Edexcel A-Level Economics A: Definitions

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Molly

Cards (100)

Marginal utility 
The utility gained from consuming one more unit of a good.
Marginal revenue
The extra revenue received from selling one more unit of output.
Marginal propensity to consume (MPC) 
The proportion of an increase in income that is spent and not saved.
Marginal product
The extra output produced when one extra unit of input is used.
Marginal cost 
The cost of producing the final unit of output.
Long-Run Aggregate Supply (LRAS)
The productive potential of economy operating at full capacity.
Liquidity 
How easily an asset can be spent.
Law of diminishing returns
If a firm increases one variable factor of production while others remain fixed, the marginal returns will eventually decrease.
Labour immobility
When labour cannot move to new jobs, or cannot switch between occupations.
Investment 
The increase of the capital stock of a firm or economy.
Interest
The money paid to a lender by a borrower.
Inorganic growth
A firm growing through mergers and takeovers.
Infrastructure
The basic facilities and services required for a country's economy to function.
Inflation
The sustained rise in the average price of goods and services in an economy over a period of time.
Inequity 
Unfairness
Income elasticity of demand (YED)
A measure of the responsiveness of demand to changes in real income.
Income 
Money a person or firm receives for providing a good or service.
Imperfect information
A situation where buyers and/or sellers do not have complete information about the goods and services in a market.
Human Development Index
A measure of a country's economic development that takes into account health (life expectancy), education (average and expected years of schooling), and standards of living (real GNI per capita).
Human capital
The economic value of a person's skills, experience and training.
Horizontal integration
Where a firm merges with or takes over a firm that is at the same stage of production of a similar product.
Horizontal equity
Where people in identical circumstances are treated equally.
Hit-and-run tactics
When a firm enters a market while supernormal profits can be made, and then leaves once prices have been driven down to normal profit levels.
Gross National Product (GNP)
The total output of the citizens of a country, regardless of whether or not they are resident in that country.
Gross National Income (GNI) 
The GDP of an economy, plus any income earned on investments/assets abroad, minus any income paid to foreigners on domestic investments/assets.
Gross Domestic Product (GDP)
The total value of all the goods and services produced in an economy in a year.
Government failure
When a government intervention to correct a market failure results in a misallocation of resources.
Globalisation
The increasing integration of economies internationally.
Full employment 
Where everyone who is of working age and who wants a job can get one at current wage rates.
Frictional unemployment
The unemployment experienced by people who are between jobs.
Free trade 
International trade with no restrictions.
Free rider problem
Once a public good is provided, there is no way to stop people who haven't paid for the good from benefiting from it.
Free market
A market where there is no government intervention.
Forward vertical integration
Where a firm merges with or takes over a firm further forward in the production process.
Foreign Direct Investment (FDI) 
When a firm in one country makes an investment in a different country.
Fixed costs
Costs that do not vary with output in the short run.
Fiscal policy 
Government policy that determines the levels of government spending and taxation.
Financial sector
Firms that provide financial services.
Financial account of the balance of payments
A part of the balance of payments that shows the movements of financial assets.
Factors of production
The four inputs used to produce what people want: land, labour, capital and enterprise.