176 terms
Absolute Advantage
Absolute advantage occurs when one producer can produce more of a good with fewer inputs than another. If a country can
Theme 1: Introduction to Markets and Market Failure
Aggregate Demand
Aggregate demand (AD) is the total spending on goods and services produced within an economy at different overall price
Theme 2: The UK Economy
Aggregate Supply
Aggregate supply (AS) represents the total output firms are willing to supply at different price levels. It includes sho
Theme 2: The UK Economy
Allocative Efficiency
Allocative efficiency occurs when resources are distributed to produce the combination of goods that maximises total wel
Theme 1: Introduction to Markets and Market Failure
Balance of Payments
The balance of payments (BoP) is an accounting statement recording all economic transactions between a country and other
Theme 2: The UK Economy
Bank of England
The Bank of England is the UK's central bank, operating independently (since 1997) from government. The Monetary Policy
Theme 2: The UK Economy
Boom
A boom is an expansion phase of the business cycle with rapid real GDP growth, falling unemployment, rising investment,
Theme 2: The UK Economy
Circular Flow
The circular flow of income is a model representing how money and goods flow in an economy. Firms pay wages to workers w
Theme 2: The UK Economy
Command Economy
A command economy is a system where the state owns resources and centrally plans production decisions through government
Theme 1: Introduction to Markets and Market Failure
Comparative Advantage
Comparative advantage exists when a producer can make a good at lower opportunity cost than others. It differs from abso
Theme 1: Introduction to Markets and Market Failure
Complements
Complements are goods that are consumed together or in conjunction. They have negative cross-price elasticity - when the
Theme 1: Introduction to Markets and Market Failure
Contestable market
A contestable market is characterised by low barriers to entry and exit, meaning potential competition threatens incumbe
Theme 3: Business Behaviour and the Labour Market
CPI
The Consumer Price Index (CPI) measures inflation by tracking price changes in a basket of goods and services purchased
Theme 2: The UK Economy
Deadweight Loss
Deadweight loss is the reduction in total economic surplus resulting from market distortion. It represents inefficiency
Theme 1: Introduction to Markets and Market Failure
Deflation
Deflation is a persistent fall in the general price level, where inflation is negative. Prices fall and the purchasing p
Theme 2: The UK Economy
Demand Curve
The demand curve is a downward-sloping line on a diagram showing the inverse relationship between price and quantity dem
Theme 1: Introduction to Markets and Market Failure
Demand for labour
Demand for labour is a derived demand, meaning it depends on demand for the final products that labour produces. Firms h
Theme 3: Business Behaviour and the Labour Market
Demerit Goods
Demerit goods are goods with negative externalities where the social cost exceeds the private cost, and consumers undere
Theme 1: Introduction to Markets and Market Failure
Disinflation
Disinflation is a reduction in the rate of inflation. Prices continue increasing but at a slower pace. For example, infl
Theme 2: The UK Economy
Economic Growth
Economic growth is the annual percentage increase in real GDP, reflecting increased output capacity. Actual growth is th
Theme 2: The UK Economy
Exchange Rate Depreciation
Currency depreciation occurs when a currency's value decreases relative to other currencies. The pound depreciates if it
Theme 4: A Global Perspective
Exports
Exports are goods and services produced within a country but sold to foreign buyers. They represent demand for domestic
Theme 2: The UK Economy
Fiscal Policy
Fiscal policy comprises government decisions on spending and taxation levels to influence AD, output, and inflation. Exp
Theme 2: The UK Economy
Fixed Exchange Rates
Fixed exchange rates occur when governments maintain currency values at predetermined levels. Central banks intervene in
Theme 4: A Global Perspective
Floating Exchange Rates
Floating exchange rates are determined entirely by market forces of supply and demand for currencies. Governments do not
Theme 4: A Global Perspective
Free Market Economy
A free market economy is a system where resources are allocated through market mechanisms (supply and demand), individua
Theme 1: Introduction to Markets and Market Failure
GDP
Gross Domestic Product (GDP) is the market value of all final goods and services produced within a country's borders in
Theme 2: The UK Economy
Globalisation
Globalisation refers to the process of increasing economic, social, and cultural integration across borders through trad
Theme 4: A Global Perspective
GNI
Gross National Income (GNI) is the total income earned by nationals of a country, including income from investments abro
Theme 2: The UK Economy
Government Failure
Government failure occurs when government intervention causes greater welfare loss than the market failure it attempts t
Theme 1: Introduction to Markets and Market Failure
Government intervention in markets
Government intervention in markets involves regulatory actions to address market failures, promote competition, protect
Theme 3: Business Behaviour and the Labour Market
Government Spending
Government spending (G) includes expenditure on goods and services (NHS, education, defence), investment (infrastructure
Theme 2: The UK Economy
Imports
Imports are goods and services produced in foreign countries but purchased by domestic residents and firms. They reduce
Theme 2: The UK Economy
Indirect Taxes
Indirect taxes are duties on specific goods and services, adding to their prices. Examples include VAT (value-added tax)
Theme 1: Introduction to Markets and Market Failure
Inferior Goods
Inferior goods have negative income elasticity - as incomes rise, demand falls. These are typically lower-quality or bas
Theme 1: Introduction to Markets and Market Failure
Inflation
Inflation is a persistent rise in the general price level of goods and services, reducing the purchasing power of money.
Theme 2: The UK Economy
Information Asymmetry
Information asymmetry occurs when buyers and sellers have different information about product quality, price, or other r
Theme 1: Introduction to Markets and Market Failure
Injections and Withdrawals
Injections are income additions from outside the households-firms circuit: investment (I), government spending (G), and
Theme 2: The UK Economy
Interest Rates
Interest rates are the price of borrowing. The central bank (Bank of England) sets the base rate, influencing all other
Theme 2: The UK Economy
Investment
Investment (I) comprises business spending on capital goods (machinery, buildings, vehicles) to produce future output. I
Theme 2: The UK Economy
Law of Demand
The law of demand states that there is an inverse relationship between price and quantity demanded, ceteris paribus. Whe
Theme 1: Introduction to Markets and Market Failure
LRAS
Long-run aggregate supply (LRAS) is typically vertical at the economy's potential output, representing the maximum susta
Theme 2: The UK Economy
Luxury Goods
Luxury goods have income elasticity greater than 1 - demand increases more than proportionately with income. These are g
Theme 1: Introduction to Markets and Market Failure
Marginal Propensity to Consume
Marginal propensity to consume (MPC) is the ratio of change in consumption to change in income. It shows how much of an
Theme 2: The UK Economy
Market Failure
Market failure occurs when the free market fails to allocate resources efficiently, resulting in deadweight loss. Major
Theme 1: Introduction to Markets and Market Failure
Merit Goods
Merit goods are goods with positive externalities where the social benefit exceeds the private benefit, and consumers un
Theme 1: Introduction to Markets and Market Failure
Mixed Economy
A mixed economy blends free market mechanisms with government intervention and control. The private sector operates thro
Theme 1: Introduction to Markets and Market Failure
Monetary Policy
Monetary policy involves central bank actions to control money supply and interest rates, aiming to achieve stable price
Theme 2: The UK Economy
Monopolistic competition
Monopolistic competition combines elements of perfect competition and monopoly: many firms selling slightly differentiat
Theme 3: Business Behaviour and the Labour Market
Monopoly
Monopoly is a market structure with one firm (the monopolist) supplying the entire market for a product with no close su
Theme 3: Business Behaviour and the Labour Market
Monopsony
Monopsony is a market structure where a single buyer (or very few buyers) purchases a large proportion of industry outpu
Theme 3: Business Behaviour and the Labour Market
Moral Hazard
Moral hazard occurs when an individual or firm changes behaviour after a transaction, taking greater risks because they
Theme 1: Introduction to Markets and Market Failure
Multiplier
The multiplier is the ratio of total change in national income to the initial change in autonomous spending. A multiplie
Theme 2: The UK Economy
Multiplier Effect
The multiplier describes how initial spending changes translate into larger output changes. The multiplier = 1/(1-MPC) w
Theme 2: The UK Economy
Net Exports
Net exports (X - M) equals exports minus imports. Positive net exports (exports exceed imports) contribute to AD; negati
Theme 2: The UK Economy
Nominal GDP
Nominal GDP measures gross domestic product using current-year prices. It grows whenever prices increase (inflation) or
Theme 2: The UK Economy
Normal Goods
Normal goods are goods with positive income elasticity of demand - as incomes rise, demand increases. Most goods are nor
Theme 1: Introduction to Markets and Market Failure
Perfect competition
Perfect competition is a market structure characterised by: many firms, identical products, perfect information, no barr
Theme 3: Business Behaviour and the Labour Market
Phillips Curve
The Phillips curve shows the relationship between inflation and unemployment. The original inverse relationship (lower u
Theme 2: The UK Economy
Price Controls
Price controls are legal limits on prices set by government. A price ceiling sets a maximum price (e.g., rent control);
Theme 1: Introduction to Markets and Market Failure
Price Elasticity of Supply
Price elasticity of supply (PES) measures the responsiveness of quantity supplied to price changes. It is calculated as
Theme 1: Introduction to Markets and Market Failure
Price Mechanism
The price mechanism is the process through which prices adjust to clear markets and allocate resources. Prices fall when
Theme 1: Introduction to Markets and Market Failure
Principal-agent problem
The principal-agent problem occurs when those managing a business (agents/managers) have different objectives from those
Theme 3: Business Behaviour and the Labour Market
Producer Surplus
Producer surplus is the profit earned by suppliers from selling goods. It is the difference between the market price rec
Theme 1: Introduction to Markets and Market Failure
Productivity
Productivity measures output produced per unit of input (labour, capital). Labour productivity (output per worker) is mo
Theme 2: The UK Economy
Rational Decision Making
Rational decision making is the process of comparing marginal costs and marginal benefits of alternatives to make the ch
Theme 1: Introduction to Markets and Market Failure
Real GDP
Real GDP measures gross domestic product using prices from a base year, eliminating the effect of inflation. It shows ho
Theme 2: The UK Economy
Recession
A recession is a contraction phase of the business cycle characterised by declining real GDP, rising unemployment, and f
Theme 2: The UK Economy
Regulation
Regulation comprises legally enforceable rules controlling business behaviour, product standards, safety requirements, a
Theme 1: Introduction to Markets and Market Failure
Regulatory Capture
Regulatory capture occurs when firms manipulate regulators through lobbying, revolving doors, or information asymmetries
Theme 3: Business Behaviour and the Labour Market
Resources
Resources (also called factors of production) are the inputs required to produce goods and services. The four main categ
Theme 1: Introduction to Markets and Market Failure
RPI
The Retail Price Index (RPI) measures inflation similar to CPI but includes housing costs such as mortgage interest paym
Theme 2: The UK Economy
Specialisation
Specialisation occurs when economic units (individuals, firms, or countries) concentrate their productive effort on the
Theme 1: Introduction to Markets and Market Failure
Stakeholders
Stakeholders are individuals or groups with interest in firm decisions and outcomes. They include shareholders (owners),
Theme 1: Introduction to Markets and Market Failure
Subsidies
Subsidies are government payments to producers or consumers, reducing the effective price of goods and services. Produce
Theme 1: Introduction to Markets and Market Failure
Substitutes
Substitutes are goods that are interchangeable or serve similar purposes. When one substitute's price increases, demand
Theme 1: Introduction to Markets and Market Failure
Supply Curve
The supply curve is an upward-sloping line showing the positive relationship between price and quantity supplied. It sho
Theme 1: Introduction to Markets and Market Failure
Supply of labour
Supply of labour is the quantity of workers willing to work at different wage levels. Labour supply is upward-sloping at
Theme 3: Business Behaviour and the Labour Market
Supply-Side Policies
Supply-side policies aim to increase aggregate supply and potential output through education, infrastructure investment,
Theme 2: The UK Economy
Terms of Trade
Terms of trade measure the relative prices of exports and imports. Terms of trade = (Index of Export Prices / Index of I
Theme 4: A Global Perspective
Trade Balance
The trade balance equals the value of exports minus imports. A trade surplus (exports exceed imports) creates a positive
Theme 4: A Global Perspective
1.1.1: Scarcity
Scarcity is the economic problem arising from the infinite wants of consumers but limited resources available to satisfy
Theme 1: Introduction to Markets and Market Failure
1.1.1: Scarcity
Ceteris paribus, meaning 'all other things being equal,' is a fundamental assumption in economic analysis. It allows eco
Theme 1: Introduction to Markets and Market Failure
1.1.2: Opportunity Cost
Opportunity cost is the benefit foregone from the next best alternative when a choice is made. It reflects the real cost
Theme 1: Introduction to Markets and Market Failure
1.1.2: Opportunity Cost
Economic models rely on assumptions to simplify reality and make analysis tractable. Common assumptions include perfect
Theme 1: Introduction to Markets and Market Failure
1.1.3: Production Possibility Frontier
The Production Possibility Frontier (PPF), also called the Production Possibility Curve (PPC), illustrates the maximum p
Theme 1: Introduction to Markets and Market Failure
1.1.3: Production Possibility Frontier
Positive economics is objective, factual analysis of economic relationships and phenomena that can be tested empirically
Theme 1: Introduction to Markets and Market Failure
1.2.10: Consumer Surplus
Consumer surplus is the welfare gain consumers receive from purchasing goods. It is the difference between the maximum p
Theme 1: Introduction to Markets and Market Failure
1.2.10: Consumer Surplus
Behavioural economics recognises that people do not always act rationally. Cognitive biases, emotions, social influences
Theme 1: Introduction to Markets and Market Failure
1.2.12: Movements vs Shifts
A movement along a demand or supply curve occurs when quantity changes due to a price change - the point moves along the
Theme 1: Introduction to Markets and Market Failure
1.2.12: Movements vs Shifts
Necessity goods are normal goods with low income elasticity of demand (YED between 0 and 1). As income rises, demand inc
Theme 1: Introduction to Markets and Market Failure
1.2.13: Shortage
A shortage occurs when quantity demanded exceeds quantity supplied at a given price. This indicates the price is below t
Theme 1: Introduction to Markets and Market Failure
1.2.13: Shortage
The income effect is the change in quantity demanded resulting from a change in real income (purchasing power) caused by
Theme 1: Introduction to Markets and Market Failure
1.2.14: Surplus
A surplus occurs when quantity supplied exceeds quantity demanded at a given price. This indicates the price is above th
Theme 1: Introduction to Markets and Market Failure
1.2.14: Surplus
The substitution effect is the change in quantity demanded resulting from a change in relative prices, assuming real inc
Theme 1: Introduction to Markets and Market Failure
1.2.3: Equilibrium
Market equilibrium occurs where the demand curve intersects the supply curve, meaning the quantity consumers demand equa
Theme 1: Introduction to Markets and Market Failure
1.2.3: Equilibrium
Diminishing marginal utility states that as consumption of a good increases, the additional satisfaction gained from eac
Theme 1: Introduction to Markets and Market Failure
1.2.6: Price Elasticity of Demand
Price elasticity of demand (PED) measures the responsiveness of quantity demanded to changes in price. It is calculated
Theme 1: Introduction to Markets and Market Failure
1.2.6: Price Elasticity of Demand
Giffen goods are inferior goods where the income effect of a price change outweighs the substitution effect, causing dem
Theme 1: Introduction to Markets and Market Failure
1.2.7: Income Elasticity of Demand
Income elasticity of demand (YED) measures how quantity demanded changes as consumer income changes. It is calculated as
Theme 1: Introduction to Markets and Market Failure
1.2.7: Income Elasticity of Demand
Veblen goods, also called positional goods, are goods where higher prices actually increase demand because consumers des
Theme 1: Introduction to Markets and Market Failure
1.2.8: Cross-Price Elasticity of Demand
Cross-price elasticity of demand (XED) measures how quantity demanded of one good responds to price changes in another g
Theme 1: Introduction to Markets and Market Failure
1.2.8: Cross-Price Elasticity of Demand
Complementarity describes the relationship between goods that are consumed together. Strong complements are goods rarely
Theme 1: Introduction to Markets and Market Failure
1.3.1: Externalities
Externalities are the uncompensated side effects of production or consumption that affect third parties. Negative extern
Theme 1: Introduction to Markets and Market Failure
1.3.1: Externalities
Barriers to entry are obstacles that make it difficult or impossible for new competitors to enter a market. These includ
Theme 1: Introduction to Markets and Market Failure
1.3.2: Negative Externality
A negative externality occurs when production or consumption imposes uncompensated costs on third parties. The social co
Theme 1: Introduction to Markets and Market Failure
1.3.2: Negative Externality
Sunk costs are expenditures that have already been made and cannot be recovered regardless of future decisions. In ratio
Theme 1: Introduction to Markets and Market Failure
1.3.3: Positive Externality
A positive externality occurs when production or consumption provides uncompensated benefits to third parties. The socia
Theme 1: Introduction to Markets and Market Failure
1.3.3: Positive Externality
The free rider problem occurs when a good's non-excludability allows people to benefit without paying. This creates a ma
Theme 1: Introduction to Markets and Market Failure
1.3.4: Public Goods
Public goods are goods and services characterised by non-excludability (cannot prevent non-payers from consuming) and no
Theme 1: Introduction to Markets and Market Failure
1.3.4: Public Goods
The tragedy of the commons occurs when common pool resources (shared but rival goods) are overexploited because users do
Theme 1: Introduction to Markets and Market Failure
2.2.2: Consumption
Consumption (C) is household spending on goods and services. It is the largest component of AD in most developed economi
Theme 2: The UK Economy
2.2.2: Consumption
Aggregate demand shifts result from changes in consumption (from income, wealth, confidence, interest rates), investment
Theme 2: The UK Economy
2.3.2: SRAS
Short-run aggregate supply (SRAS) shows the positive relationship between the price level and the quantity of output fir
Theme 2: The UK Economy
2.3.2: SRAS
Short-run AS shifts result from input cost changes (wages, raw material prices, energy), exchange rates, and tax rates.
Theme 2: The UK Economy
2.5.3: Output Gap
The output gap is the difference between actual real GDP and potential (full capacity) output. Positive gap (actual abov
Theme 2: The UK Economy
2.5.3: Output Gap
The business cycle describes regular patterns of economic expansion (boom), peak, contraction (recession), and trough. P
Theme 2: The UK Economy
2.6.5: Policy Conflicts and Trade-Offs
Policy conflicts arise because macroeconomic objectives (stable prices, full employment, growth, balanced trade) cannot
Theme 2: The UK Economy
2.6.5: Policy Conflicts and Trade-Offs
Macroeconomic objectives (growth, low unemployment, price stability, balanced payments) often conflict. Pursuing one may
Theme 2: The UK Economy
3.1.2: Business growth
Business growth refers to the expansion of a firm's operations, typically measured by increases in revenue, sales, asset
Theme 3: Business Behaviour and the Labour Market
3.1.2: Business growth
Organic growth is the expansion of a business through internal development, including increasing sales of existing produ
Theme 3: Business Behaviour and the Labour Market
3.1.2: Business growth
Vertical integration occurs when a firm expands by integrating with other firms at different stages of the supply chain.
Theme 3: Business Behaviour and the Labour Market
3.1.2: Business growth
Horizontal integration is the merger or acquisition of firms operating at the same stage of the production process and t
Theme 3: Business Behaviour and the Labour Market
3.1.2: Business growth
Conglomerate integration (or diversification) occurs when a firm expands into industries completely unrelated to its cur
Theme 3: Business Behaviour and the Labour Market
3.1.3: Mergers and acquisitions
A merger occurs when two firms of roughly equal size combine to form a new entity, whilst an acquisition involves one fi
Theme 3: Business Behaviour and the Labour Market
3.1.3: Mergers and acquisitions
A demerger occurs when a firm separates into two or more independent companies by dividing assets and operations. This r
Theme 3: Business Behaviour and the Labour Market
3.2.1: Profit maximisation
Profit maximisation is the traditional economic assumption that firms set output where marginal revenue equals marginal
Theme 3: Business Behaviour and the Labour Market
3.2.1: Profit maximisation
Revenue maximisation occurs where marginal revenue equals zero (MR = 0), corresponding to the highest point on the total
Theme 3: Business Behaviour and the Labour Market
3.2.1: Profit maximisation
Satisficing is a behavioural objective where firms target achieving acceptable or satisfactory profit levels rather than
Theme 3: Business Behaviour and the Labour Market
3.2.1: Profit maximisation
Sales maximisation is equivalent to revenue maximisation, where the firm pursues maximum sales quantity and revenue (MR
Theme 3: Business Behaviour and the Labour Market
3.3.1: Total revenue
Total revenue (TR) is the firm's total income from sales, calculated as Price × Quantity (P × Q). It represents the tota
Theme 3: Business Behaviour and the Labour Market
3.3.1: Total revenue
Average revenue (AR) is calculated as Total Revenue ÷ Quantity (TR ÷ Q), representing the revenue per unit sold. It equa
Theme 3: Business Behaviour and the Labour Market
3.3.1: Total revenue
Marginal revenue (MR) is the additional revenue received from selling one additional unit of output, calculated as Chang
Theme 3: Business Behaviour and the Labour Market
3.3.2: Total cost
Total cost (TC) is the sum of all costs incurred in producing a given level of output. It comprises Total Fixed Cost (TF
Theme 3: Business Behaviour and the Labour Market
3.3.2: Total cost
Total fixed cost (TFC) represents all costs that remain constant regardless of output level in the short run. These incl
Theme 3: Business Behaviour and the Labour Market
3.3.2: Total cost
Total variable cost (TVC) represents all costs that increase as output increases. These include raw materials, energy, p
Theme 3: Business Behaviour and the Labour Market
3.3.2: Total cost
Average cost (AC), also called average total cost (ATC), equals Total Cost ÷ Quantity (TC ÷ Q). It represents the cost p
Theme 3: Business Behaviour and the Labour Market
3.3.2: Total cost
Average fixed cost (AFC) equals Total Fixed Cost ÷ Quantity (TFC ÷ Q). It represents the fixed cost allocated to each un
Theme 3: Business Behaviour and the Labour Market
3.3.2: Total cost
Average variable cost (AVC) equals Total Variable Cost ÷ Quantity (TVC ÷ Q). It represents the variable cost per unit an
Theme 3: Business Behaviour and the Labour Market
3.3.2: Total cost
Marginal cost (MC) is the cost of producing one additional unit, calculated as Change in Total Cost ÷ Change in Quantity
Theme 3: Business Behaviour and the Labour Market
3.3.3: Economies of scale
Economies of scale exist when a firm's long-run average cost (LRAC) decreases as output increases. These are cost advant
Theme 3: Business Behaviour and the Labour Market
3.3.3: Economies of scale
Diseconomies of scale occur when a firm's long-run average cost (LRAC) increases as output increases beyond minimum effi
Theme 3: Business Behaviour and the Labour Market
3.3.3: Economies of scale
External economies of scale are cost reductions available to firms in an industry regardless of individual firm size, ar
Theme 3: Business Behaviour and the Labour Market
3.3.3: Economies of scale
Minimum efficient scale (MES) is the output level at which long-run average cost is minimised. It represents the smalles
Theme 3: Business Behaviour and the Labour Market
3.3.4: Normal profit
Normal profit is the profit level where Total Revenue equals Total Cost, resulting in zero economic profit. It represent
Theme 3: Business Behaviour and the Labour Market
3.3.4: Normal profit
Supernormal profit (also called economic profit or abnormal profit) occurs when Total Revenue exceeds Total Cost by more
Theme 3: Business Behaviour and the Labour Market
3.3.4: Normal profit
A loss occurs when Total Revenue is less than Total Cost (TR < TC), resulting in negative profit or economic loss. Price
Theme 3: Business Behaviour and the Labour Market
3.4.1: Productive efficiency
Productive efficiency occurs when a firm produces at the minimum point of its average total cost curve, producing the ma
Theme 3: Business Behaviour and the Labour Market
3.4.1: Productive efficiency
Dynamic efficiency refers to a firm's incentive and ability to innovate, invest in research and development, and improve
Theme 3: Business Behaviour and the Labour Market
3.4.1: Productive efficiency
X-inefficiency (or X-ineffectiveness) occurs when a firm operates above its minimum average cost curve, incurring higher
Theme 3: Business Behaviour and the Labour Market
3.4.4: Oligopoly
Oligopoly is a market structure characterised by: few dominant firms (typically 2-10) controlling large market shares, h
Theme 3: Business Behaviour and the Labour Market
3.4.4: Oligopoly
A concentration ratio (CR) measures market concentration by summing the market shares of the largest firms. The most com
Theme 3: Business Behaviour and the Labour Market
3.4.4: Oligopoly
In game theory, the Lanchester equation describes how symmetric competitors in price wars or marketing spending reach eq
Theme 3: Business Behaviour and the Labour Market
3.5.3: Wage determination
Wage determination refers to how wages are set in labour markets. In competitive labour markets, wages equal the margina
Theme 3: Business Behaviour and the Labour Market
3.5.3: Wage determination
Wage discrimination occurs when workers of equal ability and productivity are paid different wages based on personal cha
Theme 3: Business Behaviour and the Labour Market
3.6.1: Competition policy
Competition policy comprises government measures to maintain and promote competitive markets, including merger control,
Theme 3: Business Behaviour and the Labour Market
3.6.1: Competition policy
Privatisation is the sale of state-owned enterprises to private investors and operation by private companies rather than
Theme 3: Business Behaviour and the Labour Market
4.1.6: Protectionism
Protectionist policies include tariffs (taxes on imports), quotas (quantity limits), subsidies to domestic producers, an
Theme 4: A Global Perspective
4.1.6: Protectionism
Tariffs are taxes on imported goods. Ad valorem tariffs are percentage taxes; specific tariffs are per-unit taxes. Both
Theme 4: A Global Perspective
4.1.6: Protectionism
Import quotas limit the total quantity of imports to a fixed level. Unlike tariffs, quotas directly control quantity rat
Theme 4: A Global Perspective
4.1.8: Exchange rates
An exchange rate is the price of one currency in terms of another (e.g., £1 = $1.25). Exchange rates are determined by s
Theme 4: A Global Perspective
4.1.8: Exchange rates
Currency appreciation occurs when a currency's value increases relative to other currencies. The pound appreciates again
Theme 4: A Global Perspective
4.1.8: Exchange rates
The Marshall-Lerner condition states that depreciation improves the trade balance if (PED of exports + PED of imports) >
Theme 4: A Global Perspective
4.2.1: Absolute poverty
Absolute poverty refers to a condition where individuals lack sufficient income or resources to obtain basic necessities
Theme 4: A Global Perspective
4.2.1: Absolute poverty
Relative poverty refers to deprivation relative to average living standards in a society, typically defined as income be
Theme 4: A Global Perspective
4.2.2: Gini coefficient
The Gini coefficient (or Gini index) measures income inequality on a scale from 0 to 1 (or 0% to 100%). A value of 0 ind
Theme 4: A Global Perspective
4.2.2: Gini coefficient
The Lorenz curve is a graph showing the cumulative percentage of income on the y-axis against cumulative percentage of p
Theme 4: A Global Perspective
4.3: Emerging economies
Emerging economies are developing countries experiencing rapid economic growth, industrialisation, and integration into
Theme 4: A Global Perspective
4.3: Emerging economies
Developing economies are low-income countries with limited industrialisation, predominantly agricultural sectors, low pe
Theme 4: A Global Perspective
4.3.2: Foreign direct investment (FDI)
Foreign direct investment (FDI) is investment by multinational enterprises in productive assets in foreign countries, in
Theme 4: A Global Perspective
4.3.2: Foreign direct investment (FDI)
The Harrod-Domar model states growth rate = (Savings Rate × Capital Output Ratio) / 1. Higher savings enable more invest
Theme 4: A Global Perspective
4.3.3: Strategies for economic development
Development strategies are policy frameworks pursued by developing countries to promote economic growth and development.
Theme 4: A Global Perspective
4.3.3: Strategies for economic development
The Lewis model describes development as labour transfer from low-productivity agricultural sector to high-productivity
Theme 4: A Global Perspective
4.3.3: Strategies for economic development
Microfinance provides small loans (typically under $1,000) to poor entrepreneurs unable to access traditional banks. Inc
Theme 4: A Global Perspective