Economics B A-Level

Economics B A-Level glossary

622 key terms for Economics B A-Level, A to Z, each linked to the topic pages that use it.

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A

Absolute poverty: An international measure using a standardised threshold such as the World Bank's poverty line, allowing cross-country comparisons of severe deprivation…Pearson Edexcel
Advertising Standards Authority (ASA): A body that cannot impose fines but can ban adverts and refer cases to Trading Standards, which can levy statutory penalties.Pearson Edexcel
Aggregate demand: Total demand in the economy, which increases when expansionary fiscal or monetary policy is used to stimulate growth and reduce cyclical unemployment.Pearson Edexcel
Aggregate Demand (AD): The total planned expenditure on goods and services produced within an economy at a given price level over a specific period, calculated as AD = C + I + G +…Pearson Edexcel
Aggregate demand and supply: Changes in taxation, government spending, interest rates or quantitative easing affect these, and their interaction determines the impact on the economy.Pearson Edexcel
Aggregate Supply: The total volume of goods and services producers are willing and able to supply at a given price level.Pearson Edexcel
Allocative efficiency: Achieved when a firm's structure of production perfectly matches the pattern of consumer preferences, meaning resources are used to produce exactly what…Pearson Edexcel
Anti-competitive practices: Practices such as price-fixing cartels or predatory pricing, which restrict choice and inflate prices.Pearson Edexcel
Appreciation: A rise in a currency's value so that it buys more foreign currency, caused for example by higher interest rates bringing in hot money flows.Pearson Edexcel
Asymmetric information and market failure: A situation where one party, usually the seller, has more or better information than the buyer, which can lead to unsafe products, misleading claims and…Pearson Edexcel
Automatic stabiliser: A role of a floating exchange rate whereby a current account deficit increases the supply of the currency, causing depreciation, which makes exports cheaper…Pearson Edexcel
Average cost: Total cost divided by the quantity produced, so that producing 100 units at a total cost of £500 gives an average cost of £5.Pearson Edexcel
Average costs: Total cost divided by output, influenced by operational decisions like capacity utilisation and lean production.Pearson Edexcel
Average fixed costs: Fixed costs spread over a larger number of units, so that they fall per unit as production volume increases.Pearson Edexcel
Average revenue: Total revenue divided by quantity, which is also the price of the product.Pearson Edexcel
Average total cost: Total cost divided by quantity, which is different from the cost of producing one additional unit.Pearson Edexcel

B

Balance of payments: Affected by MNCs, as initial FDI improves the financial account while exports improve the current account, though profit repatriation worsens it.Pearson Edexcel
Barriers to entry: Factors that deter potential competitors, such as large incumbent firms producing at a lower average cost than new, smaller entrants.Pearson Edexcel
Base rate: The official interest rate set by the Monetary Policy Committee, which influences commercial rates but is not the same as them.Pearson Edexcel
Base year: The year against which other years are compared, assigned a value of 100, whose raw value is divided into the target year's raw value.Pearson Edexcel
Bias: A critical issue that can occur if survey questions are leading or if the sample is unrepresentative.Pearson Edexcel
Bilateral trading agreements: Negotiations between two nations to reduce tariffs and quotas, fostering closer economic ties.Pearson Edexcel
Boom: A phase in the economic cycle characterised by rapid economic growth, where actual GDP rises above the long-term trend line, creating a positive output gap.Pearson Edexcel
Brain drain: A reduction in productive capacity suffered by a source country or region when emigration occurs.Pearson Edexcel
Brand identity: A strong identity a firm can build by specialising.Pearson Edexcel
Branding: A method of differentiation that can be purely psychological, achieving differentiation without physical changes to the product.Pearson Edexcel
Break-even analysis: A model that relies on simplifying assumptions which limit its real-world accuracy, including that all output is sold and costs behave in set ways.Pearson Edexcel
Break-even output: The level of output from which the margin of safety is measured, being the point at which the business does not yet begin to incur a loss.Pearson Edexcel
Break-even point: The exact level of output where a business neither makes a profit nor a loss, because total sales revenue is exactly equal to total costs.Pearson Edexcel
Buffer stock: Stock held in reserve; JIT aims for zero buffer stock, so a lack of it leaves a business unable to handle sudden spikes in demand or supply chain disruptions.Pearson Edexcel
Business competition and supply chains: Local firms may benefit from technology transfers and supply chain contracts, but can also be outcompeted by the MNC's economies of scale, causing closures.Pearson Edexcel
Business costs: Costs that employee protection regulations increase, such as wage bills or compliance costs.Pearson Edexcel
Business investment: Financing of investment by businesses through credit, allowing them to invest in capital, expand operations and manage cash flow.Pearson Edexcel
Business resilience: The ability of businesses to withstand shocks, often through diversification, maintaining cash reserves, and flexible supply chains.Pearson Edexcel
Business revenue and pricing: Elasticity informs business pricing strategies, including whether to raise or lower prices to maximise total revenue.Pearson Edexcel
Business survival: Short-term survival depends on positive cash flow to pay immediate liabilities, whereas long-term survival requires profitability.Pearson Edexcel
Business uncertainty: Arises when high or volatile inflation makes future costs and revenues difficult to forecast, reducing business confidence.Pearson Edexcel
Business viability: Whether a new product or service is worth pursuing, assessed by businesses using the break-even equation to set sales targets.Pearson Edexcel

C

Capacity utilisation: The proportion of maximum possible output currently being produced, calculated as current output divided by maximum possible output and expressed as a…Pearson Edexcel
Capital: Man-made aids to production, such as equipment, machinery, and the premises where operations occur.Pearson Edexcel
Capital allocation: Directing pooled resources to productive uses, such as loans for investment or consumption, so that idle funds are used efficiently.Pearson Edexcel
Capital flows: Forms of capital movement other than FDI, from which FDI must be distinguished.Pearson Edexcel
Capital raising: Allowing businesses to raise long-term capital to fund expansion by issuing new equities in the primary market.Pearson Edexcel
Capital-intensive production: A process using a high ratio of capital machinery to labour inputs, with a high proportion of machinery and automated technology relative to human labour.Pearson Edexcel
Cartels: Firms that restrict competition to act like a monopoly, raising prices and reducing consumer surplus.Pearson Edexcel
Cash flow: The physical movement of money into and out of a business, representing the actual timing of cash inflows and outflows.Pearson Edexcel
Cash-flow forecast: A forward-looking statement of expected cash inflows and outflows over a specific period, used to identify periods where outflows exceed inflows.Pearson Edexcel
Central bank: The institution, such as the Bank of England, that implements monetary policy and whose Monetary Policy Committee sets the base interest rate independently.Pearson Edexcel
Central banking: Acting as a banker to commercial banks by holding their reserve accounts to settle interbank payments and manage daily clearing.Pearson Edexcel
Ceteris paribus: The assumption that all other things are equal, meaning only one variable changes at a time, which rarely holds true in reality.Pearson Edexcel
Changes in the number of firms in an industry: New entrants alter total market supply and shift the supply curve right.Pearson Edexcel
Child labour: Employing minors in work that deprives them of education or harms their development.Pearson Edexcel
Claimant Count: A measure recording the number of people claiming unemployment-related benefits, such as Jobseeker's Allowance.Pearson Edexcel
Collapse of lending to businesses: A severe credit crunch in which firms could not finance their daily operations, triggering a deep global recession.Pearson Edexcel
Collateral: An asset, such as property or equipment, pledged by a borrower to secure a loan, which the bank can seize if the borrower defaults.Pearson Edexcel
Comparative advantage: A country has this when it can produce goods at a lower opportunity cost than other nations, which drives specialisation.Pearson Edexcel
Competition regulation: The use of concentration ratios by regulators to assess market dominance and the potential for anti-competitive behaviour.Pearson Edexcel
Competitive advantage: A sustainable edge that small firms achieve by cultivating close, mutually beneficial relationships with key stakeholders, including local suppliers,…Pearson Edexcel
Competitiveness: A firm's international position, improved when higher productivity lowers average costs and allows lower prices or higher profit margins.Pearson Edexcel
Complementary goods: Related goods where a rise in one good's price causes a decrease in demand for the other good, shifting its demand curve inwards.Pearson Edexcel
Complementary labour: Labour that is demanded together, such as pilots and cabin crew, so that a change in demand for one type affects demand for the other.Pearson Edexcel
Compliance costs and regulatory burden: Protection imposes costs on firms, and excessive rules may reduce choice or innovation.Pearson Edexcel
Concentration ratio: The proportion of total market sales held by the largest firms in an industry, found by adding the market shares of the top n firms.Pearson Edexcel
Conglomerate integration: The merging of two businesses in entirely unrelated industries, which helps to diversify risk across different markets.Pearson Edexcel
Constant prices: Prices that use a chosen base year to adjust for inflation, allowing for meaningful historical comparisons.Pearson Edexcel
Consumer behaviour: The way demand-side cultural and social factors influence how consumers act in global markets.Pearson Edexcel
Consumer credit: Lending to individuals takes forms such as mortgages, personal loans and credit cards.Pearson Edexcel
Consumer demand: High levels and rapid growth of disposable income indicate strong potential consumer demand in a new international market.Pearson Edexcel
Consumer preferences: The pattern of what people want, which changes over time and requires firms to continuously adapt their production structures.Pearson Edexcel
Consumer protection: Part of the Competition and Markets Authority's remit, alongside competition enforcement, merger control and market investigations, which includes taking…Pearson Edexcel
Consumer protection legislation and standards: Legislation and mandatory standards set minimum safety, quality or labelling requirements, and include rules such as cooling-off periods and bans on…Pearson Edexcel
Consumer spending: Spending by consumers that banks facilitate by providing credit, allowing the purchase of expensive items like houses and cars.Pearson Edexcel
Consumer surplus: A surplus that firms can convert into producer surplus through price discrimination, increasing total profits.Pearson Edexcel
Consumer trust: The genuine confidence that marketing strategies should build rather than relying on deception.Pearson Edexcel
Consumer welfare: The benefit to consumers that governments promote competition to enhance.Pearson Edexcel
Consumption: Household spending, influenced by interest rates and confidence.Pearson Edexcel
Contestability: The ease with which new firms can enter and exit a market.Pearson Edexcel
Contingency planning: A form of preparation that businesses can use to respond to uncertainty, alongside flexibility and adaptability, as potential impacts and their likelihoods…Pearson Edexcel
Contraction: A decrease in quantity supplied caused by a change in the price of the good itself, shown as a movement along the supply curve.Pearson Edexcel
Contraction of demand: A decrease in quantity demanded caused by a rise in price, shown as a movement along the existing curve.Pearson Edexcel
Contribution per unit: A measure of how much each product sold contributes towards paying off a firm's fixed costs and subsequently generating profit, calculated as selling price…Pearson Edexcel
Corporate culture: The shared values, beliefs, and norms influencing how employees behave within a business.Pearson Edexcel
Corporate social responsibility: The ethical issues surrounding pay and working conditions are central to modern business operations and this concept.Pearson Edexcel
Corporate Social Responsibility (CSR): Policies through which an MNC voluntarily monitors its adherence to ethical and safety standards, often forming the basis of self-regulation.Pearson Edexcel
Cost efficiency: The minimisation of average total costs to improve competitiveness.Pearson Edexcel
Cost leadership: A route to competitive advantage where a firm produces at a lower cost and offers lower prices.Pearson Edexcel
Cost management: Under-utilisation raises average fixed costs and so total unit costs, while over-utilisation raises average costs through overtime pay and higher maintenance…Pearson Edexcel
Cost structures: Changed by the digital economy, which reduces the need for physical premises and lowers fixed costs, though variable costs like delivery and cybersecurity may…Pearson Edexcel
Cost-plus pricing: Calculating a mark-up on unit cost by adding a percentage mark-up to the unit cost of a product to ensure a profit margin.Pearson Edexcel
Cost-push inflation: Inflation caused by an inward shift in short-run aggregate supply, perhaps due to rising raw material costs.Pearson Edexcel
Costs of production: Changes in these, such as wages, raw material prices or business taxes, cause shifts in short-run aggregate supply.Pearson Edexcel
CPI: The UK's official measure for its inflation target, excluding housing costs like mortgage interest payments.Pearson Edexcel
Creative destruction: A process in the new business environment where innovative digital firms are created while traditional businesses that cannot compete are destroyed.Pearson Edexcel
Credit: Borrowed money that must be repaid with interest, allowing consumers and businesses to borrow for immediate use.Pearson Edexcel
Credit provision: Banks providing credit allows economic agents to borrow funds, enabling consumers to purchase high-value goods and businesses to invest in capital, expand…Pearson Edexcel
Credit rating agencies: Institutions that evaluate the default risk of corporate and government bonds and assign grades to help investors assess that risk.Pearson Edexcel
Credit requirements: The external credit a business needs, such as an overdraft or short-term loan, identified by a negative net cash flow and arranged in advance.Pearson Edexcel
Credit risk: The likelihood that a borrower will fail to meet debt obligations, also known as default risk.Pearson Edexcel
Creditworthiness: What banks assess before lending, charging interest based on risk.Pearson Edexcel
Cross elasticity of demand: Calculated by dividing the percentage change in quantity by the percentage change in the price of another good, where a positive result signifies substitutes.Pearson Edexcel
Cultural differences: Varying values, traditions and social norms that dictate which products are acceptable in a country.Pearson Edexcel
Culture clash: A misalignment that may occur when a small business with a collaborative culture merges with a bureaucratic corporation, disrupting operations and reducing…Pearson Edexcel
Current account: The record of trade in goods and services, plus primary and secondary income flows between a country and the rest of the world.Pearson Edexcel
Current account surplus: A position often viewed positively, but a very large one can cause political friction and indicate unbalanced domestic consumption and over-reliance on exports.Pearson Edexcel
Current prices: The actual prices at the time data was collected, equivalent to nominal values.Pearson Edexcel
Customs union: A trading bloc that adds a common external tariff to a free trade area.Pearson Edexcel
Cyclical unemployment: Unemployment that falls when an outward shift in aggregate demand increases real output, as firms hire more workers.Pearson Edexcel

D

Data interpretation: Reading an index number to determine the percentage change from the base of 100, remembering a slower rate of increase still means the underlying value is…Pearson Edexcel
Decision lag: The time required to formulate and pass policy, especially fiscal measures.Pearson Edexcel
Deflation: A sustained decrease in the general price level, meaning the inflation rate falls below 0%, which increases the purchasing power of money but can lead to…Pearson Edexcel
Demand-pull inflation: Upward pressure on wages and prices that arises as increased aggregate demand pushes the economy towards full capacity.Pearson Edexcel
Demand-side factors: Influences such as cultural differences and income levels to which firms expanding globally must adapt their marketing strategies.Pearson Edexcel
Demand-side shocks: Events such as a sudden collapse in consumer confidence, linked to consumer spending or investment.Pearson Edexcel
Demerit goods: Products that are considered harmful to the individual consumer and generate negative externalities in consumption, meaning they impose costs on third parties.Pearson Edexcel
Demographic changes: A factor that influences the supply of labour, alongside migration and the level of welfare benefits.Pearson Edexcel
Demographic segmentation: Categorising consumers by quantifiable traits such as age, gender, income, and occupation.Pearson Edexcel
Depreciation: A fall in a currency's value so that it buys less foreign currency, caused for example by high relative inflation making exports less competitive.Pearson Edexcel
Derived demand: The demand for labour depends on the demand for the final goods or services the workers produce.Pearson Edexcel
Development: Incurs R&D costs with zero sales, causing negative cash flow.Pearson Edexcel
Different tastes: Local preferences for flavours, aesthetics or features that a business must cater to.Pearson Edexcel
Differentiation: A route to competitive advantage where unique features justify a premium price.Pearson Edexcel
Digital skills: Skills such as data analysis and digital marketing that firms must recruit and train staff in to support e-commerce operations.Pearson Edexcel
Diseconomies of scale: Occur when a firm expands beyond its optimum size, causing long-run average costs to rise.Pearson Edexcel
Disinflation: A situation where the rate of inflation slows down but remains positive, so prices are still rising, but at a slower pace.Pearson Edexcel
Distribution methods: Methods such as exclusive retail partnerships or direct-to-consumer online sales that enhance convenience and accessibility, further driving sales.Pearson Edexcel
Diversification: A wider product range that cushions the firm against sector-specific economic shocks, which over-reliance on a narrow product range lacks.Pearson Edexcel
Domestic competition: Intense rivalry at home, with aggressive rivals driving down profit margins, which may push a firm to look to overseas markets.Pearson Edexcel
Dynamic market: A market subject to rapid, continuous change, high uncertainty and frequent innovation, driven by technological advancements, shifting consumer trends or…Pearson Edexcel

E

Ease of doing business: Straightforward regulations for starting a company reduce setup barriers when a business expands into a new market.Pearson Edexcel
Economic agents: Individuals, firms and governments, who must make decisions about how best to allocate scarce resources.Pearson Edexcel
Economic cycle: The natural fluctuation of an economy between periods of expansion and contraction over time, measured by changes in real Gross Domestic Product (GDP).Pearson Edexcel
Economic development: A broader, qualitative concept encompassing improvements in living standards, education, healthcare, and human welfare, often measured by the Human…Pearson Edexcel
Economic efficiency: What intervention seeks to improve in contexts such as environmental pollution or under-provision of education.Pearson Edexcel
Economic growth: A genuine increase in an economy's output, which can be determined by converting nominal values to real values to see whether the economy is really growing or…Pearson Edexcel
Economic incentives: Cutting income tax or corporation tax increases incentives for workers and firms, while interventionist policies offer targeted grants.Pearson Edexcel
Economic indicators: Key macroeconomic measures such as inflation, unemployment and economic growth, on which the impact of a policy is analysed.Pearson Edexcel
Economic integration: Process facilitated by ASEAN among its Southeast Asian member states through free trade.Pearson Edexcel
Economic interdependence: The mutual reliance between economies for goods, services, and capital, often intensified within regional trading blocs.Pearson Edexcel
Economic sectors: The primary, secondary, tertiary, and quaternary parts of an economy whose relative share of output and employment shifts during structural change.Pearson Edexcel
Economic trade-offs: The balancing required between competing outcomes, such as accepting higher inflation to reduce unemployment or slower growth to control inflation.Pearson Edexcel
Economic uncertainty: A situation where firms may delay capital investment due to uncertainty over future costs and revenues.Pearson Edexcel
Economic vulnerability: A risk of over-specialisation, leaving a country exposed to external shocks such as sudden shifts in global demand or resource depletion.Pearson Edexcel
Economies of scale: Reductions in average costs that a business can achieve through growth, either internal to the firm or external as the industry expands.Pearson Edexcel
Effective exchange rate: An index measuring a currency's value against a basket of other currencies, weighted by the relative importance of trade with each country.Pearson Edexcel
Efficiency: Operating at or above maximum capacity can reduce labour productivity due to fatigue, so over-utilisation is not the same as high productivity.Pearson Edexcel
Emerging economies: Nations such as the BRIC countries whose growth has often been significantly higher, driven by rapid industrialisation, urbanisation and integration into…Pearson Edexcel
Emerging markets: Markets characterised by rapid industrialisation, high growth rates, and increasing integration into the global economy.Pearson Edexcel
Emissions: The release of greenhouse gases and pollutants, contributing to climate change and air pollution.Pearson Edexcel
Employee empowerment: Giving employees at all levels the confidence to identify inefficiencies and suggest practical solutions without fear of criticism.Pearson Edexcel
Employee motivation: Something a strong corporate culture can boost, alongside improving retention and ensuring consistent customer service.Pearson Edexcel
Employee protection: Laws designed to safeguard the rights, health, and financial security of workers.Pearson Edexcel
Employment: The number of people of working age engaged in paid work.Pearson Edexcel
Employment and unemployment: Jobs are created through the derived demand for labour when aggregate demand and production increase.Pearson Edexcel
Enforcement, redress and compensation: Bodies that enforce protection and mechanisms for redress compensate consumers and deter poor firm behaviour.Pearson Edexcel
Enterprise: The factor of production that organises land, labour, and capital to produce goods and services.Pearson Edexcel
Entrepreneurs: Those who take on risk when making investment decisions, weighing potential financial returns against the probability of losing their invested capital.Pearson Edexcel
Entrepreneurship: The willingness of an entrepreneur to take calculated risks in pursuit of profit.Pearson Edexcel
Environmental externalities: Unintended environmental costs or benefits that economic activities create for third parties.Pearson Edexcel
Environmental externalities and sustainability: A key negative externality where MNC operations might cause environmental degradation, resource depletion or pollution, requiring strict regulatory oversight…Pearson Edexcel
Equilibrium: A position where the current account is broadly in balance, with inflows roughly matching outflows over time and no unsustainable deficits or surpluses.Pearson Edexcel
Ethical production: Social or ethical goals, such as minimising environmental impact, which may lead a producer to source more expensive, sustainable raw materials.Pearson Edexcel
Ethical stance: Running a business to align with personal moral values, going beyond minimum legal requirements to actively pursue moral objectives such as fair trade or…Pearson Edexcel
Ethnocentric approach: A domestic approach that assumes what works in the home market will work globally, leading to standardised products and centralised decision-making.Pearson Edexcel
Excess demand: A situation where the price is below equilibrium and a shortage occurs, so consumers bid the price up.Pearson Edexcel
Excess supply: A situation where producers supply more than consumers demand, which pushes the price down as sellers reduce prices to clear stock.Pearson Edexcel
Exchange rate: The price of one currency expressed in terms of another.Pearson Edexcel
Exchange rate risk: Financial uncertainty arising from currency fluctuations during international transactions, where a business faces potential financial losses between the time…Pearson Edexcel
Exchange rates: Fluctuations affect competitiveness; a depreciation of the pound makes exports cheaper but imported raw materials more expensive.Pearson Edexcel
Expanding capacity: Investing in new machinery, extending premises or hiring more staff to resolve over-utilisation, though this requires significant time and finance.Pearson Edexcel
Exploitation of labour: When workers face unsafe conditions, excessive hours, or wages below a living standard.Pearson Edexcel
Exports: Goods and services sold to other countries, resulting in an inflow of money.Pearson Edexcel
Extension: An increase in quantity supplied caused by a change in the price of the good itself, shown as a movement along the supply curve.Pearson Edexcel
Extension of demand: An increase in quantity demanded caused by a fall in price, shown as a movement along the existing curve.Pearson Edexcel
Extension strategies: Entering new international markets can act as one of these for a product in decline.Pearson Edexcel
External benefits: The positive spillover effects experienced by third parties not directly involved in the transaction.Pearson Edexcel
External costs: Negative third-party effects that are ignored by buyers and sellers and not reflected in the market price.Pearson Edexcel
External shocks: Sudden events, such as extreme weather destroying crops, that cause the supply curve to shift, usually leftward.Pearson Edexcel
External stakeholders: Those outside the business, encompassing customers, suppliers, the local community, and the government.Pearson Edexcel
Externalities: Indirect taxation internalises negative externalities by increasing production costs, and tradable permits create a market for externalities by capping total…Pearson Edexcel

F

Factors of production: Economic resources that must be fully and efficiently employed for an economy to reach full capacity output.Pearson Edexcel
Financial derivatives: The forward contract itself, as distinct from the underlying asset such as the physical commodity or currency.Pearson Edexcel
Financial incentives: Profit acts as a primary financial incentive for entrepreneurs to take the risks associated with starting and running a business.Pearson Edexcel
Financial institutions: Traditional organisations such as banks that provide structured credit facilities, including commercial loans, mortgages and overdrafts.Pearson Edexcel
Financial intermediation: The process by which the financial sector collects savings and provides loans, ensuring idle funds are allocated efficiently to productive uses.Pearson Edexcel
Financial performance: What the statement of comprehensive income shows over a period, making it vital for stakeholders assessing a business.Pearson Edexcel
Financial risk: The risk of making a loss, which a larger margin of safety indicates is lower, giving the business a buffer against unexpected downturns in demand or…Pearson Edexcel
Financial stability: A condition of the financial system that banking regulation is essential to maintain, preventing systemic failures such as those seen during the Global…Pearson Edexcel
Firm behaviour: Linked to the characteristics of a market structure, such as the pricing strategies firms use.Pearson Edexcel
Fiscal policy: Involves the government altering its spending and taxation, including both direct and indirect taxes, to influence aggregate demand.Pearson Edexcel
Fixed costs: Costs that are spread over a greater number of units when production volume rises, reducing average costs.Pearson Edexcel
Flexibility: Spare capacity provides the flexibility to meet unexpected increases in demand without delay.Pearson Edexcel
Floating exchange rate: A policy instrument where a currency's value is determined by the market forces of supply and demand, without direct intervention from the central bank.Pearson Edexcel
Foreign direct investment: Investment flows in which a multinational corporation might build a factory in a developing nation to access new markets or lower production costs.Pearson Edexcel
Foreign direct investment (FDI): Occurs when a firm in one country makes a physical investment or acquires significant business interests in another, such as building a new factory or…Pearson Edexcel
Forward contract: An agreement that allows a firm to lock in a specific exchange rate for a future date, providing certainty over costs or revenues.Pearson Edexcel
Forward market: A financial market where contracts are made to buy or sell assets at a future date at a pre-agreed price.Pearson Edexcel
Forward markets: Financial markets where contracts are made to buy or sell currencies at a fixed rate on a specified future date.Pearson Edexcel
Fraction: A part-to-whole expression obtained from a ratio by summing the parts to find the denominator, so a 3:1 ratio gives 3/4.Pearson Edexcel
Franchising: A way to introduce competition for the market, through franchising and tendering, where competition in the market is not feasible.Pearson Edexcel
Free trade area: Arrangement such as NAFTA, which removes tariffs on goods but, unlike a single market, does not allow free movement of factors of production.Pearson Edexcel
Full capacity: Occurs when a business produces at its maximum possible output with its current resources, meaning all factors of production are fully employed.Pearson Edexcel
Full capacity output: The maximum level of real GDP an economy can produce when all available factors of production are fully and efficiently employed.Pearson Edexcel

G

Gaps in the market: Opportunities identified by constructing a market map, which can highlight possibilities for new product development or repositioning.Pearson Edexcel
GDP per capita: Total GDP divided by population, measuring average income and indicating economic growth but ignoring income distribution.Pearson Edexcel
Geocentric approach: A mixed approach that seeks a balance, aiming for global integration while remaining locally responsive, often summarised as 'think global, act local'.Pearson Edexcel
Geographic segmentation: Dividing the market based on physical locations, such as regions, countries, or urban versus rural areas.Pearson Edexcel
Geographical immobility: Physical or financial barriers, such as high housing costs, that prevent workers from moving to locations with job vacancies.Pearson Edexcel
Geographical mobility: The movement of workers between regional labour markets, which affects the interdependence of those regional labour markets.Pearson Edexcel
Global economic shifts: Changes in growth trajectories, such as those caused by the 2008 global financial crisis and fluctuating global commodity prices.Pearson Edexcel
Global niche market: A market requiring highly tailored marketing strategies appealing to specialised consumer needs across countries.Pearson Edexcel
Global supply chains: Created by offshoring and outsourcing, increasing the cross-border flow of goods and services as firms seek to maximise efficiency and reduce average costs.Pearson Edexcel
Globalisation: The integration of economies driven by factors such as trade liberalisation, capital market liberalisation, political change, reduced transport and…Pearson Edexcel
Glocalisation: The adaptation of global products to meet the specific needs, tastes, and cultural expectations of local markets.Pearson Edexcel
Government borrowing: Usually increases during a recession because tax revenues fall, while expenditure on welfare benefits rises.Pearson Edexcel
Government failure: A situation where the costs of regulation can outweigh the benefits, or regulators act in the interest of the firms they oversee, leading to misallocation of…Pearson Edexcel
Government incentives: Support such as tax breaks that reduce the initial outlays of setting up a production site.Pearson Edexcel
Government intervention: Direct government action, such as progressive taxation, welfare benefits, minimum wage legislation, and investment in education and healthcare, used to reduce…Pearson Edexcel
Government spending: A direct component of aggregate demand that the government can increase to stimulate demand.Pearson Edexcel
Gross profit: Calculated by deducting the cost of sales, such as direct costs like raw materials, from sales revenue.Pearson Edexcel
Gross profit margin: A profitability ratio measuring the proportion of revenue left over after deducting the direct costs of producing goods or services, calculated as (Gross…Pearson Edexcel

H

Health indicators: Measures such as life expectancy at birth or infant mortality rates that reflect the quality of human capital and standard of living.Pearson Edexcel
Horizontal integration: Merging with a competitor at the same stage of production in the same industry, such as two rival banks joining to increase market share.Pearson Edexcel
Hot money flows: Flows of money into a country when its interest rates rise, increasing demand for the currency and causing it to appreciate.Pearson Edexcel
Human capital: The skills and quality of the labour force can be improved through government spending on education and training, or through policies encouraging private…Pearson Edexcel
Human capital investment: Skills training and education that ensure workers operate machinery effectively, boosting output per worker.Pearson Edexcel
Human Development Index (HDI): A composite measure combining GNI per capita, life expectancy, and mean/expected years of schooling, scoring countries between 0 and 1 and providing a broader…Pearson Edexcel

I

ILO measure: A survey-based measure, gathered via the Labour Force Survey, defining unemployment as someone without a job who has actively sought work in the last four…Pearson Edexcel
Imports: Goods and services purchased from other countries, leading to an outflow of money.Pearson Edexcel
Inaccurate translations: Inappropriate or inaccurate translations that can confuse consumers or make a business appear unprofessional.Pearson Edexcel
Inappropriate promotional activities: Advertising that is offensive, targets vulnerable groups like children, or promotes harmful behaviours.Pearson Edexcel
Incentives and rationing: A rising price provides an incentive for producers to extend the quantity supplied while simultaneously contracting the quantity demanded.Pearson Edexcel
Incentives to work: The motivation to work longer hours or seek higher-paying jobs, which is reduced when extra earnings bring little or no increase in disposable income.Pearson Edexcel
Income: A flow concept, representing the money received by an individual or household over a specific period.Pearson Edexcel
Income distribution: The way income is spread across the population, which poverty reduction policies aim to affect through mechanisms such as progressive taxation and welfare…Pearson Edexcel
Income elasticity of demand: Calculated by dividing the percentage change in quantity by the percentage change in income, where a positive result indicates a normal good.Pearson Edexcel
Income elasticity of demand (YED): Calculated by dividing the percentage change in quantity demanded by the percentage change in income.Pearson Edexcel
Income inequality: A situation where income is distributed unevenly, often high in developing and emerging economies where a small number of very wealthy individuals exist.Pearson Edexcel
Independence: A motive allowing individuals to be their own boss, make autonomous decisions, escape corporate hierarchies and control their own strategic direction and…Pearson Edexcel
Index numbers: A statistical measure used to track changes in economic variables over time, such as inflation or economic growth, relative to a base year.Pearson Edexcel
Indirect taxation: A tax levied on goods and services that increases the cost of production for goods with negative externalities, shifting the supply curve left to internalise…Pearson Edexcel
Indirect taxes: These are levied on producers, increasing their costs and shifting the supply curve left.Pearson Edexcel
Industrial action: A consequence of unresolved stakeholder conflicts, alongside loss of customers or negative public relations, which businesses seek to prevent.Pearson Edexcel
Inferior good: A good with a negative YED, where demand falls as income rises because consumers switch to higher-quality alternatives.Pearson Edexcel
Inflation: A sustained increase in the general price level of goods and services in an economy over a period of time, which leads to a fall in the purchasing power of…Pearson Edexcel
Inflation measurement: Using index numbers to compare changes over time, where interpreting an index reveals prices have risen by a percentage since the base year.Pearson Edexcel
Inflation targeting: The primary objective of meeting the government's inflation target, currently 2% as measured by the Consumer Prices Index.Pearson Edexcel
Inflationary pressures: Demand-pull pressures that are eased when a leftward shift in aggregate demand cools the economy.Pearson Edexcel
Information failure: A situation where consumers underestimate the long-term private costs of consuming demerit goods to their own health or well-being.Pearson Edexcel
Information gaps: A situation where buyers or sellers lack the necessary data to make fully informed economic decisions, leading to irrational decisions and a misallocation of…Pearson Edexcel
Infrastructure: High-quality infrastructure, including reliable transport and communication networks, ensures efficient distribution.Pearson Edexcel
Infrastructure investment: Improving infrastructure usually relies on interventionist public spending, but can utilise market-based private finance initiatives to build new transport or…Pearson Edexcel
Injections: Additions to the circular flow that do not originate from domestic households: investment by firms, government spending, and export revenue.Pearson Edexcel
Inorganic growth: Expansion through external mergers and acquisitions, happening when a business joins with or buys another business.Pearson Edexcel
Insolvency: Occurs when a business cannot pay its debts as they fall due, directly threatening its survival.Pearson Edexcel
Intellectual property rights: Patents and copyrights that legally prevent rivals from copying products.Pearson Edexcel
Interdependence: A characteristic of an oligopoly where the actions of one firm directly impact its rivals' decisions and market share.Pearson Edexcel
Interest rates: The cost of borrowing and the reward for saving, expressed as a percentage, charged by banks when they provide credit.Pearson Edexcel
Internal communication: Breakdowns in this can occur as organisational structures gain more layers, so messages become distorted or delayed, reducing agility.Pearson Edexcel
Internal migration: The movement of labour between regions within the same country, often driven by regional wage differentials.Pearson Edexcel
Internal stakeholders: Those within the business, including employees, managers, and shareholders, who typically seek job security, high wages, and dividends.Pearson Edexcel
International aid: The voluntary transfer of resources from one country or organisation to another to assist economic development and poverty reduction.Pearson Edexcel
International comparisons: Comparing unemployment figures between countries, for which the ILO measure is the standard because benefit systems vary wildly between countries.Pearson Edexcel
International competitiveness: A measure better captured by an effective exchange rate than a single bilateral rate, because it reflects overall trade competitiveness.Pearson Edexcel
International migration: The movement of labour across national borders, influenced by relative macroeconomic performance and immigration policies.Pearson Edexcel
International Monetary Fund (IMF): An institution focused on global monetary cooperation that provides loans to countries facing balance of payments crises.Pearson Edexcel
International poverty line: A fixed threshold used to measure absolute poverty, such as the World Bank's line of living on less than $2.15 per day.Pearson Edexcel
International trade: Global trade driven by increasing specialisation, as nations must export their surplus and import what they no longer produce.Pearson Edexcel
Interpreting an index: Reading an index number to reveal the percentage change in a variable since the base year, such as a 20% increase in GDP.Pearson Edexcel
Interventionist methods: Policies requiring active government involvement to correct market failures.Pearson Edexcel
Investment: Capital spending that is often delayed when uncertainty makes the expected return harder to calculate.Pearson Edexcel
Investment and growth: Equity markets facilitate corporate growth and investment by connecting savers with borrowers.Pearson Edexcel
Investment decisions: Choices businesses make using potential market growth, which higher prices and profits can incentivise.Pearson Edexcel
Invisible hand: The market forces of price changes that automatically eliminate a surplus without intervention in a free market.Pearson Edexcel
Invisibles: Intangible services, such as banking, insurance, tourism, and education.Pearson Edexcel

J

Just in time (JIT): A lean production method of stock management where materials and components are delivered exactly when they are needed in the production process, rather than…Pearson Edexcel

K

Kaizen: A lean production philosophy originating in Japan that focuses on making small, incremental changes to improve efficiency and quality over time.Pearson Edexcel

L

Labour: The human effort, both physical and mental, contributed by managers and employees.Pearson Edexcel
Labour market flexibility: Reforming the labour market can involve reducing trade union power or altering unemployment benefits, with market-based reforms typically removing regulations…Pearson Edexcel
Labour market participation: Involvement in work, which the poverty trap limits because earning more brings little or no gain in disposable income.Pearson Edexcel
Labour market slack: Hidden underutilisation of workers that is not captured by headline unemployment rates.Pearson Edexcel
Labour markets: The structure of the market for labour, whose elasticity of demand and monopsony power determine whether minimum wages cause unemployment.Pearson Edexcel
Labour markets and exploitation: The effect of MNCs on local labour, where working conditions can vary and sometimes lead to exploitation despite job creation and higher wages.Pearson Edexcel
Labour mobility: The ease with which workers can transfer their skills between different jobs, or move between geographical regions, determining how interdependent labour…Pearson Edexcel
Labour productivity: Output per worker, which education and skills training increase while reducing error rates.Pearson Edexcel
Labour-intensive production: A process using a high ratio of labour to capital inputs, relying heavily on human workforce relative to machinery.Pearson Edexcel
Land: All natural resources, including raw materials like timber or oil.Pearson Edexcel
Language barriers: Differences in language that can prevent marketing messages from reaching target audiences in global markets.Pearson Edexcel
Lean production: An operational improvement that lowers average costs by minimising inventory and waste.Pearson Edexcel
Leasing: Allows a business to use an asset over a set period in return for regular payments, without the need for a large initial capital outlay.Pearson Edexcel
Legal control: Involves legislation such as environmental laws and employment rights to restrict harmful practices, though MNCs may exploit regulatory arbitrage by…Pearson Edexcel
Legal incorporation: Creates a separate legal identity for the business, which applies to incorporated businesses such as private and public limited companies.Pearson Edexcel
Legislation: The creation of laws by parliament to ban or restrict activities.Pearson Edexcel
Likely return on investment: The expected gain that selecting a production site aims to maximise by balancing multiple factors.Pearson Edexcel
Limit pricing: Pricing competitively to deter new rivals, used by existing firms because of the threat of entry.Pearson Edexcel
Limited liability: The business has a separate legal identity, so shareholders are only liable for the amount invested in their shares, protecting personal wealth.Pearson Edexcel
Line of equality: A 45-degree line representing a perfectly equal society, where every percentile of the population earns the same percentage of total income.Pearson Edexcel
Liquidation: The outcome avoided when managing cash flow ensures a business can meet its short-term debts.Pearson Edexcel
Liquidity: The ability of investors to easily convert their equities back into cash by selling them to other investors in the secondary market.Pearson Edexcel
Liquidity and solvency: Emergency liquidity is provided to banks that are illiquid but solvent, whereas insolvency is usually handled by the government.Pearson Edexcel
Literacy rates: The percentage of adults who can read and write, reflecting the quality of human capital and standard of living.Pearson Edexcel
Living standards: The typical economic well-being of a population, which median income often reflects more accurately than mean income.Pearson Edexcel
Living wage: Fair compensation that goes beyond the legal minimum, which businesses may pay instead of just the statutory minimum.Pearson Edexcel
Loan: A fixed sum borrowed for a specific period, usually repaid in regular instalments with interest, making it suitable for long-term investments.Pearson Edexcel
Local expertise: Support businesses must use to ensure communication is culturally sensitive, accurately translated, and conveys the intended message.Pearson Edexcel
Location in a trade bloc: Siting production within a trade bloc, which allows tariff-free access to larger markets.Pearson Edexcel
Long tail: The strategy of selling a large number of unique, niche items in relatively small quantities.Pearson Edexcel
Long-run Aggregate Supply: Determined by the economy's productive capacity, heavily influenced by changes in productivity.Pearson Edexcel
Lorenz curve: A diagrammatic analysis of income or wealth distribution, plotting the cumulative percentage of the population on the x-axis against the cumulative percentage…Pearson Edexcel
Low unemployment: A key macroeconomic objective indicating that an economy is operating near its full productive capacity, with working-age individuals actively seeking work…Pearson Edexcel
Luxury good: A normal good with a YED greater than 1, where demand grows proportionately more than income.Pearson Edexcel

M

Macroeconomic equilibrium: The point identified on an AD/AS diagram where the new equilibrium shows the resulting changes in the general price level and real output.Pearson Edexcel
Macroeconomic objectives: Goals such as economic growth, which often conflicts with the objective of minimising negative externalities, creating a significant policy trade-off.Pearson Edexcel
Macroeconomic performance: The growth record of an economy, with the UK's steady but relatively low growth contrasting with the higher, more volatile rates of Brazil and Russia.Pearson Edexcel
Macroeconomic shocks: Events that transmit rapidly from one member state to others through trade and financial channels in deeply interconnected economies.Pearson Edexcel
Macroprudential regulation: The Financial Policy Committee is responsible for this, covering the whole financial system rather than individual conduct.Pearson Edexcel
Margin: The point at which individuals and firms evaluate the costs and benefits of producing or consuming one additional unit.Pearson Edexcel
Margin of safety: The difference between a business's current or expected sales volume and its break-even output, measuring how much sales can fall before the business begins…Pearson Edexcel
Marginal cost: The change in total cost from producing one extra unit, compared with marginal revenue when deciding whether to increase output.Pearson Edexcel
Marginal revenue: The change in total revenue divided by the change in quantity, measuring the impact of selling one additional unit of output.Pearson Edexcel
Market clearing: Reaching a market-clearing price where quantity supplied equals quantity demanded, so the market clears.Pearson Edexcel
Market competition: The amount of competition, which dictates whether a firm is a price maker or taker and can force firms in highly competitive markets to use competitive pricing.Pearson Edexcel
Market concentration: An economic feature assessed by interpreting a calculated ratio or fraction within the context of the provided data.Pearson Edexcel
Market dynamics: Real-world markets in which multiple determinants often change at once, complicating predictions of price and quantity.Pearson Edexcel
Market entry: New firms entering a market in response to supernormal profit, which increases supply and drives down prices until only normal profit is made.Pearson Edexcel
Market equilibrium: The point where the market demand curve intersects the market supply curve, so the quantity consumers are willing to buy exactly equals the quantity producers…Pearson Edexcel
Market exit: Firms leaving a market in response to a loss (subnormal profit), which reduces market supply and can push prices back up for the remaining firms.Pearson Edexcel
Market failure: A situation in which imperfect or asymmetric information prevents the price mechanism from allocating resources efficiently, distorting prices and quantities…Pearson Edexcel
Market failure correction: Policies such as state provision, indirect taxation, tradable permits, information and regulation are used to correct market failure.Pearson Edexcel
Market forces: The supply and demand of a currency, which determine its value in a floating exchange rate system.Pearson Edexcel
Market interrelationships: The way markets do not operate in isolation, so that changes in one market ripple through to others via derived demand, joint supply, composite demand, and…Pearson Edexcel
Market intervention: Government action to correct market failure, which incurs significant costs such as administrative, enforcement and compliance costs.Pearson Edexcel
Market map: A visual tool used to plot the position of competing brands based on two key variables, such as price and quality.Pearson Edexcel
Market orientation: A business approach that prioritises identifying and fulfilling consumer needs and preferences, with businesses actively researching and responding to…Pearson Edexcel
Market positioning: How a product is perceived by consumers relative to competing products.Pearson Edexcel
Market power: Control of enough of a market for a merged firm to raise prices, which the Competition and Markets Authority examines when two large firms propose a merger.Pearson Edexcel
Market research: Collecting primary and secondary data to quantify likely demand and gain insight into consumer behaviour.Pearson Edexcel
Market saturation: A condition in which sales growth stagnates, for example when a product reaches the maturity or decline stage domestically.Pearson Edexcel
Market segmentation: The process of dividing a heterogeneous market into distinct, homogeneous groups of consumers with shared needs or characteristics.Pearson Edexcel
Market share: The portion of a market held by a firm, which growth can increase alongside brand recognition.Pearson Edexcel
Market structure: The organisation of a market, determined by the presence of barriers to entry, ranging from concentrated forms like oligopolies or monopolies to highly…Pearson Edexcel
Market structures: Defined by characteristics such as the number of firms, barriers to entry, and product differentiation.Pearson Edexcel
Market-based methods: Policies that reduce government intervention to allow free markets to function efficiently.Pearson Edexcel
Market-clearing price: The price at equilibrium, at which there is no excess demand or supply because the quantities consumers buy and producers sell are equal.Pearson Edexcel
Mass market: A market in which businesses often employ a standardised approach to achieve economies of scale, tweaking promotional messages or packaging to suit local…Pearson Edexcel
Mass markets: Markets where products are standardised for a large customer base with price elastic demand.Pearson Edexcel
Maturity: Features peak sales but intense competition.Pearson Edexcel
Median income: The income figure used to define relative poverty, as opposed to the mean, which can be skewed by a small number of very high earners.Pearson Edexcel
Medium of exchange: Something the financial sector provides to overcome the inefficiencies of a barter system, which requires a double coincidence of wants.Pearson Edexcel
Mergers and acquisitions: Joining with or buying another business as a method of external growth, offering rapid expansion and immediate market share.Pearson Edexcel
Mergers and takeovers: Combinations of firms that regulatory bodies control to prevent the creation of monopolies that could abuse their dominant market position.Pearson Edexcel
Micromarketing: The use of digital data to target specific individuals or very small consumer segments, tailoring promotions to individual preferences rather than mass markets.Pearson Edexcel
Misleading product labelling: Packaging that makes false claims about a product's benefits, ingredients or environmental impact, such as 'greenwashing' to appear eco-friendly.Pearson Edexcel
Monetary policy: Managed by the Bank of England's Monetary Policy Committee, it uses interest rates and the money supply to influence borrowing and saving behaviour.Pearson Edexcel
Monetary Policy Committee: The body within the Bank of England that is responsible for setting the official interest rate, also known as the base rate.Pearson Edexcel
Monopoly power: A position held by incumbent firms protected from new competition by barriers to entry, allowing them to maintain supernormal profits in the long run.Pearson Edexcel
Monopsony power: Arises when a single buyer dominates, such as a large supermarket forcing down prices paid to dairy farmers.Pearson Edexcel
Moral hazard: Taking excessive risks because the negative consequences will be borne by someone else, encouraged by the belief that major banks were 'too big to fail' and…Pearson Edexcel
Movement along a supply curve: Caused solely by a change in the price of the good itself, resulting in an extension or contraction of the quantity supplied.Pearson Edexcel
Movement along the AD curve: Caused exclusively by a change in the general price level, whereas a shift represents a change in the underlying components.Pearson Edexcel
Movement along the demand curve: Caused solely by a change in the price of the good itself, resulting in an extension or contraction of demand.Pearson Edexcel
Multinational corporations: Powerful competitors that may crowd out domestic firms in the host country.Pearson Edexcel

N

National income: In the model, national income is theoretically equal to national expenditure and national output.Pearson Edexcel
Natural monopolies: Exist when high fixed costs mean only one firm can fully exploit economies of scale, like a national water grid.Pearson Edexcel
Natural monopoly: A market where one firm can supply total demand at lower average cost than two or more firms because of high fixed costs and substantial economies of scale.Pearson Edexcel
Necessity versus luxury: Whether a good is a necessity or a luxury affects its price elasticity of demand, with necessities being more inelastic and luxuries having price elastic…Pearson Edexcel
Negative externalities: Impacts of emissions and waste on third parties.Pearson Edexcel
Negative externalities in consumption: Costs that demerit goods impose on third parties when they are consumed.Pearson Edexcel
Net exports: The value of exports minus imports, affected by exchange rates.Pearson Edexcel
Niche markets: Specific, well-defined segments of the market with distinct needs that small firms target, catering to consumer preferences that mass-market producers ignore.Pearson Edexcel
Nominal values: Values expressed in the monetary terms of the period being measured, without any adjustment for inflation.Pearson Edexcel
Non-governmental organisations: Independent, non-profit organisations that operate separately from national governments and deliver aid directly to communities.Pearson Edexcel
Non-price competition: Strategies firms use to attract and retain customers without changing the price of their products, through branding, advertising, customer service, loyalty…Pearson Edexcel
Non-price determinants: Factors other than price; only changes in these cause a shift of the curve, whereas a change in price causes a movement along the curve.Pearson Edexcel
Normal good: A good with a positive YED, where demand rises as income increases.Pearson Edexcel
Normal luxury good: A good whose YED value is greater than 1.Pearson Edexcel

O

Occupational immobility: The inability of workers to transfer their skills to new industries, meaning they cannot easily retrain.Pearson Edexcel
Occupational mobility: How easily workers can transfer their skills between different jobs, which determines the extent to which labour markets are interdependent.Pearson Edexcel
Offshore outsourcing: Combines both strategies by hiring a foreign third party to carry out a business process.Pearson Edexcel
Offshoring: Involves relocating a company's own production facilities to a different country to exploit lower costs, such as cheaper labour.Pearson Edexcel
Oligopoly: A market structure suggested by a high concentration ratio, where a few dominant firms have significant pricing power and influence.Pearson Edexcel
Oligopoly behaviour: Conduct in oligopolistic markets where price wars can be destructive, making non-price competition particularly common.Pearson Edexcel
Online distribution: Reaching consumers directly online, which shortens supply chains and enables direct-to-consumer sales.Pearson Edexcel
Online retailing: Selling to consumers over the internet, which reduces the need for physical premises and lowers fixed costs.Pearson Edexcel
Operating profit: Deducts operating expenses, such as overheads like rent and administrative salaries, from gross profit, showing the profit from core business activities.Pearson Edexcel
Operating profit margin: The proportion of revenue that remains after deducting both the cost of sales and operating expenses, but before interest and tax are paid, calculated as…Pearson Edexcel
Operational efficiency: How efficiently a business manages its core operations and overheads, which the operating profit margin indicates.Pearson Edexcel
Opportunity cost: The benefit of spending money elsewhere that a consumer weighs against the marginal utility of an additional unit.Pearson Edexcel
Organic growth: Expansion from within the business using its own resources, achieved by launching new products, opening new branches or entering new markets.Pearson Edexcel
Output gaps: Positive or negative gaps created when actual growth is above or below the long-term trend line.Pearson Edexcel
Outsourcing: Occurs when a business contracts out a process, such as IT support, to a third-party specialist.Pearson Edexcel
Over-specialisation: Relying heavily on a narrow range of exports, which leaves economies vulnerable to external shocks such as sudden changes in global commodity prices.Pearson Edexcel
Overdraft: A flexible, short-term facility allowing a bank account holder to withdraw more money than they have, up to an agreed limit, ideal for managing temporary cash…Pearson Edexcel

P

Patents: Legal protection for successful innovations that prevents rivals from copying the invention.Pearson Edexcel
Payment systems: Efficient mechanisms such as debit cards, electronic bank transfers, clearing house automated payment systems (CHAPS) and digital wallets that allow…Pearson Edexcel
Penetration pricing: Setting a low initial price to rapidly gain market share and build a customer base.Pearson Edexcel
Percentage: A fraction of 100, useful for market share or interest rates, calculated by dividing the part by the whole and multiplying by 100.Pearson Edexcel
Percentage change: The relative change between two values, calculated as ((new value - original value) / original value) x 100.Pearson Edexcel
Percentage change between index numbers: Found using the formula ((New Index - Old Index) / Old Index) × 100 when comparing two non-base years.Pearson Edexcel
Percentage changes: Found using the formula ((New Value - Original Value) / Original Value) × 100, dividing by the original value rather than the new value.Pearson Edexcel
Percentage point change: The absolute difference between two percentages, found by the simple arithmetic difference between two percentage figures.Pearson Edexcel
Perfectly contestable market: A market with no barriers to entry or exit, meaning sunk costs are zero and new entrants have access to the same technology as incumbent firms.Pearson Edexcel
Persistent current account deficit: A continuing shortfall that may indicate structural weaknesses, such as poor productivity or high relative inflation, and may require financing through…Pearson Edexcel
Policy conflicts: Situations where achieving one macroeconomic objective, such as reducing unemployment, works against another, such as controlling inflation.Pearson Edexcel
Policy trade-offs: Direct conflicts between macroeconomic objectives, such as pushing unemployment too low leading to labour shortages and wage-push inflation, conflicting with…Pearson Edexcel
Political influence: Occurs when governments use policies to steer MNC behaviour, though MNCs often hold significant bargaining power due to the jobs they provide.Pearson Edexcel
Political stability: This minimises the risk of sudden policy changes or conflict disrupting operations.Pearson Edexcel
Polycentric approach: An international approach that recognises each market is unique, resulting in adapted products and decentralised control given to local subsidiaries.Pearson Edexcel
Positive externalities: Benefits of innovation that extend beyond the private firm to society, causing the social benefits to exceed the private benefits.Pearson Edexcel
Potential market growth: The estimated future increase in the size or value of a market.Pearson Edexcel
Potential skills shortages: Rapid expansion can leave a growing firm struggling to recruit enough qualified staff to meet increased demand, forcing it to pay higher wages or accept lower…Pearson Edexcel
Predatory pricing: Setting prices deliberately below average variable cost to force competitors out of the market, which is illegal.Pearson Edexcel
Pressure groups: Campaign to change MNC behaviour through boycotts or lobbying, raising public awareness of unethical practices.Pearson Edexcel
Price comparison sites: Services that reduce information asymmetry by allowing consumers to easily compare prices across suppliers.Pearson Edexcel
Price competition: Winning market share in global markets by offering lower prices, often achieved through economies of scale.Pearson Edexcel
Price discrimination: Charging different prices to different consumer groups for an identical good or service, for reasons unrelated to cost differences.Pearson Edexcel
Price elastic demand: Where PED is less than -1, so a price decrease causes a proportionately larger increase in quantity demanded and raises total revenue.Pearson Edexcel
Price elasticity of demand: Measures the responsiveness of quantity demanded to a change in price, with a numerical value always negative due to the inverse relationship between price…Pearson Edexcel
Price index: A measure used to convert a nominal value to a real value, with a value of exactly 100 in the base year.Pearson Edexcel
Price indices: Measures such as the CPI and RPI that measure changes in the general price level using a weighted basket of goods reflecting typical household spending.Pearson Edexcel
Price inelastic demand: Where PED is between 0 and -1, so a price increase leads to a proportionately smaller fall in quantity demanded and total revenue rises.Pearson Edexcel
Price leadership: A method of tacit collusion where a dominant firm sets a price and rivals follow suit.Pearson Edexcel
Price mechanism: Signals potential market growth to firms and investors, for example through higher prices when demand rises.Pearson Edexcel
Price skimming: Setting a high initial price for an innovative product to maximise short-term revenue before rivals enter.Pearson Edexcel
Price stability: A situation where firms avoid price competition because they anticipate rivals' reactions to any price changes.Pearson Edexcel
Price volatility: Adverse price movements in currencies and commodities that businesses manage the risks of through forward markets.Pearson Edexcel
Price-cap regulation: A method, such as RPI minus X, that limits price increases and gives the firm an incentive to cut costs.Pearson Edexcel
Pricing strategies: The approaches a business chooses for setting prices, determined by factors such as USPs, price elasticity of demand, competition, brand strength, life cycle…Pearson Edexcel
Primary research: Gathering new data first-hand for a specific purpose, such as through surveys or focus groups.Pearson Edexcel
Principal-agent problem: Arises where there is a divorce of ownership from control, leading managers to prioritise their own job security or personal perks over achieving maximum…Pearson Edexcel
Private benefits: The direct advantages gained by the individual consumer or firm from an economic transaction.Pearson Edexcel
Private costs: The costs internal to a transaction borne by the producer or consumer.Pearson Edexcel
Privatisation: The transfer of state-owned assets to the private sector, introducing profit motives and competitive pressures.Pearson Edexcel
Process innovation: Implementing new or improved production and delivery methods, such as automated robotic assembly lines to reduce unit costs and increase productive efficiency.Pearson Edexcel
Product adaptation: Modifying a product to cater to regional tastes, such as offering spicier or vegetarian alternatives where demanded.Pearson Edexcel
Product differentiation: A feature of imperfect competition, where many firms sell differentiated products, unlike the homogeneous products of perfect competition.Pearson Edexcel
Product innovation: The development of new or significantly improved goods and services, aiming to increase consumer demand and market share through differentiation.Pearson Edexcel
Product life cycle: The stage a product has reached, which is crucial because pricing strategies change across it, such as penetration pricing at launch and prices dropping…Pearson Edexcel
Product portfolio management: Adjusting the mix of products a firm offers, such as premium brands in a boom and own-label value products in a downturn, to mitigate risks.Pearson Edexcel
Productive capacity: Changes in this, driven by the quantity or quality of factors of production, shift long-run aggregate supply.Pearson Edexcel
Productive efficiency: Achieved when a firm operates at the lowest possible cost per unit, maximising output from given inputs and minimising waste during production.Pearson Edexcel
Productivity: Output per unit of input in a given time period, such as units produced per worker per hour.Pearson Edexcel
Profit: The surplus remaining after total costs are deducted from total revenue over a given period, recorded when a sale is made regardless of whether money has been…Pearson Edexcel
Profit and loss: Outcomes that vary, as firms adapting successfully can achieve economies of scale and higher profits, while those failing to adapt face losses.Pearson Edexcel
Profit for the year (net profit): Calculated by deducting finance costs, such as interest on loans, and tax from the operating profit.Pearson Edexcel
Profit for the year margin: Profit for the year divided by revenue multiplied by 100, showing the final percentage of revenue remaining after all costs, including interest and tax, are…Pearson Edexcel
Profit maximisation: Occurs when the difference between total revenue and total cost is greatest, often the primary goal to satisfy shareholders and fund reinvestment.Pearson Edexcel
Profit motive: The prospect of higher profit margins that provides an incentive for producers to increase output and for new firms to enter the market.Pearson Edexcel
Profit per unit: Found by subtracting average cost from average revenue, and multiplied by the quantity to give total profit.Pearson Edexcel
Profit-maximising level of output: The level of output that occurs where marginal cost equals marginal revenue.Pearson Edexcel
Profitability: Gross profit, operating profit and profit for the year, found by deducting cost of sales, operating expenses, interest and tax in turn.Pearson Edexcel
Profitability ratios: A category of ratio that includes the gross profit margin, which measures the proportion of revenue left after deducting the direct costs of producing goods…Pearson Edexcel
Progressive taxation: A mechanism such as income tax where higher earners pay a larger percentage of their income, directly reducing the post-tax income gap.Pearson Edexcel
Protectionism: Barriers to international exchange, such as tariffs and quotas, which trade liberalisation reduces or removes.Pearson Edexcel
Psychographic segmentation: Grouping consumers according to their lifestyle, social class, personality, and personal values.Pearson Edexcel
Pull factors: Conditions that attract a business to expand into international markets rather than being pushed out of its domestic market.Pearson Edexcel
Purchasing power: The amount of goods and services money can buy, which diminishes for savings if the interest rate is lower than inflation.Pearson Edexcel
Purchasing power parity: An adjustment used by international measures so that a standardised threshold enables valid comparisons of absolute deprivation across different countries.Pearson Edexcel
Push factors: Negative domestic conditions that compel a business to seek international trade opportunities to maintain or grow revenue.Pearson Edexcel

Q

Quality assurance: A system of agreeing and meeting quality standards at each stage of production to prevent defects.Pearson Edexcel
Quality control: Over-utilisation increases the risk of quality control failures, and rushed production may mean defective goods reach customers.Pearson Edexcel
Quality management: Total Quality Management is a lean production technique that, along with lean methods, often improves product quality and reduces defect rates and returns.Pearson Edexcel
Quantitative data: Numerical data used to measure demand levels and estimate the volume of likely demand.Pearson Edexcel
Quantitative easing: Involves asset purchases by the central bank to increase the money supply and stimulate lending when interest rates cannot be lowered further.Pearson Edexcel
Questionnaire bias: A form of bias that can occur if survey questions are leading.Pearson Edexcel
Quotas: Barriers to international trade that trade liberalisation removes or reduces, alongside tariffs.Pearson Edexcel

R

Rate of inflation: The percentage change in the index over a year, found by calculating the percentage change in the price index between two periods.Pearson Edexcel
Rate-of-return regulation: A method that allows a fair return on capital but may weaken the incentive to minimise costs.Pearson Edexcel
Ratio: A comparison of parts to parts or parts to a whole, such as a 3:1 ratio of employed to unemployed individuals in a specific sample.Pearson Edexcel
Rational decision making: Making utility-maximising decisions, which economic agents cannot do when they lack the complete information required.Pearson Edexcel
Rationalisation: The reorganisation of a firm's operations to increase efficiency and reduce costs, which may involve downsizing, relocating, or closing unprofitable divisions.Pearson Edexcel
Rationality: The assumption of rational consumer behaviour, which in reality may not hold as consumers may act irrationally due to habit or social influence.Pearson Edexcel
Real Gross Domestic Product: The primary measure used to assess the rate of economic growth, accounting for inflation.Pearson Edexcel
Real income: Nominal income adjusted for the rate of inflation, so it measures the purchasing power of earnings.Pearson Edexcel
Real income growth: Growth in income that accounts for inflation, unlike nominal income growth.Pearson Edexcel
Real values: Values adjusted for price changes to show true purchasing power, found by dividing the nominal value by the price index and multiplying by the base year index.Pearson Edexcel
Recession: Two consecutive quarters of negative economic growth, measured by a decline in real Gross Domestic Product (GDP).Pearson Edexcel
Recognition lag: The time taken to identify an economic problem using data.Pearson Edexcel
Regulation: The monitoring and enforcement of rules by appointed bodies such as the Environment Agency.Pearson Edexcel
Regulatory capture: A situation where regulators act in the interest of the firms they oversee, leading to government failure and misallocation of resources.Pearson Edexcel
Relative poverty: Defined in relation to the average standard of living in a specific society, typically measured as living in a household with an income below 60% of the…Pearson Edexcel
Resource allocation: The way resources are distributed through the price mechanism, which imperfect and asymmetric information can prevent from working efficiently.Pearson Edexcel
Resource misallocation: Arises in a free market when goods with positive externalities are under-provided and under-consumed, while goods with negative externalities are…Pearson Edexcel
Return on investment (ROI): A measure of financial performance, calculated or interpreted as financial gain relative to capital expenditure, satisfying shareholders.Pearson Edexcel
Revenue and costs: The revenues, costs and expenses summarised over a specific period, with revenue transformed into net income by sequential deductions.Pearson Edexcel
Risk: The possibility that an enterprise will have lower than anticipated profits or experience a loss rather than taking a profit, involving quantifiable…Pearson Edexcel
Risk and reward: Profit represents the reward for organising the other factors of production and successfully meeting consumer needs, compensating for the risk of losing the…Pearson Edexcel
Risk management: Using foresight from projections to minimise the risk of insolvency or defaulting on supplier payments by arranging credit in advance.Pearson Edexcel
Risk premium: The higher interest rate charged to reflect the increased probability of default when assessed credit risk is higher.Pearson Edexcel
Risk spreading: A pull factor where operating in multiple countries protects overall revenue through stable or growing sales in other international markets when one market…Pearson Edexcel
Risk transfer: A mechanism where a business pays a premium to a provider to cover potential future financial losses.Pearson Edexcel
Risk transformation: Part of the intermediation process in which banks manage the risk of default on behalf of depositors.Pearson Edexcel
RPI: An alternative measure that includes housing costs, typically resulting in a higher rate than CPI.Pearson Edexcel

S

Sales maximisation: Focuses on achieving the highest possible volume of sales without making a loss, often used to increase market share or benefit from economies of scale.Pearson Edexcel
Sales revenue: The total monetary value generated from sales before any costs are deducted, also known as turnover.Pearson Edexcel
Sales volume: The physical quantity of goods or services a business sells over a specific period, measured in units.Pearson Edexcel
Satisficing: Involves making just enough profit to keep stakeholders happy while pursuing other goals.Pearson Edexcel
Saturated market: Occurs when the volume of a product in a domestic market is maximised, meaning further growth requires taking market share from rivals.Pearson Edexcel
Saving: Foregoing current consumption, as when households deposit savings into bank accounts seeking financial security and a return via interest payments.Pearson Edexcel
Saving and borrowing: The relationship between individuals and organisations with surplus funds and firms and individuals needing capital, linked by the financial sector as…Pearson Edexcel
Savings and borrowing: Inflation redistributes wealth between savers and borrowers, as savers lose out while borrowers benefit from the falling real value of their debt.Pearson Edexcel
Scarcity: The fundamental economic problem resulting from unlimited wants and finite resources, meaning society cannot produce enough to satisfy everyone's desires.Pearson Edexcel
Secondary research: Using data that already exists, like government statistics or industry reports.Pearson Edexcel
Secured loans: Loans backed by collateral, such as a mortgage secured against a house, which typically have lower interest rates than unsecured loans.Pearson Edexcel
Selection bias: A form of bias that can occur if the sample is unrepresentative.Pearson Edexcel
Self-regulation: When a Multinational Corporation voluntarily monitors its adherence to ethical and safety standards, rather than being compelled by external legislation.Pearson Edexcel
Share capital: Money raised by a business through the issue of shares to investors, providing long-term funding without the obligation of regular interest payments, though…Pearson Edexcel
Shareholders: One type of stakeholder who own part of the business and typically seek profit maximisation, high dividends and capital growth.Pearson Edexcel
Shift in the AD curve: Occurs when Consumption, Investment, Government spending or Net Exports change independently of the general price level, moving the entire curve.Pearson Edexcel
Shift of the demand curve: Occurs when a non-price determinant of demand changes, such as consumer income, tastes, or the prices of substitute goods.Pearson Edexcel
Shift of the supply curve: Occurs when a non-price determinant of supply changes, such as production costs, technology, or government taxes and subsidies.Pearson Edexcel
Shifting employment patterns: The transition of workers between sectors as an economy grows, which alters wage levels and demands new skills from the workforce.Pearson Edexcel
Shocks: Sudden, unexpected events that significantly disrupt the normal operations of an economy or a specific market.Pearson Edexcel
Short-run Aggregate Supply: Primarily influenced by changes in the cost of inputs and resources.Pearson Edexcel
Short-term financing: Finance provided to businesses to fund working capital requirements, such as overdrafts or short-term loans.Pearson Edexcel
Shortage: Illustrated by the gap between the curves at a price below equilibrium, representing excess demand.Pearson Edexcel
Single market: Arrangement, such as the European Union, allowing the free movement of goods, services, capital, and labour, deeply integrating members' economies.Pearson Edexcel
Social benefits: The total benefit to society from an economic activity, calculated as the sum of private benefits and external benefits.Pearson Edexcel
Social costs: The total cost to society, calculated as the sum of private costs and external costs.Pearson Edexcel
Social costs and benefits: The sum of private and external impacts from the production and consumption of goods and services.Pearson Edexcel
Social enterprise: A business that aims to maximise social or environmental impact, using commercial strategies to fund its objectives and reinvesting profits into the social…Pearson Edexcel
Social media: Amplifies campaigns, allowing rapid, global dissemination of information that can severely damage an MNC's brand reputation and force changes in corporate…Pearson Edexcel
Social versus private costs and benefits: Social cost equals private cost plus external cost, and social benefit equals private benefit plus external benefit.Pearson Edexcel
Social welfare: The wellbeing of society, which suffers a deadweight welfare loss when the cost of producing the last units exceeds the benefit.Pearson Edexcel
Societal welfare: Increased when an economic activity's private and social benefits exceed or equal its private and social costs.Pearson Edexcel
Sources of finance: Banks and other firms, from which businesses and consumers can obtain credit.Pearson Edexcel
Spare capacity: Exists when current output is below the maximum possible output, providing flexibility to meet sudden demand spikes.Pearson Edexcel
Specialisation: When a country focuses resources on producing goods where it holds a comparative advantage, meaning it produces them at a lower opportunity cost.Pearson Edexcel
Speculation and market bubbles: Speculation artificially inflated asset prices, particularly in housing, creating unsustainable market bubbles.Pearson Edexcel
Stable market: A market with predictable demand, established consumer preferences and slow technological change, where innovation is usually incremental.Pearson Edexcel
Stagflation: A scenario where both unemployment and cost-push inflation increase simultaneously following an inward shift in short-run aggregate supply.Pearson Edexcel
Stakeholder conflict: A situation where the objectives of economic agents clash, such as shareholders wanting higher dividends while employees demand wage increases.Pearson Edexcel
Stakeholder conflicts: Occur when the objectives of different groups associated with a business are incompatible, often driven by ethical issues.Pearson Edexcel
Stakeholder relationships: Close ties with suppliers, employees and the local community that provide a competitive advantage large firms struggle to replicate.Pearson Edexcel
Stakeholders: Individuals or groups with a vested interest in a business's activities, whose distinct objectives a firm must balance to maintain long-term sustainability…Pearson Edexcel
Stakeholders (economic agents): Individuals, groups, or organisations that have a direct interest in the activities and performance of a business.Pearson Edexcel
Standard of living: Reduced when inflation outstrips nominal wage increases, as individuals can purchase fewer goods and services with their earnings.Pearson Edexcel
Standardisation: An approach used for mass markets to achieve economies of scale, with promotional messages or packaging tweaked to suit local tastes.Pearson Edexcel
Start-up costs: Costs such as purchasing expensive capital equipment that deter firms lacking finance from entering a market.Pearson Edexcel
Static model: A model that struggles to account for dynamic market conditions, multi-product businesses or changes in the external economic environment, making it less…Pearson Edexcel
Stepped fixed costs: Costs that rise when capacity expands, meaning the assumption that fixed costs remain constant is untrue.Pearson Edexcel
Stimulating demand: Increasing current output through promotional campaigns or price cuts, which improves utilisation.Pearson Edexcel
Strategic planning: Using understanding of income elasticity of demand to decide on expansion, sales forecasting and production schedules.Pearson Edexcel
Stress tests: Checks conducted to see whether a bank can withstand severe economic shocks.Pearson Edexcel
Structural change: The shift in employment from primary agriculture into secondary manufacturing, and eventually into tertiary services, as economies develop.Pearson Edexcel
Structural unemployment: A form of unemployment resulting from both occupational and geographical immobility, which prevents the labour market from clearing.Pearson Edexcel
Sub-prime mortgages: Loans issued to borrowers with poor credit histories, which led to massive defaults when interest rates rose.Pearson Edexcel
Subcontracting: Taking on subcontracted work from competitors can increase output and resolve under-utilisation, while subcontracting work out can quickly resolve…Pearson Edexcel
Subsidies: These lower costs of production, shifting the supply curve to the right.Pearson Edexcel
Substitutability: The availability of close substitutes is the most significant determinant, so goods with many substitutes have highly elastic demand whereas those with few…Pearson Edexcel
Substitutes: Related goods where a rise in one good's price shifts demand for the other good outwards, in the same direction.Pearson Edexcel
Sunk costs: Unrecoverable costs that act as barriers to exit and reduce contestability.Pearson Edexcel
Supernormal profit: Profit earned by existing firms in a market that signals an opportunity, incentivising new firms to enter.Pearson Edexcel
Supplier relationships: The basis on which trade credit relies, with suppliers allowing businesses to delay payment for goods.Pearson Edexcel
Supply chain integration: The fragmentation of manufacturing processes across borders to exploit comparative advantages, which increases efficiency and lowers consumer prices.Pearson Edexcel
Supply curve: A graphical representation of the relationship between the price of a good or service and the quantity that producers are willing and able to supply to the…Pearson Edexcel
Supply elasticity: A concept used to evaluate how quickly and effectively a firm can respond to a change in demand; supply is often inelastic in the short run.Pearson Edexcel
Supply-side shocks: Events such as a natural disaster disrupting global supply chains or a sudden spike in oil prices, linked to production costs or capacity.Pearson Edexcel
Surplus: Shown on a diagram as the horizontal distance between the demand and supply curves at a price above equilibrium.Pearson Edexcel
Survival: An objective during an economic downturn that may result in short-term decisions like liquidating stock at a discount.Pearson Edexcel
Sustainable competitive advantage: An advantage that is difficult for competitors to copy, ensuring long-term profitability and market share growth.Pearson Edexcel
Systemic risk: The risk of failure spreading across the financial sector, which the lender of last resort function aims to prevent by stopping a bank run from causing…Pearson Edexcel
Systemic stability: The maintenance of stability across the financial system, supported by accurately assessing credit risk so that capital is allocated efficiently and…Pearson Edexcel

T

Tacit agreement: Unspoken, unwritten cooperation between firms in an oligopoly to limit competition, without any formal or explicit communication.Pearson Edexcel
Tariffs: Import taxes that, when lowered through trade liberalisation, reduce costs for domestic consumers and businesses importing raw materials.Pearson Edexcel
Taxation: Changes in corporation tax alter retained profits, whereas higher income tax reduces consumer spending.Pearson Edexcel
Taxation and benefits: The simultaneous deduction of income tax and the withdrawal of means-tested benefits, which together can leave little or no increase in disposable income.Pearson Edexcel
Technological change: Advancements that have drastically reduced the cost of transport, such as containerisation, and communications, such as the internet.Pearson Edexcel
Technological unemployment: A structural issue where automation replaces human labour, such as self-checkouts replacing cashiers.Pearson Edexcel
The banking sector: Regulation of this industry by the Bank of England aims to maintain confidence and protect the wider economy from bank failures.Pearson Edexcel
The marketing mix: The elements of product, price, place and promotion, which a firm may adapt so that it aligns with local demand.Pearson Edexcel
The price mechanism: The role of market forces in restoring market equilibrium without external intervention, as prices adjust to eliminate excess demand and excess supply.Pearson Edexcel
Third-party effects: Costs or benefits imposed on third parties not directly involved in the transaction when a good or service is produced or consumed.Pearson Edexcel
Time lags: Delays in supply adjustments, such as agricultural yields taking months to respond to price signals, which the model struggles to account for.Pearson Edexcel
Time periods in economics: Time is a crucial factor, as demand becomes more price elastic over time when consumers have longer to find substitute products.Pearson Edexcel
Total contribution: Contribution per unit multiplied by the number of units sold.Pearson Edexcel
Total cost: Fixed costs plus variable costs, used with total revenue to work out total profit.Pearson Edexcel
Total costs: The sum of total fixed costs and total variable costs.Pearson Edexcel
Total profit: Total revenue minus total cost, which rises when marginal revenue exceeds marginal cost.Pearson Edexcel
Total Quality Management (TQM): A comprehensive approach where all employees, from the factory floor to senior management, are responsible for quality.Pearson Edexcel
Total revenue: The income a firm receives from sales, which changes when prices change depending on PED.Pearson Edexcel
Trade barriers: Government intervention that restricts international trade, including tariffs, import quotas, government legislation and domestic subsidies.Pearson Edexcel
Trade creation: The replacement of expensive domestic production with cheaper imports from a member state, shifting production to more efficient member states.Pearson Edexcel
Trade credit: An arrangement where a business receives goods or services from a supplier but pays for them at a later date, helping to maintain liquidity without immediate…Pearson Edexcel
Trade diversion: The replacement of cheaper imports from the rest of the world with more expensive imports from a member state, as members must buy from less efficient bloc…Pearson Edexcel
Trade facilitation: Supporting domestic and international trade by reducing transaction costs and providing a reliable medium of exchange, ensuring markets function smoothly.Pearson Edexcel
Trade liberalisation: The removal or reduction of barriers to international trade, such as tariffs and quotas, allowing goods and services to flow more freely between countries.Pearson Edexcel
Trade-off: The balance between higher labour costs and improved worker productivity or retention when pay and conditions are improved.Pearson Edexcel
Trade-offs: Situations where satisfying one group's objectives makes it impossible to satisfy another's, so businesses must manage these competing demands.Pearson Edexcel
Trading blocs: Agreements between countries to reduce protectionist barriers like tariffs, whose expansion has reshaped global trade.Pearson Edexcel
Transaction costs: Costs that efficient payment systems reduce for consumers and businesses.Pearson Edexcel
Transmission lag: The time taken for the policy to affect aggregate demand.Pearson Edexcel
Transnational corporations: Global companies that operate across multiple countries to minimise costs and maximise market reach, accelerating integration.Pearson Edexcel

U

Uncertainty: Involves unpredictable events with unknown probabilities, such as a sudden global pandemic, unlike risk which can often be measured and managed.Pearson Edexcel
Underemployment: Workers who are overqualified for their current role or working fewer hours than desired.Pearson Edexcel
Unemployment: Typically rises during a recession as firms reduce their workforce in response to falling demand.Pearson Edexcel
Unintended consequences: Unforeseen negative effects of policies, such as a tax on waste leading to illegal fly-tipping.Pearson Edexcel
Unintended meanings: When a brand name or slogan carries a negative connotation in a different culture, damaging brand reputation.Pearson Edexcel
Unit costs: Costs per unit that firms face at a higher level when workers are less productive.Pearson Edexcel
Unitary elastic demand: Where PED equals -1, at which total revenue is maximised and remains unchanged if prices are altered.Pearson Edexcel
Unitary elasticity: A value of exactly -1, representing unitary elasticity.Pearson Edexcel
Unlimited liability: Owners are personally responsible for all business debts, so personal assets like their home can be seized to pay creditors if the business fails.Pearson Edexcel
Unsecured loans: Loans such as credit cards that are not backed by collateral and carry higher interest rates because the risk to the lender is greater.Pearson Edexcel
Utility maximisation: The primary objective of consumers in traditional economic theory, being to maximise satisfaction from the goods and services they purchase, subject to budget…Pearson Edexcel

V

Variable cost per unit: The cost, such as raw materials and direct labour, of producing one unit, which is subtracted from the selling price per unit.Pearson Edexcel
Variable costs: Costs that change directly with output levels, like raw materials.Pearson Edexcel
Venture capital: Investment from individuals or firms into early-stage, high-potential, high-risk start-ups, often in exchange for equity and a say in management.Pearson Edexcel
Vertical integration: Merging with a firm at a different stage of production in the same industry, which can be forward or backward.Pearson Edexcel
Viral marketing: A promotional strategy that leverages digital networks to rapidly spread promotional messages through user sharing, offering a cost-effective way to build…Pearson Edexcel
Visibles: Tangible physical goods, such as cars, machinery, or agricultural products.Pearson Edexcel

W

Wage determination: Analysed by understanding the factors that influence the supply of and demand for labour in competitive and non-competitive markets.Pearson Edexcel
Waste disposal: How a business manages its waste, with ethical firms aiming to minimise landfill use through recycling and circular economy practices.Pearson Edexcel
Waste reduction: Systematically reducing waste through continuous improvement, leading to lower unit costs and enhanced competitiveness.Pearson Edexcel
Wealth: A stock concept, measuring the total net value of assets owned at a specific point in time, minus any liabilities.Pearson Edexcel
Wealth distribution: A stock of assets at a given point in time, which state services primarily affect only indirectly through real income and living standards.Pearson Edexcel
Welfare improvement: A rise in welfare that occurs when aid effectively targets healthcare, education, and infrastructure.Pearson Edexcel
Welfare loss: The deadweight loss shown on a tariff diagram, which exam tips advise shading clearly alongside government revenue.Pearson Edexcel
Wider geographical markets: Markets created by the digital economy that enable consumers to purchase goods from global suppliers rather than being restricted to local retailers.Pearson Edexcel
Withdrawals: Leakages of income not spent on domestic goods and services: savings by households, taxation by the government, and spending on imports.Pearson Edexcel
Working capital: The funds required for day-to-day business operations, calculated as current assets minus current liabilities.Pearson Edexcel
Working conditions: This encompasses health and safety, working hours, job security, and the physical environment.Pearson Edexcel
Working Time Directive: A rule that limits maximum weekly working hours.Pearson Edexcel
World Trade Organisation (WTO): An institution that promotes free trade by negotiating agreements and settling trade disputes.Pearson Edexcel

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