A Level Economics Words

Front 1

Abnormal profit

Back 1

The profit over and above normal profit

Front 2

Absolute advantage

Back 2

Exists when a country is able to produce a good more cheaply in absolute terms than any other country.

Front 3

Ad velorem tax

Back 3

A tax that is forced as a percentage of the price of the good (e.g., 17.5% VAT)

Front 4

Allocative efficiency

Back 4

Occurs when nobody can be made better off by transferring resources from one industry to another without making somebody worse off.

Front 5

Average cost

Back 5

The average cost of production per unit. It is calculated by dividing the total cost by the quantity produced. It is equal to the total variable cost + the total fixed cost.

Front 6

Average fixed cost

Back 6

The average fixed cost of production per unit. It is calculated by dividing the total fixed cost by the quantity produced. It falls as quantity produced rises.

Front 7

Average product

Back 7

The quantity of output per unit of input.

Front 8

Average revenueIs

Back 8

Is calculated by dividing total revenue by the quantity produced. It is equal to the price paid for the good (so long as the price is the same for all consumers).

Front 9

Average variable cost

Back 9

The average variable cost of production per unit. It is calculated by dividing the total variable cost by the quantity produced.

Front 10

Barriers to entry

Back 10

Factors which make it difficult or impossible for a firm to enter a particular market and compete with existing firms.

Front 11

Barriers to exit

Back 11

These can occur if there are high sunk costs that can not be recovered if the firm leaves the industry.

Front 12

Capital

Back 12

One of the factors of production. It includes all buildings and machinery.

Front 13

Cartels

Back 13

A group of producers that attempt to increase the price of their good by limiting output or agreeing upon a price to sell their goods at.

Front 14

Ceteris paribus

Back 14

All other things remaining equal.

Front 15

Choices

Back 15

Economic choices have to be made regarding the use of scarce economic resources.

Front 16

Collective bargaining

Back 16

Bargaining between a group of managers and a union for the purpose of agreeing upon new conditions/ contracts etc. for the staff.

Front 17

Command economy

Back 17

An economic system where the government controls all of the factors of production.

Front 18

Comparative advantage

Back 18

This advantage is measured in terms of other goods a nation could produce.

Front 19

Complementary goods

Back 19

A good which is usually purchased with another (e.g., bread and butter).

Front 20

Composite demand

Back 20

A good that is demanded for two or more distinct choices (e.g., oil is used for petrol and the production of chemicals).

Front 21

Consumer surplus

Back 21

The difference between what consumer are prepared to pay for a good and what they actually have to pay for a good.

Front 22

Cost benefit analysis

Back 22

It is a method of appraising an investment project. It involves placing a financial value on aspects such as leisure and pollution.

(appraising = assessing the value of)

Front 23

Cross elasticity of demand

Back 23

Measures the responsiveness of demand of one good to a change in the price of another good.

Front 24

Demand

Back 24

The quantity purchased at any given price.

Front 25

Demand curve

Back 25

Shows the effective demand at any given price level.

Front 26

Demerit good

Back 26

A good that is deemed to be socially unacceptable and is over provided by the market mechanism (e.g., cigarettes)

Front 27

Derived demand

Back 27

The demand for one good results (is derived) from another good (e.g., the demand for steel will increase if the demand for cars increases).

Front 28

Diminishing returns

Back 28

If increasing quantities of a variable input (e.g., labour) are combined with a fixed input (e.g., capital) eventually the marginal product and then the average product will fall.

Front 29

Diseconomies of scale

Back 29

A rise in the longrun average costs as production rises.

Front 30

Division of labour

Back 30

Happens when specialisation takes place (e.g., on a production line).

Front 31

Economic efficiency

Back 31

The use of resources that leads to the highest possible value of output.

Front 32

Economic goods

Back 32

These goods are scarce and they can command a price when sold.

Front 33

Economic problem

Back 33

Resources are scarce, however wants are infinite.

Front 34

Economic resources

Back 34

These are the inputs necessary for production to take place; land, labour, capital and enterprise (entrepreneurial activity).

Front 35

Economies of scale

Back 35

A fall in the longrun average costs as production rises.

Front 36

Effective demand

Back 36

A want for a good or service that is backed up by the money to purchase it.

Front 37

Elastic

Back 37

A percentage change in a variable leads to a larger percentage change in the quantity demanded or supplied (an elastic band!).

Front 38

Enterprise

Back 38

One of the factors of production that is carried out by an entrepreneur.

Front 39

Entrepreneur

Back 39

The person who thinks of a business idea, raises the capital and then organises the other three factor of production.

Front 40

Equilibrium

Back 40

A situation of rest where there is no desire to move from the current position.

Front 41

Equilibrium price and quantity

Back 41

The price and quantity at which there is no tendency to change, as demand is equal to supply.

Front 42

European Union

Back 42

A customs union of European nations formed in 1991 by the Maastricht Treaty. It aims to promote trade and movement of resources without any barriers.

Front 43

Excess demand

Back 43

Where demand is greater than supply

Front 44

Excess supply

Back 44

Where supply is greater than demand.

Front 45

Excise duties

Back 45

Taxes on a specific product (e.g., on beer).

Front 46

External economies of scale

Back 46

Arise when there is an increase in the size of the industry the firm operates in.

Front 47

Externalities

Back 47

Occur when the actions of a firm lead to a variety of effects that they do not charge for. They can be positive externalities (e.g., extra healthcare is better for the community as a whole) or negative externalities (e.g., pollution).