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.
COMPARATIVE ADVANTAGE
The ability of a region or country to produce a goods or services at a lower opportunity cost than another.
NET ADVANTAGES (OF AN OCCUPATION)
The balance of all the advantages and disadvantages of a particular job or occupation that people will consider when deciding whether or not to supply their labour.
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.
RELATIVE POVERTY
An economic condition of having fewer resources than others in the same society, usually measured by the extent to which a person’s or household’s financial resource s fall below the average income level of others in their economy.
DEMAND
The want or willingness with ability to pay of a consumer or group of consumers to buy a good or service.
SUPPLY
The willingness of a producer or group of producers to make a product available.
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.
DERIVED DEMAND
When demand for one good or service occurs as a result of demand for another. The demand for labour by firms is a derived demand because labour is needed to produce goods and services.
EFFECTIVE DEMAND
A consumer want for a product backed by an ability to pay for it.
MARKET DEMAND
The total demand for a product from all its consumers.
MARKET SUPPLY
The total volume or value of a product supplied to a market by all its producers.
MONEY SUPPLY
The total value of bank deposits and notes and coins in an economy.
EXCESS DEMAND
When the market demand for a product exceeds its market supply so there is upward pressure on its market price.
EXCESS SUPPLY
When the market supply of a product exceeds market demand so there is downward pressure on its market price.
DEMAND SIDE POLICY
A government policy designed to manage aggregate demand in the economy in order to control the level of price inflation, employment and output.
SUPPLY SIDE POLICY
A government policy designed to improve the productive capacity of an economy.
HUMAN DEVELOPMENT INDEX (HDI)
A statistical measure complied from different development indicators by the United Nations to measure and contrast economic development in different countries.
CONSUMER PRICE INDEX (CPI)
A measure of inflation based on changes in the average price of a basket of goods and services purchased by a ‘typical’ household and which expresses these average prices as an index number series.
INFLATION
A sustained or ongoing increase in the general level of prices in an economy.
DEFLATION
A fall in the general level of prices in an economy. If the general level of prices is sustained and continues to fall over a long period of time caused by a lack of demand it is referred to as a malign deflation.
STAGFLATION
An economic situation in which both price inflation and unemployment are rising at the same time.
HYPERINFLATION
An inflation rate that is very high and out of control, as result of which confidence in a currency can be lost because its real value is eroded very quickly.
DISINFLATION
A slowdown in the rate at which the general price level is rising over time.
COST-PUSH INFLATION
Persistently rising general price levels caused by increasing production costs.
DEMAND-PULL INFLATION
A persistent increase in the general level of prices resulting from a continued excess of demand over supply.
IMPORTED INFLATION
A sustained increase in the prices of products bought from overseas producers either resulting from their rising costs or a fall in the exchange rate against overseas currencies.
INDEXATION
The automatic adjustment of a monetary variable, such as wages, taxes, welfare or pension benefits, by the increase in the consumer or retail prices index, so that its value rises at the same rate as inflation, i.e. so that the real value of the variable is kept constant.
BASIC WAGE
A guaranteed level of earnings for an employee, excluding any overtime or performance-related pay.
WAGE RATE
The amount paid to an employee per period of time worked or per unit of output produced.
EQUILIBRIUM WAGE RATE
The market clearing rate of pay at which the amount of labour demanded by firms will match the amount supplied.
WAGE-PRICE SPIRAL
An economic situation in which workers demand higher wages to compensate them for the impact of rising inflation on the real value of their earnings and in so doing force producers to pass on increased wage costs to consumers in higher prices,, resulting in even higher wage demands, and so on.
MINIMUM WAGE LEGISLATION
Laws that determine and set the lowest hourly, daily or monthly wage rate or remuneration that employers may legally pay to their workers in exchange for their labour.
IMPORT
A debit or outflow of money from an economy, and its balance of payments, to pay for goods and services produced by firms located overseas.
EXPORT
A credit of flow of income into an economy from overseas in payment for goods and services sold to overseas residents.
INVISIBLE IMPORT
The purchase of a service from an overseas producer. Payment for the service will be debited from the current account of the balance of payments.
INVISIBLE EXPORT
The sale of a service to an overseas resident. Payment received for the service will be credited to current account of the balance of payments of that country.
INCREASING RETURNS TO SCALE
A firm or production process will have increasing returns to scale if the rise in output following an increase in productive scale is proportionately more than the increase in inputs. For example, a firm has increasing returns to scale if it doubles its inputs but output more than doubles. As a result, average unit costs will tend to fall.
CONSTANT RETURNS TO SCALE
A firm or production process will have constant returns to scale if output rises in the same proportion to an increase in inputs.
DECREASING RETURNS TO SCALE
A firm or production process will have decreasing returns to scale if the rise in output following an increase in productive scale is proportionately less than the increase in inputs
ECONOMIES OF SCALE
Internal or external factors that result in falling unit costs of production as the scale of production in a firm or entire industry is increased.
DISECONOMIES OF SCALE
Problems that cause unit costs to rise as a firm expands beyond its optimum size.
EXTERNAL ECONOMIES OF SCALE
Cost advantages enjoyed by a firm and all other firms in the same industry as a result of the scale of the industry being large.
INTERNAL ECONOMIES OF SCALE
Reductions in unit costs of production enjoyed by a firm as it grows in scale.
DEVELOPED ECONOMY
A country with a high level of economic development, including high average incomes, good quality housing, legal and education systems, modern infrastructure and a wide range of industries.
LESS-DEVELOPED ECONOMY
A developing country with a low level of economic development and well-being.
DEVELOPING ECONOMY
A country with a low level of economic development and well-being.
OPEN ECONOMY
A national economy that engages freely in international trade.
COMPETITION POLICY
Government policies to prevent and reduce anti-competitive behaviour and the abuse of monopoly power.
MONETARY POLICY
A government demand-side policy that involves changes in the interest rate or supply of money in an economy to manage the overall level of economic activity.
CONTRACTIONARY FISCAL POLICY
A government macroeconomic policy that involves cutting public expenditure and/or increasing total taxation to reduce aggregate demand if an economy is overheating with the general level of prices rising rapidly.
EXPANSIONARY FISCAL POLICY
A government policy that involves expanding public expenditure and/or cutting total taxation to boost aggregate demand during downturn in economic activity.
POLICY INSTRUMENT
A tool a government can use, such as public expenditure, tax, the interest rates or a regulation, to help achieve its economic objectives.
QUANTITATIVE EASING
A monetary policy action designed to boost the quantity of money held by banks during an economic downturn so they can increase lending to consumers to spend. It involves the central bank buying financial assets from banks.
Aim Institute of Economics 