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    Economics GCSE

    Economics GCSE glossary

    59 key terms for Economics GCSE, A to Z, each linked to the topic pages that use it.

    A

    Appreciation
    An increase in the value of a currency in a floating exchange rate system.Pearson Edexcel

    C

    Capital
    Man-made physical resources used in the production process (e.g., machinery).Pearson Edexcel
    Consumer and Producer Welfare
    The quantification of economic benefit through surplus.Pearson Edexcel
    Current Account
    A record of all trade in goods and services between a country and the rest of the world.Pearson Edexcel
    Current Account Deficit
    When the value of a country's imports of goods and services is greater than the value of its exports.Pearson Edexcel

    D

    Depreciation
    A decrease in the value of a currency in a floating exchange rate system.Pearson Edexcel
    Derived Demand
    Demand for a factor of production (like labour) that occurs not for its own sake, but as a result of the demand for the goods and services it produces.Pearson Edexcel
    Division of Labour
    The breaking down of the production process into separate, sequential tasks, with different workers specialising in each task.Pearson Edexcel

    E

    Economic Agent
    An individual, firm, or government that makes economic decisions regarding the allocation of scarce resources.Pearson Edexcel
    Economies of Scale
    The reduction in average unit costs as a firm increases its scale of production.Pearson Edexcel
    Enterprise
    The willingness to bear the risks of business and organise the other three factors of production.Pearson Edexcel
    Equilibrium Wage Rate
    The wage rate at which the quantity of labour demanded by firms exactly equals the quantity of labour supplied by workers.Pearson Edexcel
    Exchange Rate
    The price of one currency expressed in terms of another currency.Pearson Edexcel
    Externality
    A spillover effect of economic activity that imposes costs or creates benefits for third parties not directly involved in the transaction.Pearson Edexcel

    F

    Factors of Production
    The inputs used in the production of goods and services: land, labour, capital, and enterprise.Pearson Edexcel
    Fiscal Policy
    The use of government spending and taxation to influence the level of aggregate demand in the economy.Pearson Edexcel
    Fixed Exchange Rate
    An exchange rate system where the government or central bank intervenes to maintain the currency's value at a specific target rate.Pearson Edexcel
    Floating Exchange Rate
    An exchange rate system where the value of the currency is determined by the market forces of supply and demand.Pearson Edexcel

    G

    Gross Domestic Product (GDP)
    The total value of all goods and services produced within an economy in a given period (usually a year).Pearson Edexcel

    I

    Imperfect Information
    A situation where economic agents do not have all the necessary facts to make a perfectly rational decision.Pearson Edexcel
    Income Elasticity of Demand (YED)
    A measure of the responsiveness of quantity demanded to a change in consumer income.Pearson Edexcel
    Inferior Good
    A good for which demand decreases as consumer income increases (negative YED).Pearson Edexcel
    Inflation
    A sustained increase in the general price level over time.Pearson Edexcel
    Internalising the Externality
    Government intervention (like a tax) that forces producers or consumers to pay the full social cost of their actions.Pearson Edexcel

    L

    Labour Market
    A factor market where the supply of labour (from workers) and the demand for labour (from firms) interact to determine the wage rate and employment level.Pearson Edexcel
    Labour Productivity
    The amount of output produced per worker (or per labour hour) over a given period of time.Pearson Edexcel

    M

    Macroeconomic Objectives
    The overarching goals a government sets for the whole economy, such as low inflation and steady growth.Pearson Edexcel
    Market Equilibrium and Disequilibrium
    The state where planned demand equals planned supply (market clearing).Pearson Edexcel
    Market Failure
    A situation where the free market mechanism fails to allocate resources efficiently, leading to a net loss in social welfare.Pearson Edexcel
    Merit Good
    A good that brings unanticipated benefits to consumers and society, which would be under-consumed in a free market.Pearson Edexcel
    Mixed Economy
    An economic system combining private enterprise and a degree of state monopoly/government intervention.Pearson Edexcel
    Monetary Policy
    The use of interest rates and the money supply to influence the level of aggregate demand and inflation.Pearson Edexcel

    N

    National Minimum Wage (NMW)
    A legally mandated price floor on the hourly wage rate, set by the government, below which employers cannot legally pay their workers.Pearson Edexcel
    Normal Good
    A good for which demand increases as consumer income increases (positive YED).Pearson Edexcel

    O

    Opportunity Cost
    The value of the next best alternative foregone when an economic choice is made.Pearson Edexcel

    P

    Phillips Curve
    An economic concept showing an inverse relationship (trade-off) between the rate of inflation and the rate of unemployment.Pearson Edexcel
    Price Elastic Demand
    When the percentage change in quantity demanded is greater than the percentage change in price (PED > 1).Pearson Edexcel
    Price Elasticity of Demand (PED)
    A measure of the responsiveness of quantity demanded to a change in price.Pearson Edexcel
    Price Inelastic Demand
    When the percentage change in quantity demanded is less than the percentage change in price (PED < 1).Pearson Edexcel
    Private Cost
    The cost borne directly by the producer or consumer involved in a transaction (e.g., a firm's raw materials or a consumer's purchase price).Pearson Edexcel
    Private Sector
    The part of the economy owned and run by private individuals and businesses, driven by the profit motive.Pearson Edexcel
    Productivity
    The ratio of output produced per unit of input used in the production process.Pearson Edexcel
    Profit Maximisation
    The objective of firms to make the largest possible difference between total revenue and total costs.Pearson Edexcel
    Public Good
    A good that is non-excludable and non-rivalrous, meaning the private sector will not provide it.Pearson Edexcel
    Public Sector
    The part of the economy controlled by the government, funded primarily through taxation.Pearson Edexcel

    R

    Rational Behaviour
    Decision-making that involves weighing up costs and benefits to maximise a specific objective.Pearson Edexcel

    S

    Satisficing
    Aiming for an acceptable or 'good enough' outcome rather than the absolute maximum.Pearson Edexcel
    Scarcity
    The situation where finite resources are insufficient to satisfy infinite human wants.Pearson Edexcel
    Social Cost
    The total cost to society of an economic activity.Pearson Edexcel
    Specialisation
    When an individual, firm, region, or country concentrates on producing a limited range of goods or services.Pearson Edexcel
    Supply-Side Policies
    Government policies aimed at increasing the productive capacity (aggregate supply) of the economy.Pearson Edexcel

    T

    The Economic Problem
    How to allocate scarce resources to satisfy unlimited human wants.Pearson Edexcel
    The Price Mechanism
    The process by which price changes coordinate the decisions of buyers and sellers to allocate scarce resources.Pearson Edexcel
    Third Party
    Individuals, organisations, or society as a whole who are affected by an economic transaction but did not choose to be involved in it.Pearson Edexcel
    Time Lags
    The delay between an economic action (like a policy change) and its effect being fully felt in the economy.Pearson Edexcel
    Total Factor Productivity
    The amount of output produced relative to all inputs combined (land, labour, capital, enterprise).Pearson Edexcel
    Trade Union
    An organisation of workers established to protect and improve their economic interests and working conditions through collective bargaining.Pearson Edexcel

    U

    Unemployment
    When individuals who are willing and able to work cannot find employment.Pearson Edexcel
    Utility
    The satisfaction or benefit derived from consuming a good or service.Pearson Edexcel

    Where these terms come from

    Each definition is one we publish on a Economics GCSE 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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