Economic Terms and Their Definitions

Economic Terms and Definitions

The following are economics terms you need to know for the most rewarding study of economics and economics assignment. Get guidance by reviewing the following terms dictionary in economics now.

1. 18th Century Rule

Since the year 19701 until today, it is known as the principle of gains from trade. It means that the importation of commodities from abroad are beneficial when they are acquired in exchange for exports in a lesser real cost than their production at home would get.

2. Ability-to-Pay-Principle

This states that individuals should be taxed based on their ability to pay, whatever benefits they receive.

3. Above the line

This deals with the transactions, which are included in the calculation of the balance of payments deficit or surplus. Those, which are not included in this term, are typically official reserve transactions, short-term capital flows and transactions below the line.

4. Absolute advantage

This is the ability of an individual, a household, a firm or known as an economic actor to make some specific goods or services with a lesser total input of capital, land, labor or other economic resources per unit of output than other economic actors are.

5. Balance Sheet

This is an itemized list of all the assets and liabilities of a business to show its net worth at a particular time.

6. Business cycle

This refers to the wave-like variations or regular swings in the speed of a country’s economic growth, the well below and well above in the long-term trend in the growth rate of the overall production. It may also mean the ups and downs of the general business activity. It may also be called as the trade cycle.

7. Capital

This is the existing stock of goods that are utilized in the making of other goods or services, which were previously made by human activities.

8. Collateral

This refers to anything that has a value, usually, a car or a house, which is promised by a borrower as a security for a loan. Once he or she fails to pay said loan, the collateral will be sold. The proceeds of the said sale will be utilized as payment of the unpaid debt.

9. Cost-Benefit Analysis (CBA)

The foremost method utilized for valuation. CBA is the method of compiling the expenses or cots of a project. It also included the benefits. They will not be interpreted to monetary terms. They will also be discounted over time.

10. Discounting

This is the determination of the existing value of the future costs and benefits.

11. Economic

This is the social science of studying how an individual or individuals have choices in the utilization of resources for the satisfaction of necessities. Scarcity needs choice. Economics is the study of the determination of those choices.

12. Elasticity of demand (ed)

This is the measurement of how the price responses to the quantity demanded. It is equal to the change of percentage in the quantity demanded divided by the price change percentage.

13. Environmental economics

This is a branch of economics, which recognizes the value of both the economic activity and environment. Out of the said values, one can make choices. The objective is to equalize the environmental impacts and economic activity by taking into account all the benefits and costs.

14. Externalities

These are consequences of consumption and production activities, which are not straight in the market. They can be either positive or negative.

15. Factor Cost

This refers to the measurement of the output showing the costs of all the factors of production that were utilized, instead of the market prices, which may be different from subsidy and indirect tax.

16. Giffen Good

This happens whenever the substitution effect is outweighed by the income effect.

17. Gross Domestic Product

GDP refers to an economic measure, which embodies the sum of the whole economic activity on a country. Economic Activity is measured based on market value.

18. Hard currency

This is a currency accepted worldwide for the reason that it is the usual currency of a country with a big and steady market.

19. Import

This is a commodity or a service, which comes into a country from a foreign producer for commercial purposes.

20. Income effect

This is the alteration in the consumption of an item, which is related, with the change in buying power with the price held continuously.

21. Income tax

This is the tax imposed on person or corporations’ income.

22. Indifference Curve

This refers to the line, which represents all the combinations of two goods, which provides a buyer or consumer’s equal use.

23. Indirect Taxes

These are the taxes imposed on the producers. But such taxes will be passed to the consumers as a portion of the good’s price. This is the opposite of direct taxes.

24. Innovation

This refers to the creation of new things into reality. Power and wealth are also created because of innovation.

25. Joint product

In here, one of two or more products, which can be a service or a good are made by a single production process. Example is the milking of a cow, you can have both a cream and milk.

26. Labor

This refers to the voluntary exertion of persons to achieve a purpose or aim.

27. Law of demand

It provides that if all factors stay the same, and the price of a good is higher, there will be lesser people who will demand for it. If the good’s prices fall down, there will be a higher demand for it.

28. Law of Supply

This is the opposite of Law of Demand. It provides that, when the price of a good goes high, the suppliers will produce for more. If the goods or services will be sold at higher prices, there will be more profits.

29. Majority goods

These are the goods, which are usually offered to consumers as they can be mass-produced regardless of the quantities they demand.

30. Market

This is where sellers and buyers exchanges products.

31. Market Price

This refers to the actual price, which consumers use to pay for one unit of goods or services.

32. Microeconomics

This is a branch of economics, which is the study of how persons, whether natural or juridical decide to allocate a specific number of resources. This is applied mostly in markets where goods or services are purchased or being purchased.

33. Movements

This is the change along a curve like the demand curve. If it is on the demand curve, movement means a change in both the demand quantity and price from one point to another point on the curve. Movement indicates the consistency of the demand relationship.

34. Multivariable function

This is the function, which has an output variable and two or more input variables.

35. National Income

This refers to the general term, which is the total value of the output of goods and services in a country at an accounting period without providing a particular formal accounting concept like the Gross Domestic Product.

36. Negative Equity

This occurs when the value of a house is below the amount of the mortgage but should still be paid off

37. Non Durable Goods

These refer to any time, which has duration of less than three years when utilized on a regular basis.

38. Nominal price

This is the unconditional or present dollar price of a service or good when it is sold.

39. Oligopoly

This refers to the market for a good where only a limited major suppliers account for big majority of sales.

40. Opportunity Cost

This is the highest valued alternative, which should be sacrificed to achieve something or fulfil a want.

41. Production Possibilities Curve

This is the curve which represents the total possible combinations of all the outputs that can be made with the assumption that an amount set of productive resources are present and that there is an efficient use of such resources.

42. Profit warning

This occurs when a company issues a statement telling that its profits will not be in its expected height.

43. Property Rights

This refers to the exclusive authority to know the utilization of a resource. The resource can be owned by individuals or the government.

44. Real price

This is a price, which is linked to a collective measurement of prices, or continuous dollar price. It is also the measurement of prices related to the others.

45. Scarcity

This occurs when there is a limited resource insufficient to provide for the unlimited want and necessities.

46. Scarcity Economics

This is the study on how people have choices under the state of scarcity.

47. Shortage

This occurs when there is either an excess in the demanded quantity or insufficiency in the supplied quantity. The difference between the two in a particular price below the market clearing price is the shortage.

48. Specialization

This refers to a laborer or worker who develops a skill to a particular task so that it will be done effectively which an unskilled one cannot.

49. Stable equilibrium

This is a state where a shock interrupts the dominant equilibrium from the supply and demand. Usually, there are normal self-corrective forces that immediately result in the disequilibrium to come back eventually to the equilibrium.

50. Supply

This is all the quantity of the products or services, which a marketplace can provide.

51. Tariff

This refers to the tax levied on goods that are produced abroad and are domestically sold.

52. Value

This is the worth’s assignment based its usefulness or scarcity of the item.

53. Wealth

This refers to all the collection of the economic products, which are valuable, concrete and scarce.

54. Zombie Bank

This is the financial firm or institution with a net worth that is below zero, which remains to work as its ability to repay its debts is shored up by obvious or implied credit support from the government.

55. Normative analysis

This is the analysis in the examination of queries of what should to be.

56. Joint venture

This occurs when there are two parties that take an undertaking for a particular purpose and duration, complying with its legal forms. Imagine two corporations coming together to provide for a good or service that is different from the product that they produce individually.

57. Judicial review

When an unfair trade occurs, this is the mechanism to appeal a decision.

58. Juridical person

This is an entity, which is different from a natural person. Examples of juridical persons are corporations and partnerships. They have some rights, which are similar to persons under the law.

59. Knowledge economy

This is the modern advanced economies, the knowledge of which is that advanced technology and human capital are known to be more necessary than other factors like natural resources for economic success.

60. Knowledge transfer

This is generally similar to technology transfer even if it includes international educational services. This is in the concept of international economics.

61. Life expectancy

This is the value of the number of years, which an individual is expected is yet to live with a given age. If age is not given, it will depend on the distribution of the actual deaths in population in which the persons belongs, at birth. Life expectancy is a necessary indictor to know the level of development and well-being of a country.

62. Limit pricing

This is setting a purchase price, which is lower, the level where the sellers would consider it as profitable to enter a market.

63. Limited liability

This occurs when a business fails or becomes insolvent, the partial owner or business owners like partners and stockholders can only lose a specific liability.

64. Lump sum

This is the undistorted behavior of a tax or subsidy.

65. Market failure

This is the market’s incapability to show the total costs or benefits of commodities, state of the world or services. Hence, when there is a failure in the market, there will be an inefficiency or unfavorable distribution of the resources.

66. Money

This is a legal tender, an accepted medium of exchange generally accepted in a specific society as a payment for debts out of exchanges on credit.

67. Negative Externalities

This is the act of a party to impose a cost to another party.

68. Positive Externalities

This is the act of a part, which favors or benefits another party.

69. Profit

This is amount of the excess of all the sales revenue from all the costs of production of commodities, goods or services, which are made by a business firm.

70. Qualitative

This refers to the characteristics of anything that is described instead of the exact numerical measurement.

71. Quality

This is a dimension where products can be compared or differentiated.

72. Rational-comprehensive decision-making

This is a theoretical model on how public policy decisions should be accepted or taken.

73. Subsidy

This is generally a special amount of money paid by a government to firms in a favored industry. It is commonly for them to sell their own products in a price, which are lower than the expenses of the production.

74. Substitution effect

This is the change in the consumption of an item, which is related, with the modification in its price together with the utility level that is held constantly.

75. Surplus

This is occurs when there is an excess in the quantity supplied or when there is insufficiency in the quantity demanded. Then, the difference between them at a price, which is above the market-clearing price, is the surplus.

76. Tax, taxation

This is the required movement of the money, sometimes goods or services from private persons, institutions or groups of the states.

77. Use value

This is the value taken from the actual utilization of a good or service like fishing, hunting or hiking. Indirect uses like the bug which a fish may eat that a fisherman catches, are also included.

78. Value added

This is the value of the output subtracted to the value of all intermediate inputs, which is represented then to the contribution of, and payments to, which are the primary factors of production.

79. Value added trade

This is the measurement in international trade, which concentrates on the value added in every export of a country instead of their overall value where imported intermediate inputs are included.

80. Variable cost

This is the part of an industry or a firm’s expenses that alters with the output, different with the fixed costs.

81. Variable geometry

This is term is usually used in the European Union for the commitments which do not include all. It only includes the countries, which are part or members of the EU. It is also known as Europe à la carte and multi-speed Europe.

82. Variable levy

This is a tax levied on the imports. It differs overtime to steady the domestic price of the imported commodities. This is the tax derived from the difference of the target domestic price and world price.

83. Variable returns

This the property of a production function that returns to the scale that may either go up or go down compared to rates at dissimilar levels of output.

84. Variance

This refers to the measurement of how much an economical or a statistical variable varies across observations. The calculation is the same to the covariance of itself.

85. Variety

This is the multiplicity of different products, which are in several industries. The multiplicity may be larger with the trade.

86. Wage Labor

This refers to the kind of work that employees perform for others, under the latter’s direction in consideration of a wage or salary.

87. World Bank

A structure opened in 1946 and created with the IMF at BRETTON WOODS in 1944. The World Bank has three main branches: the International Bank for Reconstruction and Development (IBRD), the International Development Agency (IDA) and the International Finance Corporation (IFC). The main aim of the World Bank is promoting economic development in the world’s poorer countries through advice and long-term lending, averaging $30 ­billion a year, spread around 100 countries.

88. Wage drift

The difference or change in a worker’s basic locally-negotiated wage when it exceeds the level stated by nationally negotiated wage agreements.

89. Windfall profit

Also named as windfall gain, is an unexpected gain in income which could be a consequence a winning a lottery, unforeseen inheritance or shortage of supply.
Windfall gains are temporary.

90. Windfall profit

Welfare economics, branch of economics that trys to estimate economic policies in terms of their effects on the well-being of the society. It became established as a well-defined branch of economic theory during the 20th century.

91. Wealth tax

It is a tax based on the market value of assets that are owned.

92. Welfare to work

A government policy in the UK that helps unemployed people who are receiving money from the government to get jobs.

93. Willingness to pay

This means the biggest amount of money that a person or group can pay even with a policy change without becoming worse. It is then a monetary measure of the benefit to them because of the change in policy. It measures its cost when it is negative.

94. X

For international trade in economic models, this symbol is used to represent exports.

95. X-efficiency

This is the firm’s ability to have a maximum output coming from its own inputs. If one failed, the technical inefficiency or the x-inefficiency may be caused by the lack of incentives from competition.

96. Zero sum game

This is a game where the payoffs to the players are added until zero. This is for a gain for one will be equal to the loss of the others. This is the opposite of the positive sum game.

97. Zeroing

This is used by the US for the calculation of dumping margins for the treatment of individual prices. These prices are above the fair price. This is for the average price is at or below the fair price, and it is to obtain a positive dumping margin.

98. Zipf’s Law

This is a contribution by Zipf for economics in 1949. He has noticed that in a country, the cities’ population are near to proportional to 1/r. R is the city’s population rank. So, the biggest city has more or less two times the population of the second largest, and then three times the population of the third largest, and so on.

99. Zollverein

This is a German customs union formed by numerous Germans states since 1818. It is seen as a precursor to German unification.

100. Zero profit

This is a state where the profit in an industry is none or zero. This is generally the outcome of a free entry and exit.

Refer to this list of economics terms when you need!