IB HL Economics ALL DEFINITIONS (2/2)
Terms in this set (77)
GDP per capita
measure of real output/ income/ expenditure in the economy in one year per head of the population
real GDP or real output is the
value of all final domestic goods and services, adjusted for inflation.
Gross National Income/Gross National Product (GNI/GDP) is
made up of GDP plus net property income (current transfers) from abroad. A GNP that is larger than GDP must have a positive figure (balance) for net property income (current transfers).
Gini Coefficient is a
measure of inequality in the distribution of income.
Human resources are the
labor force of a country.
Import substitution policies are designed to
encourage the domestic production of goods, rather than importing them. The strategies encourage protectionism.
Income elasticity of demand is the
measure of the responsiveness of demand of a good or service to a change in income.
Indebtedness is the
amount of money that a country owes to other countries and/or international institutions.
Inflation is a
sustained increase in the general or average level of prices.
deflation is a
sustained decrease in the average level of prices (general price level) in an economy.
Inflationary gap refers to
inflationary pressure created by the current (or SR) equilibrium being above the full employment (or LR) equilibrium.
Informal markets refer to
markets in which economic activity is not officially measured/ recorded.
essential facilities and services such as roads, airports, sewage treatment, railways, telecommunications and other utilities typically provided by the government.
Interest rate is the
price of capital or the price of borrowed/loaned money, usually expressed as a percentage.
expenditure by firms on capital equipment and is an injection into the economy.
see import substitution
Managed exchange rates is a
system where the exchange rate is determined by market forces, but the government/Central Bank intervenes from time to time in order to keep it within a certain range
Market is the
interaction between buyers and sellers in order to exchange goods or services or buyers and sellers coming together in order to exchange a good or service.
Market economy is an
economy where resource allocation is determined mainly by market forces of demand and supply.
Maximum price is the
upper limit imposed by the government below which the price may not fall. A maximum price is usually set below the equilibrium to aid relatively poor consumers.
Merit goods are
goods or services with strong positive externalities that would be under-provided by the market and so under-consumed.
Demerit good is a
good considered to be harmful to people that would be over-provided by the market and so over-consumed or a good whose consumption creates negative externalities, or a good whose consumption creates costs for third parties, not involved in the purchase or sale of the product.
A loan that allows poor people to set up a small scale business, is loaned to borrowers who do not have security/collateral, and contributes to the empowerment of women.
Millennium Development Goals (MDGs)
include eradicating extreme poverty and hunger, achieving universal primary education, promoting gender equality and empower women, reducing child mortality,improving maternal health, combating HIV/AIDS, malaria and other diseases, ensuring environmental sustainability, and developing a global partnership for development.
Minimum price is the
lower limit imposed by the government below which the price may not fall. A minimum price is usually set above the equilibrium to aid farmers.
Monetary policy is a
demand-side policy with the Central Bank using changes in the money supply or interest rates to affect AD.
Monopolistic competition is a
market when there are many buyers and sellers, producing differentiated products, with no barriers to entry.
Monopoly is a
market structure where there is only one firm in the industry or a single firm dominates the market.
Multinational corporations (MNCs) are
companies that have productive units in more than one country.
Reasons MNCs might invest in LDCs include
gaining access to new markets, cutting costs by avoiding the need to comply with legislation which exists in the domestic economy, gaining access to resources, cheaper labour and raw materials, avoiding import duties by producing in the target market.
Multiplier (HL) is the
ratio of the induced change in national income to the increase in the level of injections and it is equal to one over mps + mpt + mpm.
non-government organizations that exist to promote sustainable economic development and/or humanitarian ideals.
Nominal is the
value of an economic variable that has not been adjusted for the effects of inflation.
Non-price competition exists
where competition is not in terms of price, but rather in terms of non-price activities designed to differentiate the products.
Normal profit (HL) is the
amount of revenue needed to cover the total costs of production, including the opportunity costs.
(Official) foreign (currency) reserves are
reserves of foreign currencies held by the Central Bank or the government of a country.
Oligopoly is a
market where few large firms dominate the industry, with at least one other characteristic such as interdependency of firms, high barriers to entry, homogeneous or differentiated product with example, imperfect information.
collusive oligopoly is where
a few firms act together to avoid competition by resorting to agreements to fix prices or output.
Opportunity cost is the
cost of an economic decision in terms of the next best alternative foregone.
Poverty cycle (poverty trap) involves
low incomes which lead to low savings and low investment which ensure low incomes in the future OR low incomes leads to low levels of human capital that leads to low productivity that leads to low incomes OR any linked combination of factors which causes poverty to be self-perpetuating with low income as the cause
Preferential trade agreement, An explanation that it is a type of ...
economic integration that removes or reduces trade barriers for certain products to countries that are in the agreement.
Price elasticity of demand is a
measure of the responsiveness of quantity demanded to a change in the price of the good.
price inelastic is when a
change in the price of a product leads to a proportionately smaller change in the quantity (demanded) or PED is less than one or % change in quantity (demanded) is less than the % change in price.
Price discrimination (HL) exists when a
producer charges a different price to customers for an identical good or service.
Product differentiation (HL) is where a
producer attempts to distinguish her product from those of competitors, with the aim of making demand less price elastic.
Productive efficiency (HL) exists when
production is achieved at lowest cost per unit of output. This is achieved at the point where average total cost is at its lowest value. (MC = AC)
give people a legal right to own property/assets.
Protectionism (restrictions on free trade) involves
government intervention in order to restrict trade between countries.
import barriers that set limits on the quantity or value of imports into a country.
Rationing is a
way that scarce goods (or services or resources) are allocated or the distribution/allocation of a good (or service or resources) among users (consumers), or a method of distributing a good when there is a shortage.
Real price is the
nominal price of a good or service adjusted for inflation.
at least two consecutive quarters of negative economic growth.
Restrictions on free trade
are imposed by a government in order to influence the flow of goods and services to and from the country.
Resource allocation (allocation of resources) is
how resources (land, labor, capital and management) are distributed in an economy.
(total) Revenue is equal to
price times quantity sold or the total money received by a firm from the sale of a particular quantity of output.
income that is not spent, present consumption foregone, a withdrawal from the circular flow of income or money stored in financial institutions.
Subsidy is a
payment made by the government to producers in order to reduce the costs of production or to increase output.
Supernormal / abnormal profits (HL) refer to a
situation where all costs, including opportunity cost, are more than covered by revenue, OR profits that are above the level that is sufficient to keep the firm in an industry.
Supply is the
willingness and ability of producers to produce a quantity of a good at a given price in a given time period.
Supply-side policies are
policies designed to shift the AS curve to the right. They may include tax cuts, reductions in welfare payments, promotion of training etc.
Sustainable development is the
development needed to meet the needs of the present generation without compromising the ability of future generations to meet their own needs.
Indirect tax is
an expenditure tax or a tax levied on goods and services and it is imposed by the government.
Progressive tax is
the higher the level of income, the higher the percentage of taxation that is paid (or the higher the average rate of taxation).
Regressive taxes is where
the proportion of income paid in tax falls as the income of the taxpayer rises or where the average rate of tax falls as income rises.
Tariff is an
indirect tax on imports/imported goods.
Terms of trade
an index (ratio) that shows the value of a country's average export prices relative to their average import prices. Formula is index of export prices/index of import prices x 100.
terms of trade deterioration is where
the average price of exports falls relative to the average price of imports, or making it more expensive to buy imports, in terms of exports that need to be sold.
Tradeable permits are
permits to pollute, issued by a governing body, which sets a maximum amount of pollution allowable. Firms may trade these permits for money.
Transfer payments are
a payment received for which no good or service is exchanged, or a payment made by the government to individuals (for the purpose of redistributing income), or a form of aid where money is transferred from one country to another. e.g. a student grant or a pension.
people of working age in the labor force actively seeking work at the current wage rate but cannot find one.
structural unemployment is
long term unemployment caused as a result of a fall in the demand for a particular type of labor occurring as a result of the changing structure of an economy due to changes in the demand/supply and/or technology. It occurs when there is a mismatch between the skills of unemployed workers and the jobs available or as a result of rigidities in the labor market
when workers are employed part-time even though they are available for full-time employment, or workers are employed but work less than they would have wanted to, or when workers are carrying out jobs for which they are over-qualified.
unemployment rate is the
number of workers without a job, who are willing and able to work, expressed as a percentage of the workforce.
Wage is the
payment for labor
real wage is the
payment for labor adjusted for inflation.
World Bank is
an international organization whose main aims are to provide aid and advice to developing countries, as well as reducing poverty levels.
World Trade Organization (WTO) is an
international body that encourages the reduction of trade barriers between its member nations.