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goods and services produced over time.

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 Y11 IGCSE ECONOMICS GLOSSARY  6

unem"loyment unemployed due to a fall in the aggregate demand as the result of aslump or a recession in the economy.

Debt 'ebt is the money owed by a borrower. A country6s national debt is thetotal the government owes from borrowing to cover its excessgovernment spending that could not be covered from the revenueincome.

De4!tion 'e9ation is negative in9ation rate" from a persistent decline in theaverage price of goods and services over a period of time" usuallyfollowing a recession.

Dem!nd 'emand is uantity consumers are willing and able to buy at any givenprice.

Dem!nd*"ullin4!tion

'emand#pull in9ation is the increase in price caused by excessdemand resulting from high national income during a period of boomGtax or interest rate cuts resulting in higher purchasing power or asubstantial increase in government spending.

Dem!nd*side/oli-ies

+overnment policies are designed to aect the aggregate demand inthe economy to in9uence the economic growth" in9ation orunemployment is referred to as demand#side policies" !xpansionarydemand#side policies such as tax cuts" lower interest rates andincrease government spending will increase aggregate demand. Thiswill increase the purchasing power of consumers and /rms" createeconomic growth and create employment" but may cause in9ation.ontractionary demand#side policies such as higher and new taxes"higher interest rates and cuts in government spending will reduceaggregate demand and lower economic growth" lower rates of in9ationbut may increase unemployment as A' falls.

Demerit Goods 'emerit goods such as cigarettes and alcohol are goods that thegovernment would lie the public to consume less of as the social costof these goods generally are greater than private cost of consumingthat product.

De"endent

"o"ul!tion

'ependent population consists of young defendants under the age of

1C and old aged defendants over the age of C0. To calculate thedependent population you add the young and old#aged dependantpopulation and divide the sum by the total population.

'ependent ) Houng dependants E old aged dependants population under 1C years of age over C0 years of age  Total

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 Y11 IGCSE ECONOMICS GLOSSARY  =

help to lower their long run average transport cost.

E$tern!lities !xternalities occur when the action of an individual or /rm aects thirdparties. !-tors o./rodu-tion

4actors of production are resources needed in productionG capital"enterprise" land and labour.

>!ir*Tr!de 4air#trade refers to the preferential treatment of the supplier" usuallyfrom a less economically developed country that will be given a pricethat will ensure a good standard of living and a sustainable demand fortheir product. ommodities such as coee" cocoa and cotton havesuccessfully implemented fair#trade agreements.

>in!n-i!l A--ount 4inancial Accounts in the 7alance of ondon company in!nglandG an American getting a mortgage from a foreign ban such asthe J7" a panish millionaire buying a famous water colour paintingfrom hina or an Australian buying shares in the &ndian toc!xchange are all examples of transactions that will appear in the/nancial account.

>inite 4inite is the /xed limit to the amount of resources available. Thesupply of oil" gas and coal are /nite as they cannot be replaced oncethey have been consumed" as there is only a limited supply of them inthe world.

>is-!l "oli-ies 4iscal policies are concerned with the control of governmentexpenditure of government revenue. The government trying to cut thenational debt has a choice of cutting government expenditure or

raising government revenue. The IB government is currently doingboth by withdrawing troops from Afghanistan t cut governmentexpenditure and increasing government revenue by introducing a 50%tax rate for those earning over 100"000p.a..

>i$ed Costs 4ixed costs are factors of production that does not change withchanges in the uantity produced" such as rent" /re insurance andsalary of worers.

>i$ed E$-3!ngeR!tes

4ixed !xchange 3ate refers to the set price of one currency againstanother. The exchange rate of the Jong Bong currency is /xed at $K.Lagainst one I dollar.

>le$ible 7or?ing3ours

4lexible woring hours is an agreement between worers and theiremployer on the hours wored that can be changed when worersneed to change the hours they wor. This permits more students andfemale worers" especially mothers with children to wor.

>ree >lo!tingE$-3!nge R!tes

 The Inited Bingdom operates a free#9oating exchange rate where theprice of the sterling is determined by the demand and supply of thepound.

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>ree M!r?et A free#maret exists where buyers and sellers can enter and leave anindustry. There are no barriers to entry or exit. The allocation ofresources is determined by the euilibrium price where demand eualssupply.

>ree Resour-es 4ree resources" such as air and sunshine" have no opportunity cost intheir consumption.

>ree*Tr!de 4ree#trade exists when exports and imports are able to move betweencountries without restrictions such as taris or uotas.

>ri-tion!lunem"loyment

4rictional unemployment exists when worers are waiting to tae upemployment" such as a Iniversity graduates waiting to tae up their/rst employment.

Geogr!"3i-immobility

+eographic immobility describes the restriction some worers face in/nding wor because they are unable to tae up wor in another area. This may be due to the high cost of housing in large cities" family tiesin his home area or the need for wor permit or visas in anothercountry.

Gross Domesti-/rodu-t

+ross 'omestic

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system of income tax exist whereby higher tax rates are charged forthose earning higher income.

Indire-t T!$es &ndirect taxes such as VAT or +T are charged on goods or servicespurchased by consumers or /rms" but paid to the government througha third party" usually the seller.

Inel!sti- &nelastic demand or inelastic supply exists when a change in the price

of a good or service results in a smaller change in uantity demandedor uantity supplied.

In.erior goods 'emand for inferior goods will fall as income rises because consumershave more moneyG income eect" and can substitute the good for amore expensive brandG substitutional eect. weet potatoes is aninferior good as hinese people will buy more rice when their incomerises.

In4!tion &n9ation is the sustained rise in the average price of goods andservices over time. The onsumer abour is a factor of production involving the physical and mental

ability of the worforce.

L!bour >or-e  The >abour force consists of the total number of people in thepopulation able to wor in the economy. Jowever" amongst the labourforce there will be people unable to wor or who are voluntarilyunemployed.

L!bour M!r?et  The >abour maret can be for one particular industry or for the regionor the whole country. &t consists of worers willing and able to worand companies willing and able to employ worers.

L!nd >and is a factor of production consisting of natural resources includingthe /elds" coal" oil and water.

Long run >ong run refers to the period of time when all factors of production canbe changed.

M!-roe-onomi-s -acroeconomics studies the interaction of individuals" /rms and thegovernment in the whole economy. &t focuses on how they aect thelevel of Employment" Growth" Government expenditure and revenue"

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In9ation" Trade and Standard of living.M!n!gedE$-3!nge r!tes

-anaged exchange rate refers to the government control of theexchanged rates through interest rates" changes in the money supplyand changes in laws and regulations. &t usually allows the currency to9uctuate between a N9oor6 and a Nceiling6" so there is only a need tointervene when the currency 9oat outside these levels.

M!r?et >!ilure -aret failure exists when the free maret fails to allocate resourceseFciently" demand is not eual to supplyG marginal bene/ts is noteual to marginal costs.

M!$imum7or?ing 3our

ome countries such as 4rance introduced a maximum woring hour"O5 hours in 4rance" as an expansionary supply#side policy in the hopethat /rms will employ more worers to meet their production needsand in so doing reduce the unemployment rate.

Money Su""ly -oney supply is the combined value of the currency and demanddeposit of a country.

Merit Goods -erit goods are goods that are usually under#consumed by society" butthe government would lie the public to consume more of" such aseducation and sporting facilities. They are underprovided by theprivate sector because they are not pro/table.

Mi-roe-onomi-s -icroeconomics is the study of individuals and /rm6s behavior andtheir decision#maing in the use of resources in the economy.

Minimum !ge -inimum wage is the legal lowest value payable to worers set by thegovernment. Jong Bong6s minimum wage is $L per hour.

Mi$ed E-onomies -ixed economies consist of private enterprises and public sectorenterprises.

Monet!ry /oli-ies -onetary policies are government instruments such as changes to theinterest rates" money supply or /nancial regulations that will aect thedemand and supply of the country6s money supply. An expansionarymonetary policy will increase money supply" lower interest rates andrelax /nancial regulations such as the amount of reserves in a ban. Acontractionary policy will reduce money supply" raise interest ratesand increase /nancial regulations such as compulsory credit checs onmortgage borrowers.

Mono"olies A monopoly is where one company such as -icrosoft or +oogledominates the share of the industries6 maret" usually 0% share ofthe maret sales. A pure monopoly is where only one industry exists inthe economy such as the water companies in a region.

Mono"sony A monopsony is where the industry is dominated by one buyer in themaret such as 'el -onte in the buying of pineapples in Benya. A puremonopsony is where there is only one buyer for the products producedsuch as the I government on the purchase of the space shuttle.

MNCs -ultinational national companies are businesses that operate in morethan one country" such as -c'onalds and oca ola. They usuallyconsists of a headuarter in their home country" branch#plants maing

goods world#wideG sometimes in less economically developedcountries where the factors of production is cheaper" and the 3esearchand 'evelopment centers in more economically developed countries.-s are responsible for over a uarter of all world trade and a thirdof global direct investment and over a third of employed worforce.

Multi"lier E8e-t  The multiplier eect describes the additional output" expenditure andincome generated from an initial investment in the economy. 4orexample the government investment in the expansion of the airportwill create Dobs for thousands of people in construction and supportingservices" these worers and companies in turn demand more goodsand resources from businesses not directly related to the airport"higher demand generate higher revenue and encourage higher outputand higher employment" thus generating more income" expenditure

and output in the economy that causes economic growth.N!tion!l Debt ational debt is the total value of debt owed by the government over

time.

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Needs eeds are resources we need to survive" such as food" water andshelter.

Non*"ri-e-om"etition

on#price competition refers to incentives businesses introduce toencourage customers to buy more of its product other than cuttingprice" e.g. competitions" preferential treatment for loyal customers"dierential location for rooms in hotels with a view" etc.

Non*rene7!ble on#renewable resources are those that cannot be replaced once it isconsumed" such as oil" gas and coal.

NGOs on#governmental organisations such as 3ed cross and Pxfam helpcountries to develop for humanitarian reasons rather than for pro/t.

Oligo"olies Pligopolies are groups of companies in an industry that tries toin9uence the price and output in the maret. The mobile phoneindustry is dominated by well#nown brands that set similar prices andrelease new technologies around the same time to sustain their shareof the maret and mae it more diFcult for new companies to enterthe maret.

O--u"!tion!limmobility

Pccupational immobility refers to the diFculties worers havechanging Dobs due to the lac of sills. A miner will have to retrain as a

hairdresser as the two Dobs reuire very dierent sills.O""ortunity Cost Ppportunity cost is the next best alternative foregone.

/ri-e Ceiling

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Ris?*be!ringe-onomies

A large /rm sells in more marets and has a wider product range thana smaller company. The rapid expansion of multi product businesses ispart of a process of diversi/cation. This helps spread business riss sothat if one maret does badly the company has other marets to sellinto.

S-!r-ity carcity exists because there is a lac of supply or an excess demandfor a resource.

S3ort*run hort#run refers to a period of time where at least one factor ofproduction must be /xed" such as capital.

S"e-i!li;!tion peciali=ation refers to the speci/c wor or tas done by a worer"such as a welder in the construction industry.

S"e-if- T!$ peci/c tax is an indirect tax levied on a volume of goods such as $5on a pacet of cigarette or $10 on petrol.

Subsidies ubsidies are government payment to /rms to help increase outputand reduce their costs so that prices for consumers can be lowered.

Substitutes ubstitutes are goods that can be replaced by another" for example

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5nem"loyment Inemployment is the total number in the worforce willing and able towor" but unable to /nd wor.

5nit!ry el!sti-ity Initary elasticity in demand or supply refers to the same percentagechange in demand and supply to the percentage change in price" so ifprice increases by 10%" the uantity demanded or supplied will also

increase by 10%.#!ri!ble -osts Variable costs are inputs such as raw materials or electricity that

varies with the level of output.

#olunt!ryunem"loyment

Voluntary unemployment refers to the worforce who is able but notwilling to wor" such as a baner who chooses to return to universityfor further study or a nurse who is on a one year sabbatical.

!ges Qages are payment for wor usually per unit or per hour.

!nt Qant are things individuals desire to have but are not necessary tosurvive. Qants are always greater to needs because a rational man willalways maximi=e what he can have.

e!lt3 Qealth is the stoc of assets owned by individuals including your

property" shares" wors of art and antiues.e!lt3 e8e-t Qealth eect describes the changing ability of consumers to purchase

a good or services as the price or their income changes. As the price of a good falls the consumer has more money left in their pocets so theycan buy more of that product especially if the product is relativelycheap.

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