Edexcel A Level Economics
Absolute advantage - ANSWER When a country's output of a product per unit of input is
greater than that of any other country.
Absolute poverty - ANSWER When a person does not have the income or wealth to fulfil
their basic needs.
Aggregate Demand (AD) - ANSWER 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) - ANSWER 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 - ANSWER The transfer of resources from one country to another.
Allocative efficiency - ANSWER 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 - ANSWER Where buyers have more information than sellers in a
market, or vice versa.
Automatic stabilisers - ANSWER Parts of fiscal policy that automatically react to changes in
the economic cycle.
,Average Cost (AC) - ANSWER The cost of production per unit of output.
Average Revenue (AR) - ANSWER The revenue per unit sold.
Backward vertical integration - ANSWER Where a firm merges with or takes over a firm
further back in the production process.
Balance of payments - ANSWER A record of the international transactions of an economy.
Bank rate - ANSWER 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 - ANSWER Potential difficulties that make it hard for firms to enter a
market.
Barriers to exit - ANSWER Potential difficulties that make it hard for firms to leave a market.
Black market - ANSWER Economic activity that occurs without taxation and government
intervention.
Budget deficit - ANSWER When government spending exceeds tax revenues.
Budget surplus - ANSWER When tax revenues exceed government spending.
Capital account of the balance of payments - ANSWER A part of the balance of payments
that shows transfers of non-monetary and fixed assets into and out of the economy.
,Cartel - ANSWER A group of products who collude to limit output in order to keep prices
high.
Central bank - ANSWER The institution responsible for issuing banknotes in an economy,
acting as a lender of last resort, and implementing monetary policy.
Ceteris paribus - ANSWER All other things remaining equal
Circular flow of income - ANSWER The flow of national output, income and expenditure
between firms and households.
Command economy - ANSWER An economy where only the government determines the
allocation of resources.
Comparative advantage - ANSWER When the opportunity cost of producing a good or
service is lower than that of any other country.
Competition policy - ANSWER Government policy aimed at reducing monopoly power in
order to increase efficiency and to ensure fairness for consumers.
Concentration ratio - ANSWER A measure of the dominance of firms in a market.
Conglomerate integration - ANSWER Where a firm merges with or takes over a firm in a
completely different market.
Consumer surplus - ANSWER The difference between the price a consumer pays and the
price they were willing to pay.
, Consumption - ANSWER The purchase of goods and services.
Contestability - ANSWER The degree to which new entrants find it easy to enter the market.
Cost-push inflation - ANSWER Inflation caused by rising costs of production.
Cross elasticity of demand (XED) - ANSWER A measure of the responsiveness of demand of
one good/service to a change in price of another good/service.
Current account of the balance of payments - ANSWER A part of the balance of payments
that consists of: trade in goods, trade in services, primary income and secondary income.
Cyclical unemployment - ANSWER Unemployment caused by a lack of demand in the
economy.
Deflation - ANSWER The sustained fall in the average price of goods and services in an
economy over a period of time.
Demand-pull inflation - ANSWER Inflation caused by increased demand in the economy.
Demand-side policy - ANSWER Government policy that aims to alter aggregate demand in
the economy.
Demerger - ANSWER Where a firm sells of a part/parts of its business to create separate
firms.
Deregulation - ANSWER Removing government legislation that could restrict competition.
Absolute advantage - ANSWER When a country's output of a product per unit of input is
greater than that of any other country.
Absolute poverty - ANSWER When a person does not have the income or wealth to fulfil
their basic needs.
Aggregate Demand (AD) - ANSWER 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) - ANSWER 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 - ANSWER The transfer of resources from one country to another.
Allocative efficiency - ANSWER 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 - ANSWER Where buyers have more information than sellers in a
market, or vice versa.
Automatic stabilisers - ANSWER Parts of fiscal policy that automatically react to changes in
the economic cycle.
,Average Cost (AC) - ANSWER The cost of production per unit of output.
Average Revenue (AR) - ANSWER The revenue per unit sold.
Backward vertical integration - ANSWER Where a firm merges with or takes over a firm
further back in the production process.
Balance of payments - ANSWER A record of the international transactions of an economy.
Bank rate - ANSWER 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 - ANSWER Potential difficulties that make it hard for firms to enter a
market.
Barriers to exit - ANSWER Potential difficulties that make it hard for firms to leave a market.
Black market - ANSWER Economic activity that occurs without taxation and government
intervention.
Budget deficit - ANSWER When government spending exceeds tax revenues.
Budget surplus - ANSWER When tax revenues exceed government spending.
Capital account of the balance of payments - ANSWER A part of the balance of payments
that shows transfers of non-monetary and fixed assets into and out of the economy.
,Cartel - ANSWER A group of products who collude to limit output in order to keep prices
high.
Central bank - ANSWER The institution responsible for issuing banknotes in an economy,
acting as a lender of last resort, and implementing monetary policy.
Ceteris paribus - ANSWER All other things remaining equal
Circular flow of income - ANSWER The flow of national output, income and expenditure
between firms and households.
Command economy - ANSWER An economy where only the government determines the
allocation of resources.
Comparative advantage - ANSWER When the opportunity cost of producing a good or
service is lower than that of any other country.
Competition policy - ANSWER Government policy aimed at reducing monopoly power in
order to increase efficiency and to ensure fairness for consumers.
Concentration ratio - ANSWER A measure of the dominance of firms in a market.
Conglomerate integration - ANSWER Where a firm merges with or takes over a firm in a
completely different market.
Consumer surplus - ANSWER The difference between the price a consumer pays and the
price they were willing to pay.
, Consumption - ANSWER The purchase of goods and services.
Contestability - ANSWER The degree to which new entrants find it easy to enter the market.
Cost-push inflation - ANSWER Inflation caused by rising costs of production.
Cross elasticity of demand (XED) - ANSWER A measure of the responsiveness of demand of
one good/service to a change in price of another good/service.
Current account of the balance of payments - ANSWER A part of the balance of payments
that consists of: trade in goods, trade in services, primary income and secondary income.
Cyclical unemployment - ANSWER Unemployment caused by a lack of demand in the
economy.
Deflation - ANSWER The sustained fall in the average price of goods and services in an
economy over a period of time.
Demand-pull inflation - ANSWER Inflation caused by increased demand in the economy.
Demand-side policy - ANSWER Government policy that aims to alter aggregate demand in
the economy.
Demerger - ANSWER Where a firm sells of a part/parts of its business to create separate
firms.
Deregulation - ANSWER Removing government legislation that could restrict competition.
