending on imports
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lean production
refers to any system of production that minimises costs through eliminating waste
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long tail
the mass of niche markets that has vastly extended consumer choice with many small and larger businesses providing for small groups of consumers
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market leader
the business with the most control over prices and output within its market
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marketing mix
the range of marketing strategies that businesses use to promote and sell their products or services it includes pricing design and all forms of advertising
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market power
exists when a successful business with a significant market share can influence prices and output in the market
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mean income
the average income. total income (GDP) divided by the population
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median income
is the middle value in all incomes, 50% of incomes are above it and 50% below
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merger
is the joining together of 2 or more firms into a single business with the approval of the shareholders and management concerned
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micromarketing
the marketing of products or services designed to meet the needs of a very small section of the market
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minimum efficient scale
the lowest point of the average cost curve where all available economies of scale have ben put to use
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monetary policy
uses interest rates to control the level spending in the economy
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monopoly
where there is only one firm in the market and no competition
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monopoly power
when a business is big enough to behave like a monopoly and control price over country
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monopsony
occurs when there is only one buyer of. product or service
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monopsony power
occurs when a firm is the only buyer or is big enough to behave like a monopsony. this means that it can drive down the price of inputs simple by refusing to pay more
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multinational corporations
are businesses that are active in more than one economy
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nominal value
means that the value is expressed in numerical terms at current prices
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oligopoly
occurs when several large firms dominate the industry
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organic growth
the firm grows from within using its own resources
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outsourcing
means buying inputs from independent suppliers or locating the whole production process abroad
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physical capital
any buildings told or equipment that will help generate output
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price elastic
a price change causes a proportionately bigger change in quantity demanded
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price inelastic
a price change causes a proportionately smaller change in quantity demanded
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price elasticity of demand
measures the extent to which a change in price affects quantity demanded
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pricing strategy
the way in which a business decides o n the price to charge and the factors that influence that decision
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productivity
describes how efficiently resources are actually being used enhancing efficiency and reducing costs
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product innovation
occurs when a new or improved product or service is created
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process innovation
occurs when new or improved production methods are used enhancing efficiency and reducing costs
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product lifecycle
the stages a product passes through from an initial idea to the end of its life
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promotion
the use of advertising branding and public relations increase sales
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public sector deficits
occur when government spending exceeds tax revenue and it borrow to fund the difference
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quality control
refers to the traditional method of checking that products are of an adequate standard
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quality assurance
means ensuring that quality standards are agreed and met throughout the organisation
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real value
means that the effects of inflation have been removed. real value is nominal value minus the inflation rate
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recession
occurs when there are 2 consecutive quarters of negative growth in GDP
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recovery
follows recession, GDP growth rises slowly at first then gathers pace. if it the grows faster it may lead to a boom
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resources
include land, labour, capital and enterprise
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SME
the recognised abbreviation for small and medium sized enterprises
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structural unemployment
happens when people have the wrong skills for the employment on offer, or are located too far from the avaliable jobs
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supply chain
the sequence of processes by which a final product is created. often involves many different suppliers perhaps in a range of different locations
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supply-side policies
are designed to increase the productive capacity of the economy by influencing aggregate supply
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synergy
sometimes the combination of 2 businesses that have merged will yield more than expected results
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takeover
when one firm makes a bid for another and secures over 50% of the shares. that firm effectively swallows up the other one
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team working
employees are organised into teams that share responsibility for production
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total quality management
refers to employees being involved in quality control and taking responsibility for the quality of their and their teams work
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uncertainty
describes a situation where events are unpredictable and beyond the control of the business
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underemployment
refers either to employed people whose work does not make full use of their qualifications or those forced to take part-time employment
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vertical integration
means that 2 businesses in the same industry but at different stages of production or supply chain have joined together
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viral marketing
spreads product information from person to person as individuals pass messages on via social media text or email
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absolute poverty
not having enough income to provide the basic necessities for survival
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aid
is given by both government and NGOs to countries that are struggling to reduce poverty or deal with disasters
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balance of payments
the accounts that record all international transactions including trade and capital movements
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commodities
are raw materials or semi manufactured products that are traded in bulk and are not recognisably originating from any particular business such as iron cotton wheat and oil
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common markets
have completely free trade internationally and a single unified trade policy covering all member countries trade with the rest of the world
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corporate culture
is the set of important assumptions that are shared by people working in a particular business and influence the ways in which decisions are taken
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corporate social responsibility
means taking decisions that reflect all stakeholders interests
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current account of the balance of payments
records all trade in goods and services
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developed countries
include most of Europe, Japan and the USA, Canada and Australia. all have high incomes. through capital investment they have acquired sophisticated production failure
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developing countries
have relatively low standards of living compared to developed countries. they have small manufacturing sectors many people are employed by agriculture
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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 or in other markets
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economic growth
refers to the rate of growth of output, real incomes and GDP
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emerging economies
are characterised by rapid economic growth. they have seen big increases in manufacturing output and standards of living are rising. some are still poor countries whereas others are on the way to becoming developed
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ethical decision making
means following codes of practice set embody moral values. the objective is to do the right thing acting with honest and integrity
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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 home market
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the European Union
is a trade bloc that has become a single market
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eurozone
refers to the 19 EU members that use the euro as a single currency
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geocentric approach
sees the world as a potential market with both similarities and differences in domestic and foreign markets. an effort is made to develop integrated world strategies to gain the best from both of these strands
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gini coefficient
provides an objective measure of income inequality and can range from 0 to 1. a coefficient of 0 would mean income is shared equally between all individuals, whilst a coefficient of 1 would mean one person within the population has all the income
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global market niches
smaller more specialised parts of global market where customers in more than one country have particular needs that are not fully met by the global mass market
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glocalisation
a global product or service is more likely to succeed if it is adapted to the specific requirements of local practices and cultural expectations
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human development index
a measure of development based on access to health care and eduction as well as national income. it therefore includes qualitative as well as quantitive aspects of development
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incentives
financial rewards that can influence decisions.
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index numbers
can be created for any time series data so that comparisons can be made more easily
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International monetary fund
coordinates the international monetary system. it tries to keep the system stable, providing adequate finance for world trade to continue uninterrupted
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inequality
the big differences in incomes and wealth within societies
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interdependance
refers to the way in which different economies have become increasingly reliant on one another through trade, capital movement and international agreements
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Lorenz curve
shows the extent of inequality in a particular economy. it plots the percentage of the population that receives each decile of income
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market saturation
occurs when it becomes impossible to expand sales further in that particular market
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migration
occurs when people move from one region to another or from one country to another, seeking employment or safety
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minimum wage
the minimum rate of pay per hour that must by law be paid by employers
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nominal value
means the value in money terms at current prices. no allowance for is made for inflation
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non-government organisations
a term applied to not-for-profit organisations that either acts as pressure groups or as charities or both
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non-price competition
refers to any competitive activity that does not involve cutting prices
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offshoring
locating production in a foreign country. the objective may be to exploit cost savings, lower wages in country or to be close to a thriving market or avoid trade barriers
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polycentric model
an approach that considers each target market to be unique. each of its subsidiary businesses develop unique busies and marketing strategies that suit relevant location
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poverty trap
a situation in which someone would be even poorer or not much richer if they had a job because they would no longer receive unemployment benefits from the government
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protectionism
is any government policy aimed at protecting the domestic economy from competing imports. trade barriers can protect specific domestic industries and their employees by raising the prices of important goods
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pressure groups
are organisations that attempt to influence public policy and especially government legislation, regarding their particular concerns and priorities
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professional bodies
represent groups of professionally qualified people in specific types of work such as the law society and the institute of chartered accountants
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purchasing power parity
is a way of adjusting monetary values to allow for differences in prices between countries
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quotas
are physical limits on the level of specific imports in any one year
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rationalisation
closing down parts of a firm that duplicate some functions usually after a merger
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real values
can be calculated to show changes in values with the effects of inflation removed. in other words all values are expressed at constant prices
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redundancies
are job losses that result from fewer employees being needed, because of rationalisation using more capital intensive production or falling demand for the product
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relative poverty
affects people who do not have enough income to participate in the normal life of the society in which they live
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social and cultural differences
individual societies and groups may have a distinctive way of life affecting their choice of product. this will also affect the way they do business with one another
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subcultures
are groups of people who have common interests and values in common. based on hobbies lifestyles ethnic and religious backgrounds
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subsidies
are sums of money paid by the government to a producer so that the price to the customer will be lower than it otherwise would be
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supply chains
are sequences of processes that follow one another from start to finish of production
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tariffs
are taxes on imported goods they make the price higher, sales will generally be lower
273 of 353
technology and skill transfer
occurs when FDI brings new businesses into an economy and employees learn new skills that they take with them when they change jobs
274 of 353
trade blocs
are groups of countries where barriers to trade are reduced or eliminated between member states
275 of 353
trade creation
occurs when there is an increase in the total amount goods and services traded because of reduced trade restrictions within a trading bloc
276 of 353
trade diversion
occurs when trading bloc reduces imports from non-member countries enabling businesses within member countries to increase sales inside the trading bloc
277 of 353
trade liberalisation
refers to the process of reducing barriers to trade so that economies can move gradually closer to feee trade, which would ultimately mean that there are no trade barriers at all
278 of 353
trade unions
are organisations that represent employees in negotiations with employers
279 of 353
transfer pricing
occurs when one part of a MNC in one country transfers goods or services to another part in another country
280 of 353
wealth
consists of accumulated assets including bank deposits shares property and businesses
281 of 353
working conditions
refer to possible events in the workplace that may affect the welfare of employees
282 of 353
world bank
leads to developing countries in order to fund projects which will help them to raise incomes and make their economies more efficient
283 of 353
world trade organisation
it supervises world trading arrangements and trade negotiations and helps to resolve disputes between governments and businesses
284 of 353
allocative efficiency
is achieved when resources are used to yield the maximum benefit to everyone. it is impossible to redistribute them without making someone worse off
285 of 353
anticompetitive practices
aim to reduce competition they include price fixing an collusion
286 of 353
asymmetric information
occurs when one party knows more about the product than the other
287 of 353
austerity
refers to cuts in public expenditure and tax increases that reduce public borrowing
288 of 353
barriers to entry
occur when start-up costs make it difficult for new businesses to enter the industry
289 of 353
cartel
any agreement between businesses to reduce competition or not to compete with eachother. the agreement is usually secret and may be implemented in various ways
290 of 353
competition and markets authority
investigates UK market behaviour to ensure that all businesses are acting in line with competition policy requirements
291 of 353
consumer protection
refers to regulations that protect consumers from unsafe or fraudulent purchases
292 of 353
contestable markets
are characterised by easy entry such as new firms can set up in business easily
293 of 353
current account
part of the balance of payments that covers imports and exports
294 of 353
demand-side policy
affect the economy by increasing or reducing aggregate demand
295 of 353
de-merit goods
are over produced by the free market in quantities that are greater than the optimal level for society. they are generally thought to be bad for society as a whole
296 of 353
de-regulation
means reducing the number of regulations that affect businesses
297 of 353
direct tax
is taken at source and goes directly to government such as income tax and national insurance
298 of 353
entry and exit
refer to new businesses entering a particular market and existing businesses leaving
299 of 353
EU competition policy
keeps markets competitive wherever there is a trade between EU countries
300 of 353
explicit collusion
occurs when there is a meeting or actual agreement between businesses to avoid competing vigorously and follow a joint strategy
301 of 353
external benefits
are benefits or positive side effects imposed on a third party who is neither the producer not the consumer
302 of 353
external costs
are costs or negative side effects imposed on a third party who is neither the producer nor a consumer
303 of 353
financial crisis
there period in 2007-09 when banks were endangered by excessive lending
304 of 353
fiscal policy
involves changes in the levels of taxation and/or government expenditure in order to affect lvl
305 of 353
free market policies
avoid government intervention functioning on the basis of supply and demand
306 of 353
free rider problem
occurs when public goods are under-provided or not provided at all because individuals are able to consume the good by paying little or nothing towards the cost
307 of 353
full capacity output
is the most that the economy can produce without and increase in the factors of production
308 of 353
geographical immobility
occurs when unemployed people cannot move to places where there are job vacancies
309 of 353
imperfect markets
are distorted in ways that reduce competition. they include oligopoly and imperfect completion r
310 of 353
indirect taxes
are added onto prices and go indirectly to the government from the seller such as VAT and excise duty
311 of 353
inequality
occurs when there are large differences between in incomes and wealth in the society
312 of 353
innovation
refers to the development of new ideas or techniques
313 of 353
intellectual property rights
are ideas or innovations that are protected by patents or copyrights
314 of 353
interventionist policy
are designed to control market forces, usually for political reasons
315 of 353
marginal cost
is the cost for producing one more unit of output
316 of 353
marginal revenue
is the extra revenue that comes from selling one more unit of output s
317 of 353
merit goods
can be provided by the private sector and often are but the quantity that the free market provides is lower than the optimal level for society
318 of 353
monetary policy
uses interest rates to vary the the costs of borrowing and influence the level of aggregate demand
319 of 353
monetary policy committee
sets interest rates and seeks to prevent inflation from changing significantly
320 of 353
moral hazard
means that people take bigger risks when they know they will not personally have to cover the cost of the mistake
321 of 353
natural monopoly
occurs when the most efficient scale of production is a monopoly. more than one producer or supplier would involve wasteful duplication of resources
322 of 353
non excludable
means that it is impossible to prevent people who have not paid for a good from consuming it
323 of 353
non rivalrous
means that if one person consumes a good it does not affect or reduce the amount left for someone else to consume
324 of 353
normal profit
means just enough profit to enable a business to keep going
325 of 353
occupational immobility
occurs when unemployed people lack the skills needed to do the jobs that are available
326 of 353
overheating
occurs when aggregate demand exceed aggregate supply and inflation is accelerating due to shortages
327 of 353
perfect competition
is a model that describes markets where all products are identical with no differentiation and there are may businesses competing
328 of 353
poverty trap
is a situation in which an unemployed person would be even poorer or not much richer in work because they would no longer receive unemployment benefit
329 of 353
price discrimination
means charging a higher price to people who's elasticity of demand is low. the seller must be able to identify the groups of people who are more sensitive to prices
330 of 353
privatisation
means transferring production out of the public sector and into private sector
331 of 353
productive efficiency
maximises the effective use of resources
332 of 353
profit signalling mechanism
the means by which resources are allocated. the presence of profit in a market attracts more resources and creates more output
333 of 353
progressive tax
one that takes a greater percentage of income from richer people than poorer people
334 of 353
prudential regulation authority
is part of the bank of England and supervises banks building societies and insurance companies
335 of 353
public sector deficit
occurs when public expenditure is greater than tax revenue the deficit is covered by borrowing
336 of 353
public good
one that the free market will not provide at all. there is no incentive for a producer to supply it it is impossible to charge for it and make a profit
337 of 353
public interest
the welfare or wellbeing of the general public
338 of 353
redistribution
refers to the use of tax revenue to raise the standards of living of poorer people
339 of 353
regulations
are legal and other rules that apply to businesses
340 of 353
regulatory body
is a public authority or government agency responsible for enforcing government regulations
341 of 353
regulatory capture
happens when the regulator is more influenced by the industry point of view than the customers
342 of 353
relative poverty
exists when someone does not have enough income to participate fully in the society in which they live
343 of 353
research and development
helps to develop products or processes that are new, better or cheaper
344 of 353
restrictive practices
include any action that a business uses to limit competition
345 of 353
shocks
are unexpected events that affect the economy and often come from outside it. they are not predictable
346 of 353
social benefits
the total benefits of producing goods and services and are calculated by adding together the private and social costs
347 of 353
social costs
total costs of producing goods and services and are calculated by adding together the private and social costs
348 of 353
supply-side policies
include all measures designed to increase the productive capacity of the economy. they inflicted aggregate supply
349 of 353
tacit collusion
occurs when competing firms appear to follow a similar strategy to reach the same aim such as price cutting without any agreement
350 of 353
trade
difference between sports which are part of the overall demand for the product
351 of 353
trade-offs
occur when 2 objectives cannot be achieved
352 of 353
vacancies
are unfilled jobs
353 of 353

Other cards in this set

Card 2

Front

refers to the way resources are used and distributed within the economic system

Back

allocation of resources

Card 3

Front

anything of value that can be made to yield benefits. business assets can be physical such as buildings/ machines or they can be intangible such as brands name or the skills of the workforce or they may be purely financial

Back

Preview of the back of card 3

Card 4

Front

a fixed sum of money borrowed from a bank and repaid with regular monthly repayments plus interest over a fixed period

Back

Preview of the back of card 4

Card 5

Front

the central bank of the UK responsible for monetary policy and regulation of the banking system

Back

Preview of the back of card 5
View more cards

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