Industry- a group of firms producing the same product

Primary sector- covers industries which extract natural resources

Secondary sector- covers manufacturing and construction industries

Tertiary sector- covers industries which provide services

Quatemary sector- covers service industries that are knowledge based

internal growth- an increase in the size of a firm resulting from it enlarging existing
plants or opening new ones

External growth- an increase in the size of a firm resulting from it merging or taking
over another firm

Horizontal merger- the merger of firms producing the same product and at the same
stage of production

Vertical merger- the merger of firms producing the same product, but at a different
stage of production

Vertical merger backwards- a merger with a firm at an earlier stage of the supply chain

Vertical merger forwards- a merger with a firm at a later stage of the supply chain

Conglomerate merger- a merger between firms producing different products

Internal economies of scale - lower long run average costs resulting from a firm growing
in size

External economies of scale - lower long run average costs resulting from an industry
growing in size

Internal diseconomies of scale - higher long run average costs arising from a firm
growing too large

External diseconomies of scale - higher long run average costs arising from an industry
growing too large

Corporation tax- a tax on profits of a company

Total cost- the total amount that has to be spent on the factors of production used to
produce a product

Average total cost - total cost divided by output

Fixed costs- cost which do not change with output in the short run

Average fixed cost- total fixed cost divided by output

Variable cost- costs that change with output

Average variable cost- total variable cost divided by output

Price- the amount of money that has to be given to obtain a product

Total revenue- the total amount of money received from selling a product

Average revenue- the total revenue divided by the quantity sold

Profit satisficing - sacrificing some profit to achieve some goals

Profit maximisation - making as much profit as possible

Market structure- the conditions which exist in a market including the number of firms

Competitive market- a market with a number of firms that compete with each other

Monopoly- a market with a single supplier

Normal profit- the minimum level of profit required to keep a firm in the industry in the
long run.

Supernormal profit- profit above that needed to keep a firm in the market in the long
run.

Barrier to entry- anything that makes it difficult for a firm to start producing the product

Barrier to exit- anything that makes it difficult for a firm to stop producing the product

Scale of production- the size of production units and the methods of production used

Sunk costs- costs that cannot be recovered if the firm leaves the industry,

Local government- a government organisation with the authority to administer a range

of policies within an area of the country

Natural monopoly- an industry where a single firm can produce at a lower average cost
than two or more firms because of the existence of significant economies of scale
Strategic industries- industries are important for the economic development and safety
of the country

National champions- industries that are, or have the potential to be, world leaders

Trade blocs- a regional group of countries that remove trade restrictions between them

Free international trade- the exchange of goods and services between countries without
restriction

Economic growth- an increase in the output of an economy in the long run, an increase
in the economy's productive potential

Actual economic growth- an increase in the output of an economy

Potential economic growth- an increase in an economy's productive capacity

Aggregate demand - the total demand for a country's product at a given price level. It
consists of consumer expenditure, investment, government spending and net exports
(exports-imports)

Aggregate supply- the total amount of goods and services that domestic firms are
willing to supply at a given price level

Full employment- the lowest level of unemployment possible

Economically active- being a member of the labour force

Unemployment rate- the percentage of the labour force who are willing and able to
work but are without jobs

Price stability- the price level in the economy not changing significantly over time
Inflation rate- the percentage rise in the price level of goods and services over time

Balance of payments- the record of a country's economic transactions with other

countries

Budget- the relationship between government revenue and government spending

Budget deficit- government spending is higher than government revenue

Budget surplus- government revenue is higher than government spending

National debt- the total amount the goverment has borrowed over time

Multiplier effect- the final impact on aggregate demand being greater than initial change
Direct taxes- taxes on income and wealth

Indirect taxes- taxes on expenditure

Progressive tax- one which takes a larger percentage of the income or wealth of the rich

Proportional tax- one which takes the same percentage of income or wealth of all
taxpayers

Regressive tax- one which takes a larger percentage of the income or wealth of the poor

Automatic stabilisers- forms of government expenditure and taxations that reduce

fluctuations in economic activity, without any change in government policy

Inflation- the rise in the price level of goods and services over time

Informal economy- that part of the economy that is not regulated, protected or taxed by
the government

Flat taxes- taxes with a single rate

Fiscal policy- decisions on government spending and taxation designed to influence

aggregate demand

Expansionary fiscal policy- rises in government expenditure and/or cuts in taxation

designed to increase aggregate demand

Contractionary fiscal policy - cuts in government expenditure and/or rises in taxation

designed to reduce aggregate demand

Monetary policy- decisions on the money supply, the rate of interest and the exchange
rate taken to influence aggregate demand

Foreign exchange rate- the price of one currency in terms of anther currency or
currencies

Expansionary monetary policy- increases in the money supply and/or the reduction in
the rate of interest designed to increase aggregate demand

Contractionary monetary policy- cuts in the money supply or growth of money supply
and/or rises in the rate of interest designed to reduce aggregate demand

Supply-side policy- measures designed to increase aggregate supply

Deregulation- the removal of rules and regulations

Gross domestic product (GDP)- the total output of a country

Circular flow of income- the movement of expenditure, income and output around the
economy

Value added- the difference between the sales revenue received and the cost of raw
materials used.

Transfer payments- transfers of income from one group to another not in return for
providing a good or service

Nominal GDP- GDP at current market prices and so, not adjusted for inflation

Real GDP- GDP at constant prices and so, adjusted for inflation

Subsistence agriculture - the output agricultural goods for farmers' personal use

Recession - a reduction in real GDP over a period of six months or more

International Monetary Funds (IMF) – an international organisation which promotes

international cooperation and helps countries with balance of payments problems

Sustainable economic growth- economic growth that does not endanger the country's
ability to grow in the future

Employment- being involved in a productive activity for which a payment is received

Unemployment - being without a job while willing and able to work

Claimant count- a measure of unemployment which counts as unemployed these in

receipt of unemployment benefits

Labour force survey (ILO) Measure - a measure of unemployment which counts as

unemployed people who identify as such in a survey

Frictional unemployment- temporary unemployment arising from workers being in

between jobs

Structural unemployment - unemployment caused by long-term changes in the pattern

of demand and methods of production

Cyclical unemployment - unemployment caused by a lack of aggregate demand

Search unemployment - unemployment arising from workers who have lost their jobs,
looking for a job they are willing to accept
Casual unemployment- unemployment arising from workers regularly being between
periods of employment

Seasonal unemployment- unemployment caused by a fall in demand at particular times

of the year

Regional unemployment- unemployment caused by a decline in job opportunities in a

particular area of the country

Technological unemployment- unemployment caused by workers being replaced by

capital equipment

Economically active- those in the labour force, both employed or unemployed

Economically inactive- those not in the labour force

Labour market rate- the proportion of the working age population who are in the labour
force

Deflation- a sustained fall in the prices of goods and services

Disinflation- a fall in the rate of inflation

Consumer Index price (CPI)- a measure of the weighted average of the prices of a
representative basket of goods and services.

Cost-push inflation- rises in the price level caused by higher costs of production

Demand-pull inflation- rises in the price level caused by excess demand

Wage-price spiral- wage rises leading to higher prices, in turn, lead to further wage
claims and price rises

Monetary inflation- rises in the price level caused by an excessive growth of the money
supply

Monetarists- a group of economists who think that inflation is caused by the money
supply growing more rapidly than output.

Hyperinflation- a very rapid and large rise in the price level

Index-linking- changing payments in line with changes in the inflation rate

Menu costs- costs involved in having to change prices as a result of inflation

Shoe-leather costs- costs involved in moving money around to gain higher interest rates
Human development index – a measure of living standards which takes into account
income, education and life expectancy.

Genuine Progress Indicator- a measure of living standards which takes into account a
variety of indicators including income, leisure time, distribution of income and
environmental standards.

Purchasing power parity- an exchange rate based on the ratio of the price of a basket of
a products in different countries

Gender Inequality index – a measure of gender inequalities in terms of reporoductive

health, empowerment and labour market participating.

Happy life expectancy index- an index which multiplies life expectancy by a happiness
index

Gross national happiness- – a measure of living standards which includes a wide

number of indicators including income, psychological wellbeing, education, and
ecological diversity.

Absolute poverty- a condition where people's income is too low to enable them to meet
their basic needs

Relative poverty - a condition where people are poor in comparison to others in the
country. Their income is too low to enable them to enjoy the average standard of living
in their country

Vicious circle of poverty - a situation where people become trapped in poverty

Emigration- the act of leaving the country to live in another country

Birth rate- the number of births in a year per 1000 population in a year

Death rate- the number of deaths in a year per 1000 population in a year

Infant mortality rate- the number of deaths per 1000 live births in a year

Net immigration- more people coming to live in the country than people leaving the
country to live elsewhere.

Net migration- the difference between immigration and emigration.

Population pyramid- a diagram showing the age and gender structure of a country's
population
Optimum population- the size of population which maximizes the country’s output per
head

Dependency rate- the proportion of the population that has to be supported by the
labour force.

Economic development- an improvement in economic welfare

Tarrif- tax on imports

Globalisation- the process by which the world is becoming increasingly interconnected

through trade and other links

Quota- a limit placed on imports and exports

Embargo- a ban placed on imports and exports

Exchange control- a limit on the amount of foreign currency that can be obtained

Voluntary export restraints- agreements with other governments to restrict their

exports to the country.

Infant industries- new industries with relatively low output and high cost

Declining industries- old industries which are going out of business

Strategic industries- industries that are considered important for the survival or
development of the country

Dumping- selling products in a foreign market at a price below the cost of production

Foreign exchange rate- the price of one currency in terms of another currency or
currencies

Fixed exchange rate - an exchange rate whose value is set at a particular value in terms
of another currency or currencies

Devaluation- a fall in the value of a fixed exchange rate

Revaluation- a rise in the value of a fixed exchange rate

Floating exchange rate - an exchange rate which can change frequently as it determined
by market forces

Appreciation- a rise in the value of a floating exchange rate

Depreciation- a fall in the value of a floating exchange rate

Foreign direct investment- setting up production units or buying existing production

units in another country.

Hot money flows- the movement of money around the world to take advantage of
differences in interest rates and exchange rates.

Trade in goods- the value of exported goods and imported goods

Trade in goods deficit- expenditure on imported goods exceeding revenue from

exported goods

Trade in goods surplus - revenue from exported goods exceeding expenditure on

imported goods

Trade in services- the value of exported services and imported services

Trade in service surplus- revenue from exported services exceeding expenditure on

imported services.

Primary income - income earned by people working in different countries and

investment income which comes into and goes out of the country

Secondary income - transfers between residents and non-residents of money, goods or

services, not in return for anything else

Current account balance- a record of the income received and the expenditure made by
a country in its dealings with other countries