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Any profit above normal profit.
An increase in real GDP.
Total spending in the economy at various income levels.
When price equals marginal cost so output matches consumer preferences.
Share of income that is consumed.
Restrictions that make it hard for a firm to leave a market.
Obstacles that prevent new firms from entering an industry.
All combinations of two goods affordable at given prices and income.
A formal agreement between firms to limit competition by fixing prices or output.
A simple model showing how income moves around an economy.
Unemployment measure based on people claiming benefits.
An economy that does not engage in international trade.
Household spending on goods and services.
Relationship between consumption and income.
A market where potential entry is easy enough to constrain incumbents.
A project appraisal method weighing costs against benefits.
Loss of total welfare when a market fails to reach equilibrium efficiency.
When output increases by a smaller proportion than inputs.
Demand for a factor of production that depends on the demand for the good it produces.
Countries with high GDP per head and advanced infrastructure.
An economy with low GDP per head and limited industrial base.
Barriers that prevent low-income countries from achieving sustained growth.
The extra satisfaction gained from consuming one more unit falls as more is consumed.
When adding more of a variable factor causes marginal output to fall.
When households spend more than their income, using savings or borrowing.
When average costs rise as output expands in the long run.
Income remaining after direct taxes and including government transfers.
Expanding into new markets or products to reduce dependency and risk.
Improvement in living standards and welfare within an economy.
Best use of resources to maximise output and welfare.
Increase in output and productive capacity over time.
Payment to a factor above the minimum required to keep it in use.
Falling average costs as output increases in the long run.
Cost advantages from producing a range of related goods.
Consumers maximise satisfaction when the last rupee spent on each good yields equal marginal utility.
Fairness in the distribution of income, wealth or opportunities.
Benefits to third parties not directly involved in a transaction.
Costs to third parties not considered by producers or consumers.
Industry-wide cost savings as more firms or infrastructure develop.
Unintended side effects of production or consumption affecting third parties.
An organisation that uses resources to produce goods or services.
Costs that remain constant regardless of output in the short run.
When everyone willing and able to work at current wages has a job, except those temporarily unemployed.
Study of strategic behaviour when the outcome for each firm depends on the actions of rivals.
A number between 0 and 1 that summarizes income inequality; higher values mean greater inequality.
When intervention leads to worse outcomes than the free market solution.
GDP measured at current prices, unadjusted for inflation.
GDP measured at constant prices, adjusted for inflation.
Total income earned by a nation’s residents, wherever production occurs.
Growth by merging with or acquiring firms in the same stage of production.
Composite indicator combining life expectancy, education and GNI per head.
Any market structure that departs from perfect competition (e.g., monopoly, oligopoly, monopolistic competition).
Change in quantity demanded due to a change in real income after a price change.
Shows combinations of two goods that give the consumer equal satisfaction.
All firms producing the same or closely related products.
Costs are higher than necessary, often due to lack of competitive pressure.
Graph that maps the cumulative share of income against the cumulative share of the population.
The ratio of the final change in national income to an initial injection in spending.
Fairness between current and future generations in sharing resources and opportunities.
Curve showing all input combinations that produce a given level of output.
When two or more products are produced together from the same process or resource.
Oligopoly model suggesting rivals match price cuts but not price rises, leading to price rigidity.
Shows how income inequality first rises then falls as an economy develops.
Official measure of unemployment using sample surveys of households.
Output per worker or per hour worked.
Setting price low enough to discourage new entrants but still above cost.
Graph showing cumulative percentage of income received by cumulative percentage of the population.
Tradable rights that allow firms to emit a certain amount of pollution; part of a market-based environmental policy.
A benefit enjoyed by third parties from the actions of others, such as education or vaccination.
When actual output exceeds potential output, usually creating inflationary pressure.
Increase in an economy’s productive capacity over time.
Self-perpetuating situations where low income leads to low savings, low investment, and continued poverty.
When welfare benefits or taxes discourage work and keep people on low incomes.
Exchange rate adjustment that equalises the price of a common basket of goods between countries.
Theory that the terms of trade of primary-product exporters tend to deteriorate over time.
When one dominant firm sets the market price and others follow.
Transfer of ownership of state-owned enterprises to the private sector.
Benefits enjoyed by the individual or firm directly involved in an economic activity.
Costs borne by the individual or firm undertaking the action.
Relationship showing the maximum output achievable from given inputs.
Producing goods at the lowest possible cost for a given level of output.
Tax where the rate increases as income increases.
Legal rights to own, use and transfer assets or resources.
Rules imposed by government agencies to influence or control economic behaviour.
Knowledge-based industries such as research, IT, and consultancy.
Value of output measured at constant prices, adjusted for inflation.
Fiscal or monetary actions aimed at increasing aggregate demand and boosting output.
Tax where the average rate falls as income rises.
Legal or administrative rules governing market or business behaviour.
Minimum payment required to keep a factor of production in its current use.
Business objective to increase total sales volume rather than profit.
Setting output where total revenue is highest, possibly sacrificing some profit.
Making decisions that achieve an acceptable outcome rather than the optimal one.
Part of disposable income not spent on consumption.
Relationship showing how saving changes as income changes.
Part of the economy concerned with manufacturing and construction.
Economic activity that is not recorded in official statistics.
Imputed value assigned to a good or service for which no market price exists.
Firms with limited employees and capital, usually fewer than 250 staff.
Total benefits to society, including both private and external benefits.
Total costs to society, including private and external costs.
Unemployment caused by long-term changes in the economy, such as technology or trade patterns.
Change in demand resulting from a relative change in price compared with substitutes.
Meeting present needs without compromising the ability of future generations to meet their own.
Part of the economy that provides services rather than goods.
Overall satisfaction gained from consuming all units of a good or service.
Periodic fluctuations in economic activity between boom and recession.
Minimum payment required to keep a factor of production in its current occupation.
When people who are willing and able to work cannot find employment.
Welfare benefits paid to everyone regardless of income or circumstances.
Satisfaction or usefulness obtained from consuming a good or service.
Costs that change directly with output; all costs are variable in the long run.
When a firm merges with another at a different stage of production, such as a supplier or distributor.
The total value of a person’s or country’s accumulated assets minus liabilities.
International organisation providing loans and advice to developing countries for development projects.
When firms’ costs are higher than necessary due to organisational slack or lack of competition.
Understanding Economics isn’t just about memorising graphs and equations — it’s about learning the *language* of the subject. Every concept — from opportunity cost to aggregate demand — carries meaning that shapes your understanding of the economy.
This glossary gives you a quick way to:
How to use it effectively:
When you master the vocabulary of Economics, you unlock the power to think — and write — like an economist. Keep revisiting this glossary whenever you meet a new concept. The more fluently you use these terms, the higher you’ll score in your exams! ????
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