economics definitions

• Average revenue

  Average income from the sales of each individual good (total revenue/quantity)
• Appreciation

  When the value of one currency rises in value to another
• Balance of payments

  A record of all financial transactions between the UK and the rest of the world
• Balance of payments (current account) deficit

  When the value of the UK's exports of goods and services are less than the value of imported goods and services. X > M
• Balance of payments (current account) surplus

  When the UK's exports of goods and services are greater than the values of imported goods and services. X > M
• Balance of trade

  The part of the current account that records the sales and purchase of physical items between the UK and the rest of the world
• Barriers to entry

  Circumstances that could prevent a firm from successfully joining a market (selling a particular good or service)
• Base rate

  The interest rate set by the bank of England that influences market interest rates
• Budget deficit

  When government spending is greater than tax revenue (spending > tax)
• Budget surplus

  When government tax revenue exceeds expenditure (tax > spending)
• Building societies

  A financial institution which is entirely owned by its members. It offers banking and other financial services to these members
• Capital

  The machinery and tools used in the creation of goods and services. This could include a factory or a coffee machine. The payment for capital is interest. (This is usually because it is purchased using borrowed money.)
• Claimant account

  Measures unemployment by the number of individuals claiming unemployment benefit that week
• Commercial banks (also known as high street or retail banks)


  These look to make profits by selling financial services to households and businesses
• Competitive market

  A market where a wide variety of producers are competing with each other to supply goods and services
• Complimentary goods


  Two goods which are often consumed together. Examples could include strawberries and cream or milk and cereal
• Consumers


  A person who purchase goods and services for personal use
• Consumer price index (CPI)

  Measuring inflation by taking the average weighted price level of a basket of goods and comparing it between years
• Cost push inflation


  When inflation is caused by an increase in the costs of production. For example, an increase in wages or the cost of raw materials
• Current account


  The part of the balance of payments which records the exchange of goods and services between the UK and the rest of the world
• Cyclical unemployment (often called demand deficient unemployment)


  Unemployment caused by a lack of demand for goods and services (the economy is in a recession or slump)
• Deferred payment

  Agreement between the lender and borrower allowing the borrower to pay for goods immediately and make payments in the future
• Demand

  The quantity of a good or service that consumers are willing and able to buy at a given price and a given time period
• Demand curve


  A curve showing the quantity demanded for a good or service at any given price level
• Demand pull inflation

  When inflation is caused by an increase in demand for goods and services within an economy (this often occurs during a recovery or boom stages of the economic cycle)
• De-merit goods

  Goods which are worse for the consumer than they perceive and so are over consumed by the market. An example of this would be consumption of fatty and sugary foods
• Depreciation

  When the value of one currency falls in value to another
• Deregulation

  The removal of regulations or restrictions on a particular business or industry
• Developed countries

  A country with a relatively high level of economic growth and mature institutions and infrastructure
• Direct taxation

  Taxes based on income such as income tax or national insurance contributions
• Diseconomies of scale


  Where an increase in a firm's output results in an increase in its average costs
• Division of labour


  When production of a good or service is split into a number of smaller tasks and employees then specialise in completing each of these tasks with the intention of increasing productivity
• Economic activity

  The making, producing, buying, selling or consuming products or services
• Economic resource

  Resources which are scarce. Due to them being limited decisions will have to be made about how they are used within an economy
• Economies of scale

  Where an increase in a firm's output results in a fall in average costs. Note there is not requirement for students to know the relevant diagram for Economies of scale but teachers may choose to use this in order to aid teaching
• Enterprise/entrepreneurship

  Individuals who take the factors of production and convert them into goods and services which can be sold for profit. The payment for enterprise is profit
• Equilibrium price

  When demand for a good or service is equal to supply. When a market is in equilibrium then the price is likely to be stable
• EU single market

  Refers to the European Union (EU) as one territory without any internal borders or other regulatory obstacles to the free movement of goods and services
• Excess demand


  Where quantity demanded of a good or service exceeds supply, resulting in shortages and higher prices
• Excess supply


  Where quantity supplied of a good or service exceeds demand, resulting in shortages and higher prices