IGCSE Economics | Glossary
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

 

A

A Term Definition
Absolute advantage The ability to produce a good or service at an `absolutely` lower cost.
Absolute or nominal prices The prices that we observe today in terms of today's pounds. Also called nominal or current prices.
Aggregate demand All planned expenditures for the entire economy added together.
Aggregate demand curve Planned purchase rates for all goods and services in the economy at various price levels.
Aggregate supply All planned production for the entire economy added together.
Aggregate supply curve The relationship between planned rates of total production for t he entire economy and the price level.
Asset Anything of value that is owned. Customers' deposits create assets in that the bank holds sums of money, which it can use until customers withdraw them.
Assisted areas These are geographical areas that have been designated by government as needing industrial development; hence they are assisted by having government incentives available to firms.
Average fixed costs Total fixed costs divided by the number of units produced.
Average total costs Total costs divided by the number of units produced.
Average variable costs Total variable costs divided by the number of units produced.
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B

Balance of payments A summary of transactions concerning visible goods and invisibles - services, investment earnings, and transfers - (the current account) and financial assets (the capital account).
Balance of trade The difference between the value of visible exports and the value of visible imports. Thus a country can be in surplus or in deficit on its visible transactions with one or all countries.
Bankruptcy The situation when a business entity is unable to meet its debts.
Barriers to entry Barriers that make it either impossible or difficult for firms to enter an existing industry and which ward off competition to existing producers or suppliers. Some barriers include government restrictions and legislation.
Barter Systems of exchange in which goods or services are exchanged for goods or services without the use of money.
Base year The year that is chosen as the point of reference for comparison (e.g. of prices) in other years.
Bilateral monopoly A situation in which the market consists of a single buyer and a single seller.
Birth-rate The number of births per 1000 people in the population per year.
Black economy The unofficial economic activity that cannot be precisely measured because it fails to go through official accounts.
Black market A situation where the official "white' market price is controlled but buyers are prepared to pay a price which reflects the relative scarcity of the good. Black markets usually exist only in a wartime economy when the availability of civilian goods is curtailed.
Bonds The government issues bonds in order to raise long-term finance (typically for 20 years). Government bonds are known as gilts because they are 'as good as gold' - there is no risk of default.
Building societies A group of financial institutions that specialize in providing long-term loans for house purchase (i.e. mortgages).
Business fluctuations The ups and downs in overall business activity, as evidenced by changes in national income, employment, and prices.
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C

Capital All manufactured resources, including buildings, equipment, machines, and improvements to land.
Capital gains The positive difference between the purchase price and the sale price of an asset.
Capital goods Goods that are used in the production of other goods. Examples include cranes, factories, and foundries.
Capitalism An economic system in which individuals' privately own productive resources; these individuals can use the resources in whatever manner they choose, subject to common protective legal restrictions.
Cartel The most explicit means by which oligopolists effect collusion.
Ceteris paribus assumption The assumption that all other things are held equal, or constant, except those under study.
Circular flow model A model of the flows of resources, goods, and services, as well as money, receipts, and payments for them in the economy.
Closed economy An economic system that has no transactions with any other economy.
Closed shop A business enterprise in which an employee must belong to the union before he or she can be employed. That employee must remain in the union after he or she becomes employed.
Collective bargaining Bargaining between management of a company or of a group of companies and management of a union or a group of unions for the purpose of setting a mutually agreeable contract on wages, fringe benefits, and working conditions for all employees in the union(s).
Command economic system A system in which the government controls the factors of production and makes all decisions about their use and about the distribution of income.
Commercial bank This is a privately owned profit seeking institution, sometimes referred to as a joint stock bank to highlight the fact that it has shareholders. Most high street banks, such as National Westminster and Barclays etc. are commercial banks.
Comparative advantage An advantage arising out of relative efficiency, which follows from scarcity of resources. Comparative advantage is the advantage measured in terms of other goods that could be produced. If a country has a comparative advantage in one good, it must have comparative disadvantage in another
Competition Rivalry among buyers and sellers of outputs, or among buyers nd sellers of inputs (i.e. factors of production).
Complement Two goods are considered complements if a change in the price of one causes an opposite shift in the demand for the other. For example, if the price of tennis rackets goes up, the demand for tennis balls will fall if the price of tennis rackets goes down, the demand for tennis balls will increase.
Conglomerate A firm that has interests in several, and very different markets.
Consumer goods Goods that are used directly by consumers to generate satisfaction. To be contrasted with capital goods.
Consumer sovereignty The concept of the consumer as the one whom, by his or her spending, ultimately determines which goods and services will be produced in the economy. In principle, competition among producers causes them to adjust their production to the hanging desires of consumers.
Consumption That which is spent on new goods and services out of a household's current income. Whatever is not consumed is saved. Consumption includes buying food, going to the cinema, going to a concert, and so on.
Cost-benefit analysis (CBA) This is a way of appraising an investment proposal. It is normally undertaken by government departments, since it involves adding the indirect (external) costs and benefits to the conventional direct costs and benefits (revenue). This is done by estimating monetary values for aspects such as health, time, leisure, and pollution.
Cost-push inflation Rising prices caused by rising production costs, union wage negotiations, or bosses seeking more profits.
Craft unions Labour unions composed of workers who engage in a particular trade or skill, such as baking, carpentry, or plumbing.
Cross-price elasticity of demand The percentage change in the demand for one good divided by the percentage change in the price of a related good. Cross-price elasticity of demand is a measure of the responsiveness of one good's quantity demanded to changes in a related good's price.
Currency Notes and coins - often simply referred to as 'cash'.
Cyclical unemployment Unemployment resulting from business recessions that occurs hen total demand is insufficient to create full employment.
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D

Death-rate The number of deaths per 1000 people in the population per year.
Demand curve A graphic representation of the demand schedule. A negatively sloped line showing the inverse relationship between the price and the quantity demanded.
a
Demand-pull inflation Inflation caused by total demand exceeding the current supply. This is a particular problem when the economy is at full employment.
Demand schedule A set of pairs of numbers showing various possible prices and the quantities demanded at each price. This is a schedule showing the rate of planned purchase per time period at different prices of the good.
Demerit good The opposite of a merit good. One that the political process had decided is socially undesirable.
Depreciation (currency) A lessening of the value of a domestic currency in terms of foreign currencies. Depreciation occurs in a freely floating foreign exchange market when there is an excess supply of the domestic currency. In a fixed exchange rate market, depreciation can occur if the government allows it.  
Deregulation Often used in the context of privatisation to describe the opening up of State monopolies to competition from other suppliers.
Diminishing marginal utility The smaller increase in total utility from the consumption of a good or service as more is consumed.
Direct tax Tax liability targeted at one person on the basis of income.
Diseconomies of scale When increases in output lead to increases in long-run average costs.
Distribution of income The way income is distributed among the population. For example, a perfectly equal distribution of income would result in the lowest 20 per cent of income-earners receiving 20 per cent of national income and the top 20 per cent also receiving 20 per cent of national income. The middle 60 per cent of income-earners would receive 60 per cent of national income.
Division of labour The segregation of a resource into different specific tasks, for example, one car worker puts on bumpers, another doors, and so on.
Durable consumer goods Goods used by consumers that have a life span of more than one year; that is, goods that endure and can give utility over a longer period of time.
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E

Economic efficiency The use of resources that generate the highest possible value of output as determined in the market economy by consumers.
Economic growth Defined either as the increase in an economy's real level of output over time or as the increase in the economy's real per capita level of output over time. Economic growth is therefore measured by the rate of change of real output or real per capita output.
Economic profit The difference between total revenues and the opportunity cost of all factors of production.
Economic rent That part of earnings, which is in excess of transfer earnings. Economic rent will be earned when the supply of a particular skill or personality is restricted, i.e. inelastic.
Economic system The institutional means through which resources are used to satisfy human wants.
Economies of scale When increases in output lead to decreases in long-run average costs.
Employers association A group of employers who negotiate wages jointly with trade unions.
Entrepreneurship The fourth factor of production involving human resources that perform the functions of raising capital, organizing, managing, assembling other factors of production, and making basic business policy-decisions. The entrepreneur is a risk-taker.
Equilibrium A situation in which the plans of buyers and sellers exactly coincide so that there is neither excess supply nor excess demand.
Equilibrium price The price where there is no excess quantity demanded or supplied. The price at which the demand curve intersects the supply curve.
Exchange The act of trading, usually done on a voluntary basis, in which both parties to the trade are subjectively better off.
Exchange rate target The Bank of England may set a target range for the exchange rate. Maintaining this may promote stability in the economy.
Externality A cost or benefit external to an exchange. In other words, the external benefits or costs accrue to parties other than the immediate seller and buyer in a transaction.
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F

Finance houses A group of financial institutions that specialize in providing funds for hire-purchase agreements.
Financial intermediaries Those financial institutions that link up groups of borrowers, e.g. commercial banks.
Financial markets Those markets through which saving passes before it goes either to governments or to business firms for investment purposes. Included are insurance companies, commercial banks, and pension plans.
Firm An organization that brings together different factors of production, such as labour, land, and capital, to produce a product or service that can be sold for a profit. A firm is usually made up of an entrepreneur, managers, and workers.
First world The industrialized non-communist countries of Western Europe plus the United States, Australia, New Zealand, Canada, and Japan.
Fixed costs The costs that do not vary with output. Fixed costs include such things as rent on a building and the price of machinery. These costs are fixed for a certain period of time; in the long run they are variable.
Fixed exchange rates A system of exchange rates that requires government intervention to fix the value of each nation's currency in terms of very other nation's currency.
Foreign exchange rate The price of foreign currency in terms of domestic currency, or vice versa. For example, if the foreign exchange rate for francs is 25p this means that it takes 25p to buy one franc. An alternative way of stating the exchange rate is that the value of the pound is four francs. It takes four francs to buy one pound.
Free enterprise A system in which private business firms are able to obtain resources, to organize those resources, and to sell the finished product in any way they choose.
Free good Any good or service that is available in quantities larger than are desired at a zero price.
Freely floating (or flexible) exchange rates Exchange rates that are allowed to fluctuate in the open market in response to changes in supply and demand. Sometimes called free exchange rates or floating exchange rates.
Frictional unemployment Unemployment associated with frictions in the system that may occur because of the imperfect job market information that exists.
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G

Gross domestic product (GDP) The most common measurement of a nation's income generated from resources within its own boundaries: the value of its output of goods and services.
Gross national product (GNP) Another measurement of the wealth of a country. It represents the total output of goods and services produced by the country in a year, plus the value of net property income from abroad.
Guaranteed (or target) price A price set by the government for specific agricultural products. If market-clearing prices fall below target prices, a `deficiency' payment equal to the difference between the market price and he target price is given to each farmer who qualifies.
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H

Horizontal merger The joining of firms that are producing or selling a similar product.
Human capital Investment that has taken place in education and training which enhance the productivity of the individual.
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I

Import levy A tax imposed on a good when landed at a port or other point of entry into a country.
Income-elastic demand A given change in income will result in a larger percentage change in quantity demanded in the same direction.
Income elasticity of demand The percentage change in the quantity demanded divided by the percentage change in money income; the responsiveness of the quantity demanded to changes in income.
Income-inelastic demand A given change in income will result in a less than proportionate change in demand in the same direction.
Indexing Linking a specific nominal sum to the rate of inflation, for example, under some schemes pensions can be indexed so they increase at the rate of inflation.
Indirect tax The tax imposed on spending. Value Added Tax (VAT) is an example.
Industrial unions Labour unions that consist of workers from a particular industry, such as car or steel manufacturing.
Infant industry argument An argument in support of tariffs: tariffs should be imposed to protect from import competition and an industry that is trying to get started.
Inferior good A good of which the consumer purchases less as income increases.
Inflation A sustained rise in prices formally measured by the Retail Price Index.
Injections Supplementary expenditures not originating in the household sector, which can include investment, government purchases, and exports.
Interest The payment for current rather than future command over resources. The cost of obtaining credit. Also, the return paid to owners of capital.
Investment The spending by businesses on things like machines and buildings, which can be used to produce goods and services in the future. The investment part of total income is that portion which will be used in the process of producing goods in the future.
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J

 
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K

 
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L

Labour The human resource involving productive contributions of persons who work, which involve both thinking and doing.
Laissez-faire The viewpoint that government should not intervene in a detailed way in the business life of a country other than remove legal restraints on trade.
Land The natural resources that are available without alteration or effort on the part of labour. Land as a resource includes mineral deposits, water, natural vegetation and animals.
Law of diminishing (marginal) returns After some point, successive increases in a variable factor of production, such as labour, added to fixed factors of production, will result in less than a proportional increase in output.
Leakages Those parts of national income not used for consumption, e.g. net taxes, saving, and imports.
Least developed countries The poorest of the LDCs defined with reference to three indicators of the state of development.
Less developed countries (LDCs) Those countries that are in the process of development and that have not yet reached an arbitrary per capita living standard, which in 1983 the World Bank defined as $400.
Liability Anything that is owed. Customers' deposits create a liability in that the bank must be prepared to repay the customer at any time.
Liquidity A characteristic of any asset; it describes the degree to which the asset can be acquired or disposed of without much danger of any intervening loss in nominal value and with small transaction costs. Money is the most liquid asset.
Localized industry This is when one industry dominates a whole geographical area; i.e. it is dominant in one locality.
Long run That time-period in which all factors of production can be varied.
Long-run average cost curve This represents the cheapest way to produce various levels of output given existing technology and current resource prices.
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M

Macroeconomics The study of economy-wide phenomena, such as unemployment and inflation.
Market An abstract concept concerning all the arrangements that individuals have for exchanging goods and services with one another. Thus, we can speak of the labour market, the car market and the credit market.
Market economic system A system in which individuals own the factors of production and decide individually how to use them; a system with completely decentralized economic decision-making
Market economy An economy in which prices are used to signal firms and households about the value of individual resources. It is also called the price system, or one using the price mechanism.
Market supply curve The locus of points showing the minimum prices at which given quantities will be forthcoming.
Medium of exchange Money is anything that is generally accepted for the buying and selling of goods and services. Money, therefore, acts as a means (medium) of payment (exchange).
Merit good A good that has been deemed socially desirable via the political process.
Microeconomics The study of the economic behaviour of households and firms and how prices of goods and services are determined.
Mixed economy An economic system in which the decision about how resources should be used is made partly by the private sector and partly by the government.
Mobility of labour The ease with which labour can be transferred from one type of employment to another. Mobility of labour can thus be considered in terms of geographical or occupational mobility. Economists often employ the converse concept immobility of labour.
Money supply A generic term used to denote the amount of `money' in circulation.
Monopolist The single supplier that comprises the entire industry.
Monopolistic competition A market situation where a large number of firms produce similar but not identical products. There is relatively easy entry into the industry.
Monopsonist A single buyer.
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N

National debt The accumulated government debt, the total outstanding.
National income The value of the flow of goods and services becoming available to a nation during a given period of time (usually one year).
National income accounting A measurement system used to estimate national income and its components. This is one approach to measuring an economy's aggregate performance.
Nationalisation The taking into public ownership of part or all of economic activity in a key sector of the economy.
Nationalised industries Examples of these vary from time to time and country to country. Basically they involve the government owning and running an industry, the products of which are sold through the market and priced accordingly.
Natural monopoly A monopoly that arises from the peculiar production characteristics in the industry. Usually a natural monopoly arises when production of the service or product requires extremely large capital investments such that consumers can profitably support only one firm. 
Negative income elasticity A given rise in income will result in a fall in the quantity demanded.
Newly industrializing countries (NIC's) Those upper middle-income developing countries such as Mexico and South Korea that have developed rapidly over the past decade and are now increasingly significant exporters of consumer goods.
Non-durable consumer goods Goods used by consumers that are used up within a year.
Non-monetary indicators Measures of the state of development such as the number of persons who are literate and average life expectancy. Such measures avoid the problems of using GNP data in making international comparisons.
Non-price competition The means by which firms strive to increase sales and increase market share other than by undercutting rivals. Instead of lowering prices and competing by price, firms resort to advertising campaigns, encourage new product development, and regard sales as being sensitive to effective marketing.
Normal goods Goods for which demand increases as income increases. Most goods that we deal with are normal.
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O

Oligopoly A market situation where there are very few sellers. Each seller knows that the other sellers will react to its changes in prices and quantities.
Open economy An economy that is in some way dependent on one or more other economies. Goods are traded and international exchange takes place.
Opportunity cost The highest-valued alternative that must be sacrificed to attain something or satisfy a want.
Origin The intersection of the y-axis with the x-axis in a graph.
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P

Partnership A business entity involving two to twenty individuals who join together for business purposes. In most instances, each partner is liable for the debts of the business to such an extent that he or she can lose his or her personal wealth if the business becomes bankrupt.
Perfect competition A market structure in which the decisions of buyers and sellers have no effect on market price.
Perfectly competitive firm A firm that is such a small part of the total industry picture that it cannot affect the price of the product it sells.
Perfectly elastic supply A supply curve characterized by a reduction in quantity supplied to zero when there is the slightest decrease in price.
Perfectly inelastic supply The characteristic of a supply curve for which quantity supplied remains constant, no matter what happens to price.
Perfectly price-elastic demand A demand curve that has the characteristic that even the slightest increase in price will lead to a zero quantity demanded.
Perfectly price-inelastic demand A demand curve that exhibits zero responsiveness in changes in price, i.e. no matter what the price is, the quantity demanded remains the same.
Predatory pricing The practice of temporarily selling at prices below cost with the intention of driving a competitor from the market, so that in the future prices may be raised and enhanced profits extracted.
Price control Government regulation of free market prices such that a legal maximum price is specified.
Price differentiation A situation in which price differences for similar products reflect only differences in marginal cost in providing those commodities to different groups of buyers.
Price-elastic demand A characteristic of a demand curve in which given percentages change in price will result in a larger percentage change in quantity demanded, in the opposite direction.
Price elasticity of demand The responsiveness of the quantity demanded for a commodity to changes in its price per unit. The price elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price.
Price elasticity of supply The responsiveness of quantity supplied of a commodity to a change in its price. Price elasticity of supply is defined as the percentage change in quantity supplied divided by the percentage change in price.
Price index The cost of today’s basket of goods expressed as a percentage f the cost of the same basket during a base year.
Price-inelastic demand A characteristic of a demand curve in which a given change in price will result in a less than proportionate change in the quantity demanded, in the opposite direction.
Price mechanism Prices are used as a signalling system between firms and households concerning the use of resources. Where the price mechanism operates there is a market economy.
Price-taker Another definition of a competitive firm. A price-taker is a firm that must take the price of its product as given. The firm cannot influence its price.
Private costs Those costs incurred by individuals when they engage in using scarce resources. For example, the private cost of running a car is equal to the petrol, oil, insurance, maintenance, and depreciation costs.
Privatisation In very general terms this involves the transfer of assets from the public sector to the private sector.
Product differentiation When consumers perceive there are differences in the characteristics of products that are alternatives to each other. Product differentiation thus gives producers some freedom in price determination.
Production possibilities curve A curve representing all possible combinations of total output that could be produced assuming (a) a fixed amount of productive resources and (b) efficient use of those resources.
Profit The income generated by selling something for a higher price than was paid for it. In production, the income generated is the difference between total revenues received from consumers who purchase the goods and the total cost of producing those goods.
Progressive taxation A tax system in which, as one earns more income, a higher percentage of the additional pounds is taxed. Put formally, the marginal tax rate exceeds the average tax rate as income rises.
Proportional taxation A tax system in which, as the individual's income goes up, the tax bill goes up in exactly the same proportion. Also called a flat-rate tax.
Public goods Goods for which the principles of exclusion and rivalry do not apply; they can be jointly consumed by many individuals simultaneously, at no additional cost, and with no reduction in the quality or quantity of the provision concerned.
Public sector This includes all forms of public expenditure by all types of government.
Public Sector Borrowing Requirement (PSBR) The difference between government expenditure and tax revenue, which must be financed by borrowing.
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Q

 
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R

Rationing A distribution of restricted supplies by the government, which is based on some objective criteria (such as numbers per household), at a time when quantity demanded exceeds quantity supplied. Rationing tries to effect a fair distribution of the limited supplies of basic necessities such as foodstuffs in a wartime economy.
Real income effect The change in people's purchasing power that occurs when, other things held constant, the price of one good that they purchased changes. When that price goes up, real income, or purchasing power, falls; and when that price goes down, real income, or purchasing power, increases. 
Real rate of interest The rate of interest obtained by subtracting the rate of inflation from the nominal rate of interest.
Real values Measurement of economic values after adjustments have been made for changes in prices between years.
Recession A period of time during which the rate of growth of business activity is consistently less than its long-term trend, or is negative. This may also be referred to as an economic depression if it is unduly prolonged as in the 1930s.
Regional policy Government grants and incentives made available to firms moving into certain designated areas. Previously these designated areas were referred to as 'areas for expansion'; now they are referred to as 'assisted areas'.
Regressive taxation A tax system in which, as more pounds are earned, the percentage of tax paid on them falls.
Retail price index A statistical measure of a weighted average of prices of a specified set of goods and services purchased by representative families.
Rivalry A basic definition of competition in which individual economic agents attempt to improve their relative position in a market by advertising, marketing, developing new products, seeking improved deals, and so on.
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S

Saving The act of not consuming all one's current income. Whatever is not consumed out of spendable income is, by definition, saved. Saving is an action measured over time, whereas savings are an existing
Scarcity A reference to the fact that at any point in time there exists only a finite amount of resources human and non-human. Scarcity of resources therefore means that nature does not freely provide as much of everything as people want.
Seasonal unemployment Unemployment due to seasonality in demand or in the supply of a particular good or service.
Second world The communist nations of Eastern Europe plus the Soviet Union and the People's Republic of China. This concept was always rather unsatisfactory and is perhaps increasingly inappropriate.
Services Things purchased by consumers that do not have physical characteristics. Examples of services are those obtained from doctors, lawyers, dentists, repair personnel, house-cleaners, educators, retailers, and wholesalers.
Short run That time-period in which a firm cannot alter its current size of plant.
Sight deposits Those bank accounts that allow the customer immediate access to his or her funds. Often called `current accounts'.
Social costs The full cost that society bears when a resource-using action occurs. For example, the social cost of driving a car is equal to all of the private costs plus any additional cost that society bears, including air pollution and traffic congestion.
Socialism An economic system in which the state owns the major share of productive resources except for labour. Also, socialism usually involves a greater redistribution of income than would be the case with a purely capitalist system.
Sole trader A business owned by one person who has unlimited liability.
Specialisation The division of productive activities among persons and regions so that no one individual or one area is totally self-sufficient. An individual may specialize, for example, in law, medicine, or car production. A nation may specialize in the production of coffee, computers, or cameras.
Stagflation A period of simultaneous high unemployment and rising prices. In other words, a period of both economic stagnation and inflation.
Stocks (inventories) Inasmuch as stocks of goods can be sold in the future, they are classed as investment. They may consist of unused inputs, kept by the firm for use in future production, or unsold products.
Store of value The ability of an item to hold value over time, a necessary quality of money.
Structural unemployment Unemployment resulting from fundamental changes in the structure of the economy.
Subsidies Negative taxes. Payments to producers or consumers of a good or service. For example, farmers often get subsidies for producing wheat, corn, or milk.
Substitute Two goods are considered substitutes when a change in the price of one causes a shift in demand for the other in the same direction as the price changes. For example, if the price of butter goes up, the demand for margarine will rise; if the price of butter goes down, the demand for margarine will decrease.
Substitution effect The tendency of people to substitute in favour of cheaper commodities and away from more expensive commodities.
Supply The relationship between the price and the quantity supplied (other things being equal) which is usually a direct one.
Supply curve The graphic representation of the supply schedule, a line showing the supply schedule, which slopes upwards.
Supply schedule A set of numbers showing prices and the quantity supplied at those various prices; a schedule showing the rate of planned production at each relative price for a specified time-period, usually one year.
Surplus (microeconomic) Another name for an excess quantity supplied or insufficient quantity demanded. The difference between the quantity supplied and the quantity demanded at a price above the market-clearing price.
Surplus (macroeconomic) The excess of tax revenue, over and above government pending.
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T

Tax The compulsory transfer of funds from individuals and businesses to the government. These transfers may be levied on oil, tobacco, alcohol, petroleum or inheritance.
Technological unemployment Unemployment caused by technological changes reducing the demand for labour in some specific tasks.
Terms of exchange The terms under which the trading takes place. Usually the terms of exchange are given by the price at which a good is traded.
Theory of demand Quantity demanded and price is inversely related - more is bought at a lower price, less at a higher price (other things being equal).
Third world The less developed countries (LDCs).
Total costs All the costs of a firm combined, including rent, payments to workers, interest on borrowed money, and so on.
Total expenditure The total monetary value of all the final goods and services bought in an economy during the year.
Total income The total amount earned by the nation's resources. National income, therefore, includes wages, rent, interest payments, and profits that are received, respectively, by workers, landowners, capital owners, and entrepreneurs.
Total output The total value of the entire final goods and services produced in the economy during the year.
Total revenues The price per unit times the total quantity sold.
Trade deficit When imports exceed exports there is a trade deficit, when vice versa, a surplus.
Trade unions Organizations of workers that usually seek to secure economic improvements for their members.
Transfer earnings The amount that an employee could earn in an alternative occupation.
Transfer payments Money payments made by governments to individuals for which no services or goods are concurrently rendered. Examples are social security payments and student grants.
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U

Unitary price elasticity of demand A property of the demand curve, where the quantity demanded changes exactly in proportion to the change in price. Total revenue is invariant to price changes in the unit elastic portion of the demand curve.
Utility The want satisfying power that a good or service possesses.
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V

Variable costs Those costs that vary with the rate of production. They include ages paid to workers, the costs of materials, and so on.
Vertical merger The joining of a firm with another that either sells an input or buys an output.
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W

Wealth That which has value, usually, the difference between what a people owns (assets) and what a person owes (liabilities).
Working capital Investment into working capital involves changes in the stocks of finished goods and goods in process; as well as changes in the raw materials that business keep on hand. Whenever stocks are decreasing, investment is negative; whenever they are increasing, investment is positive. 
Working population Those who are employed, self-employed, claiming benefit, or in the Forces.
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X

 
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Y

 
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Z

 
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