Edexcel A-Level Economics A: Definitions Questions & Correct Answers/ Graded A+

Absolute advantage : When a country's output of a product per unit of input is greater than that of any other country. Absolute poverty : When a person does not have the income or wealth to fulfil their basic needs. Aggregate Demand (AD) : The total demand/spending in an economy at a given price level over a given period of time. Made up of consumption, investment, government spending and net external demand. Aggregate Supply (AS) : The total amount of goods and services that can be supplied in an economy at a given price level over a given period of time. Aid : The transfer of resources from one country to another. 2 Allocative efficiency : Where the price of a good is equal to the price consumers are willing to pay. This occurs when all resources are allocated efficiently. Asymmetric information : Where buyers have more information than sellers in a market, or vice versa. Automatic stabilisers : Parts of fiscal policy that automatically react to changes in the economic cycle. Average Cost (AC) : The cost of production per unit of output. Average Revenue (AR) : The revenue per unit sold. Backward vertical integration : Where a firm merges with or takes over a firm further back in the production process. 3 Balance of payments : A record of the international transactions of an economy. Bank rate : The official rate of interest set by the central bank (e.g. by the Monetary Policy Committee of the Bank of England) Barriers to entry : Potential difficulties that make it hard for firms to enter a market.