Frequently Used Economic Terms

Frequently used economic terms Frequently used economic terms in context with the subject of economics used in our lives everyday. Familiarize yourself with these terms found in this article! Some terms commonly used in Economics: Arbitration: An industrial dispute is considered by an independent organization which makes its decision. The two sides in dispute often agree in advance to be bound by the decision. Assisted Area: An area of a country in which firms can receive financial help. Automation: Mass production using a large amount of machines relative to labour. Average Cost: The cost of producing each unit of output, Total cost divided by the total output. Average Revenue: The revenue received from the sale of each unit of output. Total revenue divided by total output. Average Revenue is same as the price. Balance of Invisibles (Intangible goods): The different between the value of invisible exports and invisible imports. Balance of payment: A record of a country’s monetary transactions with the rest of the world over a period of time. Balance of payment current Account: A record of all the receipts from visible (Tangible goods) and invisible (Intangible goods) exports and payments for visible and invisible imports. Balance of payment deficit: This occurs when the amount paid to other countries is greater than the amount received from them. Balance of Payment surplus: This occurs when receipts are greater than payments. Bank: A business which takes deposits from savers and makes loans to borrowers. Barter: Swopping commodities directly without the use of money.

Birth rate: The number of births per thousand of the population per year. Boom: A period of high economic activity and employment. Break-even: Total costs equal total revenue. Budget: An estimate of the government’s revenue from various sources to meet its expenditure. Building society: A financial institution which accepts deposits from savers and makes loans to borrowers, particularly mortgage loans. Capital: A man-made resource used to produce goods and services. (One of the four factors of production) Cash: Bank notes and coins. Centrally planned economy: An economy where resources are allocated by the state. The planners decided what to produce, how to produce and the system of output allocation. Cheque: A means of transferring a bank deposits from one person to another. Cheque Card: This guarantees payment of the amount of money written on the cheque up to a certain value. Closed ship: A system whereby only members of a given trade union or unions are allowed to work in a particular place of employment. Collective Bargaining: The work force as a whole negotiates on pay and working conditions through its representatives. Comparative Advantage: This exists where there is low opportunity cost of producing a commodity compared with other producers. Complements: Jointly consumed commodities, e.g. Compact discs and compact disc players. Conglomerate: A firm which makes a variety of commodities. Consumer: A person who used goods and services. Corporation Tax: A tax on company profits. Cost-push Inflation: A rise in prices brought about by a rise in costs of production. Cost of production: The cost of producing a given quantity of output.

Credit: Buying goods and services but paying for them later. Credit card: A method of purchase. The retailer is paid by the credit card Company, the card holder then owes that sum of money to the credit company. Current Account: A bank account which provides various services including cheques. Custom Duties: Taxes on imports. Customs Union: A group of countries which abolishes tariffs and quotas amongst themselves and which equalizes its import controls against other countries. Death Rate: The number of deaths per thousand of the population a year. Debenture: A long-term, fixed interest loan to a company. Demand: The amount bought at a given price of a certain period of time. Demand curve: A line graph relative price per unit to the quantity consumers will buy at that price. Demand-pull inflation: A rise in prices brought about by a rise in demand greater than any rise in output. Demarcation: A definition of a job and the particular worker qualified for it by a trade union. Dependency ratio: The ratio non-working population to working population. Depreciation: The gradual loss of value of capital or other asses such as a car. Depreciation is considered to be a fixed cost of production. Derived demand: The demand is determined by the demand for another commodity, e.g. the demand for steel plate is determined by the demand for cars, etc. Devaluation: A fall in the exchange rate, i.e. the value of currency falls against other countries. Developed Countries: Rich countries; countries with relatively high levels of economic activity and living standards. Developing countries: Poor countries; countries with relatively low levels of economic activity and living standards. Compiled by Hussain Noorullah