Economics

OCR AS Economics

Aggregate Demand (AD)
The total demand for a country's goods and services at a given price level and in a given time period.
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Aggregate Supply (AS)
The total amount that producers in an economy are willing able to supple at a given price level in a given time period.
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Allocative Efficiency
Where consumer satisfaction is maximised.
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Arithmetic Mean
The sum of the items dived by the number of items.
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Asymmetric Information
Information not equally shared between two parties.
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Automatic Stabilisers
Forms of government spending and taxation that change automatically to offset fluctuations in economis acticity.
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Average Propensity To Consume (APC)
The proportion of disposable income spent. It is consumer expenditure divided by disposable income.
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Average Propensity To Save (APS)
The proportion of disposable income saved. It is saving divided by disposable income.
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Balance Of Payments
A record of money flows coming in and going out of a country.
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Bar Chart
A diagram with the lengths of the bars show different values of the items.
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Capacity Utilisation
The extent to which firms are using their capital goods.
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Capital
Man-made aids to production.
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Ceteris Paribus
Assuming other variables remain unchanged.
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Choice
The selection of appropriate alternatives.
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Circular Flow Of Income
The movement of spending and income throughout the economy.
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Claimant Count
A measure of unemployment that includes those receiving unemployments related benefits.
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Clearing Price
Same as equilibrium price.
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Command Economy
An economic system in which resources are state owned and also allocated centrally.
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Compliments
Goods for which there is joint demand.
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Consumer Confidence
How optimistic consumers are about future economic prospects.
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Consumer Expenditure
Spending by households on consumer products.
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Consumer Prices Index
A measure of changes in the price of a representative basket of consumer goods and services. Differs from the retail price index in methodology and coverage.
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Corporation Tax
A tax on a firms profits.
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Cost-push inflation
Increases in the price level caused by increased the cost of production.
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Cross elasticity of demand (XED)
The responsiveness of demand for one product in relation to a change in the price of another product.
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Current Account Defecit
When more money is leaving the country than leaving it, as a result of sales of its exports, income and current transfers from abroad being less than imports, income and current transfers going abroad.
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Cyclical Unemployement
Unemployment arising from a lack of aggregate demand.
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Deflation
A suistained fall in the general price level
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Demand
The quantity of a product that the consumer are able and willing to purchase of various prices over a period of time.
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Demand Curve
This shows the relationship between the quantity demanded and the price of a product.
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Demand-pull inflation
Increases in the price level caused by increases in aggregate demand.
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Demerit Goods
The data that is used to draw the demand curve for a products.
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Developed Economy
An economy with a high level of income per head.
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Developing Economy
An economy with a low level of income per head.
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Direct Tax
One that taxes the income of people and firms and that cannot be avoided.
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Disposable Income
Income after taxes on income have been deducted and state benefits have been added.
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Dissave
Spending more than disposable Income
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Who Do You Love?
Rhea!
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Distribution Of Income
How income is shared out between households in a country.
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Division of Labour
The specialisation of labour where the production process is broken down into separate tasks.
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Economic Cycle
The tendacy for economic activity to fluctate outside its trend growth rate, moving from a high level of economic activity (boom) to negative economic growth (recession)
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Economic Efficiency
Where both allocative and productive efficiency are achieved.
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Economic Growth
In the short run, an increase in real GDP, and in the long run, an increase in productive capacity, that is, in the maximum output that the economy can produce.
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Economically Inactive
People of working age who are neither employed nor unemployed.
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Economic Problem
How to allocate scarce resources among alternative uses.
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Economics
The study of how to allocate scarce resources in the most effective way.
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Economic System
The way in which production is organised in a country or group of countries.
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Effective Demand
The willingness and ability to buy a product.
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Efficiency
Where the best use of resources is made for the benefit of consumers.
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Elastic
Responsive to a change in market conditions.
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Elasticity
The extent to which buyers and sellers respond to a change in the market conditions.
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Entrepreneur
Someone who bears the risks of the buissness and who organises production.
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Equilibrium Price
The price where the demand and supply are equal.
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Exchange
The process by which goods and services are traded.
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Exchange Rate
The price of one currency in terms of another currency or currencies.
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Exports
Products sold abroad.
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External Benefits
The benefits that accrue as a consequence of externalities to third parties.
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External Costs
The costs that are consequences of externalities to third parties.
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Externality
An effect whereby those not directly involved in taking a decision are affected by the actions of others.
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Deflationary
Of policy measures designed to reduce aggregate demand.
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Discretionary Fiscal Policy
Deliberate changes in goverment spending and taxation designed to influence aggregate demand.
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Disequilibrium
Any position in the market where demand and supply are not equal.
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Factor Endowment
The stock of factors of production.
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Factor of production
The resources inputs that are available in an economy for the production of goods and services.
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Factor services
The services provided by the factors of production.
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Fiscal Drag
Peple's income being dragged into higher tax bands as a result of tax brackets not being adjusted in line inflation.
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Fiscal Policy
The taxtation and spending decisions of a goverment.
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Free Market Mechanism
The system by which the market forces of demand and supply determine prices and the decisions made by consumers and firms.
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Free Rider
Someone who directly benefits from consumption of a public good but who does not contribute towards its provision.
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Frictional Unemployement
Short-term unemployement occuring when workers are in-between jobs.
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Full Employement
A situation where those wanting to work can find employments at the going wage rate.
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Goods
Tangible products, i.e. products that can be seen and touched, such as cars, food and washing machines.
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Gverment Bond
A financial asset issued by the centraal or local goverment.
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Goverment Spending
Spending by the central bank and local government on goods and services.
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Gross Domestic Product (GDP)
The total output of goofs and services produced in a country.
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Household
Group of people whose spending decisions are connected.
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Human Capital
Education, training and experience that a worker, or group of workers, possesses
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Hyperinflation
An inflation rate above 50 per cent.
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Hysteresis
Unemployment causing unemployment.
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Imports
Products bought from abroad.
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Income Elastic
Goods for which a change in income produces a greater proportionate change in demand.
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Income Elasticity of Demand
The responsiveness of demand to a change in come.
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Income Inelastic
Goods for which a change in income produces a less than proportionate change in demand.
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Index Number
A number showing the variation in, for example, wages or prices, as compared with a chosen base period or date.
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Indirect Tax
A tax levied on goods and services.
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Inefficiency
Any situation where economic efficiency is not achieved.
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Inferior Goods
Goods for which an increase in income leads to a fall in demand.
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Inflation
A sustained rise in the price level; the percentage increase in the price level over a period of time.
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Inflationary Noise
The distortion of price signals cause by inflation.
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Informal Economy
Economic activity that is not recorded or registered with the authorities in order to avoid paying tax or complying with regulations, or because the activity is illegal.
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Information Failure
A lack of information resulting in consumers and producers making decisions that do not maximize welfare.
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Injections
Addition of extra spending into the circular flow of income.
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International Labour Organisation (ILO)
A member organisation of the United Nations that collects statistics on labour market conditions and seeks to improve working conditions.
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International Moetary Fund (IMF)
An international organisation that helps co-ordinate the international monetary system.
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Investment
Spending on capital goods.
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Labour
The quantity and quality of human resources.
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Labour Force
The people who are employed and unemployed, that is, those who are economically active.
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Labour Force Survey
A measure of unemployment based on a survey using the ILO definition of unemployment.
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Labour Productivity
Output of a good or service per worker in a given time period.
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Land
Natural resources in an economy.
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Leakages
Withdrawals of possible spending from the circular flow of income.
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Long-term unemployement
Unemployement lasting for more than a year.
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Macroeconomic Equilibrium
A situation where aggregate demand equals aggregate supple and real GDP is not changing.
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Macroeconomics
The study of issues that affects economies as a whole.
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Market
An arrangement tha brings buyers into contacts with sellers.
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Market Economy
An economic system whereby resources are alloated through the free market mechanism.
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Market Failure
Where the free makret mechanism fails to achieve economic efficiency.
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Menu Costs
The costs of changing prices due to inflation.
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Merit Goods
These have more private benefits than their consumers actually realize.
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Microeconomics
The study of how households and firms make decisions in markets.
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Mixed Economy
An economic system in which resources are allocated through a mixture of the market and direct public sector involvement.
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Monetary Policy
Central Bank and/or goverment decisions on the rate of interest, the money supply and the exchange rate.
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Monetary Policy Committee (MPO)
A committee of the Bank of England with responsibility for setting the interest rate in order to meet the government's inflation target.
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Movement Along The Demand Curve
This is in response to a change in the price of a product.
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Multiplier Effect
The process by which any change in a component of aggregate demand results in a greater final change in real GDP.
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Negative Externality
This exists where the social cost of an activity is greater than the private cost.
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Net Exports
The value of exports minus the value of imports.
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Net Savers
People who save more than they borrow.
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Nominal GDP
Output measured in current prices and so not adjusted for inflation.
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Non-excludability
Situation existing where individual consumers cannot be excluded from consumption.
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Non-rivarly
Situation existing where consumption by one person does not affect the consumption of all others.
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Normal Goods
Goods for which an increase in income leads to an increase in demand; goods with a positive income elasticity of demand.
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Notional Demand
The desire for a product.
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Occupational Immobility of Labour
Difficulty in moving from one type of job to another.
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Opportunity Cost
The cost of the best alternative, which is foregne when a choice is made.
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Output Gap
The difference between an economy's actual and potential real GDP.
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Overheating
The growth in aggregate demand outstripping the growth in aggregate supply, resulting in inflation.
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Polluter Pays Principle
Any measure, such as a green tax, whereby the polluter pays explicitly for the pollution caused.
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Positive Externality
This exists where the social benefit of and activity exceeds the private benefit.
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Price
The amount of money that is paid for a given amount of a particular good or service.
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Price Elastic (or Price Sensitive)
Where the percentage change in the quantity demanded is sensitive to a change in price.
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Price Elasticity of Demand (PED)
The responsiveness of the quantity demanded to a change in the price of the product.
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Price Elasticity of Supple (PES)
The responsiveness of the quantity supplied to a change in the price of the product.
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Price Level
The average of the prices of all the products produced in an economy.
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Price System
A methos of allocating resources by the free movement of prices.
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Private Benefits
The benefits directly accruing to those taking a particular action.
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Private Costs
The costs incurred by those taking a particular action.
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Privatisation
Transfer of assets from the public to the private sector.
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Producer Surplus
The difference between the price a firm is willing to supply and what it is actually paid.
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Production
The output of goods and services.
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Production Possibility Curve
This shows the maximum quantities of different combinations of output of two products, given current resources and the state of technology.
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Productive Efficiency
Where production takes place using the least amounth of scarce resources.
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Productive Potential
The maximum output that an economy is capable of production
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Productivity
Output, or production, of a good or service per worker.
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Profit
The difference between the total revenue (sales revenue) of a producer and total cost.
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Progressive Tax
A tax that takes a higher percentage from the income of the rich.
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Protectionism
The protection of domestic industries from foreign competition.
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Public Goods
Goods that are collectively consumed and have the characteristics of non-excludability and non-rivarly.
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Quasi-public Goods
Goods having some but not all of the characteristics of a public good.
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Quota
A limit on imports.
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Rate of Interest
The charge for borrowing money and the amount paid for lending money.
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Real Disposable Income
Income after taxes on income have been deducted and state benefits have been added and the result has been adjusted to take into account changes in the price level.
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Real GDP
The country's output measure in constant prices and so adjusted for inflation.
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Real Interest Rate
The nominal interest rate minus the inflation rate.
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Recession
A fall in real GDP over a period of six months or more.
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Reflationary
Of policy measures designed to increase aggregate demand.
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Regressuve Tax
A tax that takes a greater percentage from the income of the poor.
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Retained Profits
Profit kept by firms to finance investment.
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Saving
Real disposable income minus spending.
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Saving Ration
Savings as a proportion of disposable income.
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Scarcity
A sisuation where there are insufficient resources to meet all wants.
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Services
Intangible products, i.e. products that cannot be seen or touched, such as banking beauty therapy and insurance.
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Shoeleather Costs
Costs in terms of the extra time and effort involved in reducing money holdings.
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Shortage
An excess of demand over supply.
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Social Benefits
The total benefits of a particular action.
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Specialisation
The concentration by a worker or workers, firm, region or whole economy on a narrow range of goods and services.
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Structural Unemployment
Unemployment caused by the decline of certain industries and occupations due to changes in demand and supply.
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Sub-market
A recognised or distinguishable part of a market. Also known as a market segment.
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Subsidy
A payment, usually from government, to encourage production or consumption of a product.
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Substitue
A competing good.
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Supply
The quantity of a product that producers are willing and able to provide at different market prices over a period of time.
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Supply Curve
This shows the relationship between the quantity supplied and the price of a product.
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Supply Schedule
The data used to draw up the supply curve of a product.
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Supply-side Policies
Policies designed to increase aggregate supply by improving the efficiency of labour and product markets.
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Surplus
An excess of supply over demand.
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Sustainable Economic Growth
Economic growth that can continue over time and does not endanger future generations ability to expand productive capacity.
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Target Savers
People who save with a target figure in mind.
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Tariff
A tax on imports.
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Third Party
Those not directly involved in making a decision.
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Time Series
Infrmation shown at successive points or intervals of time.
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Tradable Permit
A permit that allows the owner to emit a certain amount of pollution and that, if unused or only partially used, can be sold to another polluter.
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Trade-off
The calculation involved in deciding on whether to give up one good for another.
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Trade Defecit
The value of imports exceeding the value of exports.
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Trade Surplus
The value of exports exceeding the value of imports.
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Trend Growth
The expected increase in potential output over time. It is a measure of how fast the economy can grow without generating inflation.
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Unemployment
A situation where people are out of work but are willing and able to work.
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Unemployment Rate
The percentage of the labour force who are out of work.
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Unit Cost
Average cost per unit of output.
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Voluntary Export Restraint (VER)
A limit places on imports from a country with the agreement of that country's government.
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Want
Anything you would like, irrespective of whether you have the resources to purchase it.
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Wealth
A stock of assets e.g. property, shares and money help in a saving account.
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Weighted Average
An average that takes into account the relative importance of the different items.
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World Trade Organisation (WTO)
An international organisation that promotes free international trade and rules on international trade disputes.
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Retail Prices Index (RPI)
Measure of inflation that is used for adjusting pensions and other benefits to take account of changes in inflation and frequently used in wage negotiations. Differs from the consumer pricer index (CPI) in methodology and coverage.
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Other cards in this set

Card 2

Front

Aggregate Supply (AS)

Back

The total amount that producers in an economy are willing able to supple at a given price level in a given time period.

Card 3

Front

Allocative Efficiency

Back

Preview of the front of card 3

Card 4

Front

Arithmetic Mean

Back

Preview of the front of card 4

Card 5

Front

Asymmetric Information

Back

Preview of the front of card 5
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