Economics A-Level
Economics A-Level glossary
75 key terms for Economics A-Level, A to Z, each linked to the topic pages that use it.
A
- Asymmetric Information
- A situation where one party in a transaction has more or superior information compared to another, leading to adverse selection.Pearson Edexcel
B
- Barriers to Entry and Exit
- Analysis of structural (economies of scale), legal (patents), and strategic (limit pricing) obstacles that determine market contestability and the…Pearson Edexcel
C
- Comparative Advantage
- The ability of an agent to produce a particular good or service at a lower opportunity cost than its trading partners.Pearson Edexcel
- Consumer Price Index (CPI)
- A measure that examines the weighted average of prices of a basket of consumer goods and services, used to track inflation and the cost of living.Pearson Edexcel
- Consumer Surplus
- The difference between the maximum price a consumer is willing to pay and the market price they actually pay.Pearson Edexcel
- Cost-Push Dynamics
- The transmission mechanism of input prices, including unit labor costs, raw materials, and imported inflation, into the SRAS curve, resulting in shifts that…Pearson Edexcel
- Current Account
- A component of the Balance of Payments that records the net flow of money resulting from trade in goods and services, and net investment income.Pearson Edexcel
D
- Deadweight Loss
- The loss of economic efficiency that occurs when the equilibrium for a good or service is not achieved.Pearson Edexcel
- Demand
- The quantity of a good or service that consumers are willing and able to buy at a given price in a given time period.Pearson Edexcel
- Determinants of Consumption and Investment
- Analysis of household spending patterns influenced by real disposable income, consumer confidence, and wealth effects, contrasted with business capital…Pearson Edexcel
- Determinants of Long-Run Growth
- Analysis of supply-side drivers including capital deepening, human capital accumulation, and technological innovation as the primary engines of shifts in the…Pearson Edexcel
- Division of Labour
- The breaking down of the production process into separate, sequential tasks, with different workers performing each task.Pearson Edexcel
E
- Economic Development
- A broad measure of welfare in a nation that includes indicators of health, education, and living standards.Pearson Edexcel
- Economies and Diseconomies of Scale
- Long-run analysis of how increasing the scale of production leads to lower long-run average costs (LRAC) through technical, managerial, and financial…Pearson Edexcel
- Efficiency and Welfare
- Evaluation of allocative, productive, and X-efficiency across different structures, focusing on the maximization of consumer and producer surplus and the…Pearson Edexcel
- Equilibrium Price
- The price at which quantity demanded equals quantity supplied, meaning there is no excess demand or supply.Pearson Edexcel
- External Sector Dynamics
- Evaluation of net trade (X-M) as a component of AD, focusing on the impact of exchange rate fluctuations, relative inflation rates, and the economic…Pearson Edexcel
- Externalities and Social Welfare
- Analysis of the divergence between marginal private costs/benefits and marginal social costs/benefits, leading to over-consumption of demerit goods and…Pearson Edexcel
F
- Financial Intermediation
- The process by which financial institutions bridge the gap between surplus units (savers) and deficit units (borrowers), reducing transaction costs and…Pearson Edexcel
- Fiscal and Monetary Policy Transmission
- Examination of how government spending (G) and taxation (T) directly and indirectly shift AD, and how central bank interventions via interest rates and…Pearson Edexcel
- Fiscal Policy and Debt Sustainability
- Analysis of government spending and taxation as tools for demand management.Pearson Edexcel
- Free Market Economy
- An economic system where resources are allocated entirely by the price mechanism (supply and demand) without government intervention.Pearson Edexcel
G
- GDP (Gross Domestic Product)
- The total market value of all final goods and services produced within a country's borders in a specific time period.Pearson Edexcel
- GNI (Gross National Income)
- GDP plus net property income from abroad, representing the total income earned by a nation's factors of production regardless of location.Pearson Edexcel
- Government Intervention and Market Failure
- Evaluation of the efficacy of the National Minimum Wage (NMW), maximum wage caps, and supply-side policies designed to reduce immobility and enhance human…Pearson Edexcel
- Gross Domestic Product (GDP)
- The total market value of all final goods and services produced within a country's borders in a specific time period, serving as the primary measure of…Pearson Edexcel
- Gross National Income (GNI)
- GDP plus net income from abroad, accounting for the income earned by a nation's residents regardless of where the production occurs.Pearson Edexcel
H
- Human Development Index (HDI)
- A composite statistic of life expectancy, education, and per capita income indicators, used to rank countries into four tiers of human development.Pearson Edexcel
I
- Indirect Tax
- A tax levied on goods and services, collected by producers and paid to the government.Pearson Edexcel
- Information Asymmetry
- Investigation of imbalances in information between buyers and sellers, specifically focusing on adverse selection and moral hazard in insurance and labor…Pearson Edexcel
- Institutional and Structural Frameworks
- The significance of property rights, political stability, financial market efficiency, and trade liberalization in creating an environment conducive to…Pearson Edexcel
- Interdependence and Strategic Behavior
- Examination of oligopolistic markets where firm decisions are contingent on the actions of rivals, often modeled through game theory and the kinked demand…Pearson Edexcel
L
- Labour Market Flexibility and the Gig Economy
- Examination of the shift from traditional long-term employment to flexible, short-term contracts, assessing the implications for worker security, firm…Pearson Edexcel
M
- Macroprudential Regulation
- The shift from micro-level supervision to systemic oversight, focusing on the resilience of the entire financial system against shocks and the prevention of…Pearson Edexcel
- Market Concentration and Regulation
- Evaluation of how business growth alters market structures, moving from competitive models toward oligopoly or monopoly, and the subsequent role of…Pearson Edexcel
- Market Failure in Finance
- The presence of externalities, asymmetric information (adverse selection and moral hazard), and the tendency toward monopoly power in 'too big to fail'…Pearson Edexcel
- Marshall-Lerner Condition
- The condition that a currency devaluation will only improve the trade balance if the sum of the price elasticities of demand for exports and imports is…Pearson Edexcel
- Measurement and Indicators of Disparity
- Utilization of the Gini coefficient (0 to 1 scale) and the Lorenz curve to visualize income distribution.Pearson Edexcel
- Microfinance
- The provision of small loans and financial services to low-income individuals who lack access to traditional banking.Pearson Edexcel
- Monetary Policy and Central Bank Independence
- The shift from direct government control of interest rates to independent inflation-targeting regimes.Pearson Edexcel
N
- Normative Statement
- A subjective statement based on a value judgement or opinion, often containing words like 'should' or 'ought'.Pearson Edexcel
O
- Opportunity Cost
- The value of the next best alternative foregone when a choice is made.Pearson Edexcel
- Organic vs. Inorganic Growth
- Examination of internal expansion through reinvested profits and product development versus external expansion via mergers, acquisitions, and takeovers.Pearson Edexcel
P
- Pigouvian Tax
- A tax imposed on an activity that generates negative externalities, intended to correct an inefficient market outcome.Pearson Edexcel
- Policy Intervention and Redistribution
- Evaluation of the effectiveness of means-tested versus universal benefits, the implementation of the National Minimum Wage, and the use of direct and indirect…Pearson Edexcel
- Policy Trade-offs and Conflicts
- The inherent tension between competing macroeconomic goals, most notably the short-run Phillips Curve trade-off between inflation and unemployment, and the…Pearson Edexcel
- Positive Statement
- An objective, factual statement that can be tested against evidence to be proven true or false.Pearson Edexcel
- PPP (Purchasing Power Parity)
- An exchange rate adjustment that equalizes the purchasing power of different currencies by eliminating price level differences between countries.Pearson Edexcel
- Price Elasticity of Demand (PED)
- A measure of the responsiveness of quantity demanded to a change in price.Pearson Edexcel
- Primary Product Dependency
- When an economy relies heavily on the export of raw materials and agricultural goods.Pearson Edexcel
- Productive Capacity and Potential Output
- The determinants of the LRAS boundary, focusing on the quantity and quality of the factors of production (land, labor, capital, enterprise) and the role of…Pearson Edexcel
- Profit Maximisation vs Alternative Objectives
- Examination of the neoclassical assumption that firms seek to maximise profit (MC=MR) compared to behavioral theories such as revenue maximisation (MR=0),…Pearson Edexcel
- Profit Maximization vs. Alternative Objectives
- The tension between the neoclassical objective of MC=MR and alternative goals such as revenue maximization (MR=0) or sales maximization (AC=AR) to achieve…Pearson Edexcel
- Public Goods and Market Absence
- Examination of non-excludability and non-rivalry, which creates the free-rider problem and results in the complete failure of the market to provide essential…Pearson Edexcel
- Purchasing Power Parity (PPP)
- An exchange rate adjustment that equalizes the purchasing power of different currencies by eliminating price level differences between countries.Pearson Edexcel
R
- Regulatory Capture
- A government failure where a regulatory agency, created to act in the public interest, instead advances the commercial concerns of special interest groups.Pearson Edexcel
S
- Savings Gap
- The difference between the level of domestic savings and the level of investment needed to achieve a target rate of economic growth.Pearson Edexcel
- Scarcity
- The fundamental economic problem arising from unlimited human wants relative to finite resources.Pearson Edexcel
- Social Optimum
- The level of output where the marginal social benefit (MSB) equals the marginal social cost (MSC), maximizing social welfare.Pearson Edexcel
- Stakeholder Theory and CSR
- The shift from shareholder primacy to a broader focus on stakeholders, including employees, customers, and the environment, often as a strategy for long-term…Pearson Edexcel
- Structural Causes of Inequality
- Investigation into wage differentials resulting from varying elasticities of labor supply, the impact of capital-biased technological change, and the role of…Pearson Edexcel
- Supply
- The quantity of a good or service that producers are willing and able to sell at a given price in a given time period.Pearson Edexcel
- Supply-Side Interventionism
- State-led initiatives to increase the Long-Run Aggregate Supply (LRAS).Pearson Edexcel
- Supply-Side Policy Intervention
- The use of market-based and interventionist policies to shift the LRAS rightward, aiming to increase non-inflationary growth and improve international…Pearson Edexcel
- Sustainability and Externalities
- Evaluation of the trade-offs between rapid industrial expansion and environmental degradation, focusing on the Environmental Kuznets Curve and the transition…Pearson Edexcel
T
- Terms of Trade
- An index representing the ratio of a country's export prices to its import prices; an increase signifies an improvement in purchasing power.Pearson Edexcel
- The Divorce of Ownership from Control
- The emergence of the Principal-Agent problem where managers (agents) pursue personal utility maximization, such as prestige or fringe benefits, over…Pearson Edexcel
- The Law of Diminishing Marginal Returns
- A short-run law stating that as more units of a variable factor are added to a fixed factor, the marginal product will eventually decline, causing marginal…Pearson Edexcel
- The Multiplier
- The ratio of the final change in national income to the initial change in an injection that caused it; calculated as 1/(1-MPC) or 1/MPW.Pearson Edexcel
- The Role of Expectations and Credibility
- The significance of forward guidance and the reputation of policy-making institutions in shaping consumer and firm behavior, particularly regarding…Pearson Edexcel
- Trade Creation
- The replacement of higher-cost domestic production with lower-cost imports from a member of a newly formed trading bloc.Pearson Edexcel
- Trade Liberalisation
- The removal or reduction of restrictions or barriers on the free exchange of goods between nations.Pearson Edexcel
- Transfer Payments
- Government payments to individuals (e.g., welfare, pensions) for which no good or service is exchanged; excluded from GDP to avoid double counting.Pearson Edexcel
- Transmission Mechanisms
- The complex channels through which policy changes, such as adjustments in the base interest rate or changes in taxation, filter through the economy to affect…Pearson Edexcel
W
- Wage Determination in Competitive and Non-Competitive Markets
- Analysis of equilibrium wages where labour supply meets demand in perfectly competitive markets, contrasted with wage-setting in monopsonistic markets where…Pearson Edexcel
Where these terms come from
Each definition is one we publish on a Economics A-Level topic page or study guide. Open a term to see how each exam board words it and which topic it belongs to. For the full course, go to Economics revision or the glossary for every subject.
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