A-Level Economics Key Terms And Definitions

Subcontracting a process, such as design or manufacturing, to another company.

Goods or services purchased in one country but produced in another.

Responsiveness of demand for good X following a change in the price of good Y (a

The extent to which a household's financial resources falls below an average income threshold for the economy. Exact definition varies by country

A measure of efficiency = output per unit of input or output per person employed.

Quantity of a good or service that consumers are willing and able to buy at a given

The number of people claiming unemployment-related benefits.

Total cost divided by the number of units produced.

If there is an initial injection into the economy then the final increase in AD and Real GDP will be greater.

Investment from overseas businesses into a specific country.

A single seller of a product in a given market or industry.

The reserves of gold or foreign currencies typically held by central banks on behalf of their national government

Measures the relationship between a change in quantity demanded and a change in

A monopoly limited to a specific geographical area.

A decline in the share of national income from manufacturing industries.

When the market mechanism fails to allocate resources efficiently.

A measure of who ultimately pays a tax, either directly or through the tax burden.

Costs that vary directly with the level of output.

People of low incomes are disincentivised to look for work or work longer hours because of the effects of the tax and benefits system.

Spending on capital goods including plant & machinery and infrastructure.

A foreign currency that is held in countries’ official reserves due to its inherent stability.

A measure of money's value in terms of what it can buy.

Where two firms join at the same stage of production in the same industry.

The consumption of a good by one person does not reduce the amount available for others.

A function of the price mechanism which occurs when prices adjust to show where resources need to be allocated and where they are not needed.

The barriers preventing people from moving from one area to another to find work.

Occurs when third parties benefit from the spill-over effects of production/consumption.

A boundary that shows the maximum combinations of two or more goods and services

When the value that consumers place on a good or service equals the cost of the resources used up in production. Price = Marginal Cost.

A method of production where a business or area focuses on the production of a

Where the expected value of a transaction is known more accurately by the buyer or the seller due to an asymmetry of information.

A persistent decrease in the general price level of goods and services in a country over time.

A legally imposed price below which the normal market price cannot fall.

When government spending is greater than tax revenues.

Competing through means such as the quality of the product, packaging, customer service, etc.

When the value of exports exceeds the value of imports in a given time period.

The change in total costs resulting from increasing output by one unit.

Goods in competitive demand and act as replacements for another product.

The sum of gross value added by all resident producers divided by the population.

Measures taken by government to transfer income from some individuals to others.

A market where no single firm has a dominant position and where the consumer has

A formal agreement among firms that agree to reduce competition in an attempt to increase profits. Usually occurs in oligopolistic markets.

Similar to GDP except that it adds what a country earns from overseas investments

The sending of money to people in another country.

Factors which make it difficult or expensive for new firms to enter a market in order to

A tax on a percentage of the value (sales price) of a good or service.

The process of transferring ownership of a public asset or service from the government to the private sector.

The balance between the value of exports and imports.

A tax that is imposed on producers (suppliers) by the government.

A system similar to the CPI but includes mortgage repayments and some

When a business reaches the lowest point of its average cost curve.

Factors of production that are used to make other goods and services.

A market dominated by a few large suppliers.

Exists when there is willingness to purchase a good or service, but where the consumer lacks the purchasing power to be able to afford the product.

Transitional unemployment as people move between jobs or are in active job search.

When government spending is being cut and/or taxation is being raised.

The loss in producer and consumer surplus due to an inefficient level of production.

Subjective statements, containing a value judgement which cannot be tested.

The amount of debt that a business or country has expressed as a share of GDP.

The process by which changes in interest rates and/or the supply of money work to