IGCSE Economics Definitions
ABNORMAL PROFIT The surplus of revenue over costs enjoyed by a monopoly that is in
excess of profit the same firm could expect to earn if it faced competition for its market.
ABSOLUTE ADVANTAGE The ability of a country or region to produce a good or service at a
lower average cost per unit than any other country or region is able to.
ABSOLUTE POVERTY An economic condition of lacking both money and basic
necessities needed to successfully live, such as food, water, education, health care and shelter.
ADULT LITERACY RATE A measure of the number of people of working age as a proportion
of the total population in a country who are able to read and write.
AGGREGATE DEMAND The total demand for goods and services in an economy. It is
determined by consumer spending, investment, public expenditure and spending by overseas
residents on exports.
AGGREGATE SUPPLY The total output or supply of all goods and services in an economy
that all producers are willing and able to supply.
ANCILLARY FIRMS Firms which provide goods and business services for other firms;
they are often located near to their main business customers.
APPRECIATION (in the value of a currency) A rise in the rate at which a national
currency can be exchanged for another currency or currencies, i.e. a rise in the market price of
one currency in terms of other currencies.
ARTIFICIAL BARRIERS TO ENTRY Obstacles created by a powerful monopoly or
oligopoly purposefully to restrict competition from new firms entering the markets they
dominate.
AVERAGE COST The cost per unit of output, calculated by dividing the total cost of a given
level of output by that total volume of output.
,AVERAGE REVENUE The revenue per unit of output sold, found by dividing the total
revenue from the sale of a given output by that volume of output.
AVERAGE TAX RATE The total amount of personal or corporate income tax a person or
firm pays from their total annual income as a proportion of their total annual income.
BALANCE OF PAYMENTS An accounting record of all monetary transactions between a
country and the rest of the world.
BALANCE OF PAYMENTS ON CURRENT ACCOUNT This section of the balance of
payments of a country is used to record and monitor how well or how badly it is performing in
international trade in goods and services, and other flows of incomes and transfers with other
countries.
BALANCE OF TRADE The difference between the value of visible exports from a country
and the value of visible imports to that country, usually measures per month and annually.
BARTER The exchange of goods and services without using money.
BASIC WAGE A guaranteed level of earnings for an employee, excluding any overtime
or performance related pay.
BEAR A stock market speculator who will buys shares in the hope they will quickly fall in value
so they can buy them back at a lower price. A bear market refers to a situation in which the
average prices of shares on the stock market is falling.
BIRTH RATE A measure of the number of babies born per period per 1,000 people in a
population.
BOND A debt investment with a fixed time period and rate of interest issued by a government or
company to sell to investors in order to raise money.
BRAND LOYALTY The extent of the faithfulness of consumers to the product or products of a
particular firm, expressed through their repeat purchases and irrespective of changes in the prices
and promotions of competing products from rival firms.
BREAK-EVEN LEVEL OF OUTPUT That volume of output which, if completely sold,
would raise a total revenue exactly equal to the total cost of its production.
BROKER A share dealer, able to buy and sell shares on a stock exchange.
BUDGET The budget of a government is a forecast or plan of its intended tax revenues and
expenditures in a financial year.
BUDGET DEFICIT This financial situation occurs if a government plans to spend more than it
forecasts to earn in tax revenues over the financial year. An actual budget deficit occurs if actual
public spending exceeds actual tax revenues.
, BUDGET SURPLUS This financial situation occurs if a government plans to spend more than it
forecasts to earn in tax revenues over the financial year. An actual budget deficit occurs if actual
tax revenues exceed actual public spending.
BULL The name given to a stock market speculator who buys shares in the hope their price will
rise quickly so they can sell them for a profit. A bull market refers to a situation in which the
average prices of shares on the stock market is rising.
CAPTAL EMPLOYED. Money invested in or tied up in productive assets in a firm that
enable it to produce goods and services and generate revenues.
CAPITAL INTENSIVE A production process that employs a significant amount of capital
equipment relative to labour.
CARTEL A formal agreement between a group of powerful producers to control the market
supply and price of their product. OPEC (the Organization of the Petroleum Exporting
Countries) is one of the most widely known examples of a cartel.
CENTRAL BANK The main bank in an economy, responsible for managing the stability of
its national currency and money supply, and for regulating its banking system.
CETERIS PARIBUS A term meaning 'all other factors being unchanged'.
CLOSED SHOP This exists when trade union membership is made a compulsory condition
of a taking a job in a particular workplace or organization.
COLLATERAL Security taken by a lender against a loan, such as a valuable asset owned
by the borrower that the lender could sell to recover the value of the loan if the borrower is
unable to repay it.
COLLECTIVE BARGAINING The process of negotiating pay and working conditions
between trade union representatives and employers.
COMMERCIAL BANK A type of bank with individual and business customers that has
retail branches in many towns and cities.
COMMERCIAL LOAN A bank loan to a firm, usually with a fixed repayment term and
interest rate.
COMMON STOCK Also known as ordinary shares or equity, common stock are shares issued
by limited companies that allow their holders to vote on company directors and policy at annual
general meetings.
COMPARATIVE ADVANTAGE The ability of a region or country to produce a goods or
services at a lower opportunity cost than another.
ABNORMAL PROFIT The surplus of revenue over costs enjoyed by a monopoly that is in
excess of profit the same firm could expect to earn if it faced competition for its market.
ABSOLUTE ADVANTAGE The ability of a country or region to produce a good or service at a
lower average cost per unit than any other country or region is able to.
ABSOLUTE POVERTY An economic condition of lacking both money and basic
necessities needed to successfully live, such as food, water, education, health care and shelter.
ADULT LITERACY RATE A measure of the number of people of working age as a proportion
of the total population in a country who are able to read and write.
AGGREGATE DEMAND The total demand for goods and services in an economy. It is
determined by consumer spending, investment, public expenditure and spending by overseas
residents on exports.
AGGREGATE SUPPLY The total output or supply of all goods and services in an economy
that all producers are willing and able to supply.
ANCILLARY FIRMS Firms which provide goods and business services for other firms;
they are often located near to their main business customers.
APPRECIATION (in the value of a currency) A rise in the rate at which a national
currency can be exchanged for another currency or currencies, i.e. a rise in the market price of
one currency in terms of other currencies.
ARTIFICIAL BARRIERS TO ENTRY Obstacles created by a powerful monopoly or
oligopoly purposefully to restrict competition from new firms entering the markets they
dominate.
AVERAGE COST The cost per unit of output, calculated by dividing the total cost of a given
level of output by that total volume of output.
,AVERAGE REVENUE The revenue per unit of output sold, found by dividing the total
revenue from the sale of a given output by that volume of output.
AVERAGE TAX RATE The total amount of personal or corporate income tax a person or
firm pays from their total annual income as a proportion of their total annual income.
BALANCE OF PAYMENTS An accounting record of all monetary transactions between a
country and the rest of the world.
BALANCE OF PAYMENTS ON CURRENT ACCOUNT This section of the balance of
payments of a country is used to record and monitor how well or how badly it is performing in
international trade in goods and services, and other flows of incomes and transfers with other
countries.
BALANCE OF TRADE The difference between the value of visible exports from a country
and the value of visible imports to that country, usually measures per month and annually.
BARTER The exchange of goods and services without using money.
BASIC WAGE A guaranteed level of earnings for an employee, excluding any overtime
or performance related pay.
BEAR A stock market speculator who will buys shares in the hope they will quickly fall in value
so they can buy them back at a lower price. A bear market refers to a situation in which the
average prices of shares on the stock market is falling.
BIRTH RATE A measure of the number of babies born per period per 1,000 people in a
population.
BOND A debt investment with a fixed time period and rate of interest issued by a government or
company to sell to investors in order to raise money.
BRAND LOYALTY The extent of the faithfulness of consumers to the product or products of a
particular firm, expressed through their repeat purchases and irrespective of changes in the prices
and promotions of competing products from rival firms.
BREAK-EVEN LEVEL OF OUTPUT That volume of output which, if completely sold,
would raise a total revenue exactly equal to the total cost of its production.
BROKER A share dealer, able to buy and sell shares on a stock exchange.
BUDGET The budget of a government is a forecast or plan of its intended tax revenues and
expenditures in a financial year.
BUDGET DEFICIT This financial situation occurs if a government plans to spend more than it
forecasts to earn in tax revenues over the financial year. An actual budget deficit occurs if actual
public spending exceeds actual tax revenues.
, BUDGET SURPLUS This financial situation occurs if a government plans to spend more than it
forecasts to earn in tax revenues over the financial year. An actual budget deficit occurs if actual
tax revenues exceed actual public spending.
BULL The name given to a stock market speculator who buys shares in the hope their price will
rise quickly so they can sell them for a profit. A bull market refers to a situation in which the
average prices of shares on the stock market is rising.
CAPTAL EMPLOYED. Money invested in or tied up in productive assets in a firm that
enable it to produce goods and services and generate revenues.
CAPITAL INTENSIVE A production process that employs a significant amount of capital
equipment relative to labour.
CARTEL A formal agreement between a group of powerful producers to control the market
supply and price of their product. OPEC (the Organization of the Petroleum Exporting
Countries) is one of the most widely known examples of a cartel.
CENTRAL BANK The main bank in an economy, responsible for managing the stability of
its national currency and money supply, and for regulating its banking system.
CETERIS PARIBUS A term meaning 'all other factors being unchanged'.
CLOSED SHOP This exists when trade union membership is made a compulsory condition
of a taking a job in a particular workplace or organization.
COLLATERAL Security taken by a lender against a loan, such as a valuable asset owned
by the borrower that the lender could sell to recover the value of the loan if the borrower is
unable to repay it.
COLLECTIVE BARGAINING The process of negotiating pay and working conditions
between trade union representatives and employers.
COMMERCIAL BANK A type of bank with individual and business customers that has
retail branches in many towns and cities.
COMMERCIAL LOAN A bank loan to a firm, usually with a fixed repayment term and
interest rate.
COMMON STOCK Also known as ordinary shares or equity, common stock are shares issued
by limited companies that allow their holders to vote on company directors and policy at annual
general meetings.
COMPARATIVE ADVANTAGE The ability of a region or country to produce a goods or
services at a lower opportunity cost than another.
