Economics IGCSE EDEXCEL

Advalorem tax - answer-Tax levied as a percentage of the price of a good. Aggregate demand - answer-Total demand in the economy including consumption, investment, government expenditure and exports minus imports. Anti-competitive practices or restrictive trade practices - answer-An attempt by firms to prevent or restrict competition. Assisted areas - answer-Areas designated as having problems by the UK or EU and are eligible for support. Average costs - answer-The cost per unit of output; it is equal to total cost divided by output. Backward vertical integration - answer-Merging with a firm that operates in the previous stage of production. Balance of payments - answer-A record of all transactions relating to international trade. Balance of trade or visible balance - answer-The difference between visible exports and visible imports. Barriers to entry - answer-Obstacles that might discourage a firm from entering a market. Base rate - answer-The rate of interest set by the MPC which influences all other rates in the economy. Basic economic problem - answer-Allocation of a nation's scarce resources between competing uses that represent infinite wants. Boom - answer-The peak of the economic cycle where GDP is growing at its fastest. Budget - answer-The government's spending and revenue plans for the next year. Budget deficit - answer-The amount by which government spending exceeds government revenue. Budget surplus - answer-The amount by which government revenue exceeds government spending. Capital intensive - answer-Where production relies more heavily on machinery relative to labour. Cartel - answer-Where a group of firms or countries join together and to agree on pricing or output levels in the market. Choice - answer-Deciding between alternative uses of scare resources. Collusion - answer-Agreements between firms to restrict competition. Competition - answer-The rivalry that exists between firms when trying to sell goods to the same group of customers. Competition Commission - answer-A government body that carries out investigations into mergers and markets where there may be some consumer exploitation. Complementary goods - answer-Goods purchased together because they are consumed together. Conglomerate or diversifying merger - answer-The merging of firms involved in completely different business activities. Consumer price index (CPI) - answer-A measure of the general price level; used in the UK and across the Eurozone. Contractionary fiscal policy - answer-Fiscal measures designed to dampen demand in the economy. Cost-push inflation - answer-Inflation caused by rising business costs. Costs - answer-The expenses incurred when producing goods and services. Current account - answer-Part of the balance of payments where all exports and imports are recorded. Cyclical or demand deficient unemployment - answer-Unemployment caused by falling demand as result of a downturn in the economic cycle. De-industrialisation - answer-The decline in manufacturing. Deflation - answer-A period where the level of aggregate demand is falling. Demand - answer-The amount a good will be bought at given prices over a period of time. Demand curve - answer-Line drawn on a graph which shows how much of a good will be bought at different prices. Demand-pull inflation - answer-Inflation caused by too much demand in the economy relative to supply. Depression or slump - answer-The bottom of the economic cycle where GDP starts to fall with significant increases in unemployment. Derived demand - answer-Demand that arises because there is demand for another good. Devaluation - answer-The depreciation or fall in the value of a currency. Developing countries - answer-Poorer, less economically developed nations in the world. Development aid - answer-Money and other forms of assistance that is given to less developed countries by governments in developed countries. Direct taxes - answer-Taxes levied on the income earned by firms and individuals. Discretionary expenditure - answer-Non-essential spending or spending that is not automatic. Diseconomies of scale - answer-Rising average costs when a firm becomes too big. Dividends - answer-Payments made to shareholders from profit. Division of labour - answer-The breaking down of the production process into small parts with each worker allocated to a specific task. Downturn - answer-A period in the economic cycle where GDP grows, but more slowly. Dumping - answer-Where an overseas firm sells large quantities of a product below cost in the domestic market. Economic growth - answer-The increase in national income over time. Economic policy - answer-The range of actions taken by the government to help achieve its macroeconomic objectives. Economies of scale - answer-Falling average costs due to expansion. Economy - answer-System that attempts to solve the basic economic problem. Effective demand - answer-The amount people are willing to pay for a good at given prices over a given period of time backed by the ability to pay. Efficiency - answer-Minimising costs and the use of resources. Elastic demand - answer-A change in price results in a greater change in demand. Entrepreneur - answer-An individual who organises the other factors of production and risks their own money in a business venture. Equilibrium price - answer-Price where supply and demand are equal. Excess demand - answer-Where demand is greater than supply and there are shortages in the market. Excess supply - answer-Where supply is greater than demand and there are unsold goods in the market. Exchange rate - answer-The price of one currency in terms of another. Expansionary fiscal policy - answer-Fiscal measures designed to stimulate demand in the economy. Exporter - answer-Firms that sell overseas. Exports - answer-Goods and services sold overseas. External economies of scale - answer-The cost benefits that all firms in the industry can enjoy when the industry expands. Externalities - answer-The spillover effects of consumption or production. They affect others and can be positive or negative. Factors of production - answer-The resources used to produce goods and services. They include land, labour, capital and enterprise. Fiscal policy - answer-Decisions about government spending, taxation and levels of borrowing which affect aggregate demand in the economy. Fixed capital - answer-The stock of 'man-made' resources such as machines and tools used to help make goods and services. Fixed costs - answer-Costs that do not vary with the level of output. Foreign direct investment (FDI) or inward investment - answer-Business investment undertaken by a firm in another country, building a factory for example. Foreign exchange market - answer-The markets where foreign currencies can be bought and sold. Forward vertical integration - answer-Merging with a firm that operates in the next stage of production. Free trade - answer-Trade between nations that is completely without government restrictions. Frictional unemployment - answer-When workers are unemployed for a short period of time as they move from one job to another. Globalisation - answer-The growing integration of the world's economies. Gross domestic product (GDP) - answer-An internationally recognised measure of national income. Horizontal integration - answer-The merging of two firms which are in exactly the same line of business. Human capital - answer-The value of the workforce or an individual worker. Imports - answer-Goods and services bought from overseas. Income elasticity of demand - answer-The responsiveness of demand to a change in income. Index linked/linking - answer-Where certain government payments are linked to increases in the RPI. Indirect taxes - answer-Taxes levied on spending in the economy. Inelastic demand - answer-A change in price results in a proportionately smaller change in demand. Infant industries - answer-New industries yet to establish themselves. Inferior good - answer-A good for which demand will fall if income rises or rise if income falls. Inflation - answer-A general and persistent rise in prices. Innovation - answer-The commercial exploitation of a new invention. Interdependence - answer-Where the actions of one large firm in an oligopolistic market will have a direct effect on others. Internal economies of scale - answer-The cost benefits that an individual firm can enjoy when it expands. Inverse relationship (between price and quantity demanded) - answer-When price goes up the quantity demanded falls and when the price goes down the quantity demanded rises. Invisible trade - answer-Trade in services. Labour - answer-The people used to production. Labour intensive - answer-Where production relies more heavily on labour relative to machinery.