IB Economics - Glossary of terms

This resource is designed to help you make accurate use of specialist economics terms in your work.

It is up to you how much use you make of it. Some of you will benefit from it hugely; others will find it more use as a revision tool rather than one that will help them use terminology more accurately. If I find that you are not making sense or that you are using words inaccurately then I may insist that you start to complete this and use it.

It is useful for both native and non-native speaker alike. In economics many words have a specific meaning that is not the same as the one they have in every day English.

The booklet is laid out in the same order as the course: Introduction: The Foundations of Economics Microeconomics Macroeconomics International Trade Development Economics

The words are in English. If English is not your ‘home language’, you need to write them in your ‘home language’.

It is up to you to ensure that you are using the right word here. Remember words often have different meanings.

Then you must write in your own definition. Avoid using ‘cut and paste’ or use definitions you happen to find on the Internet! The very act of writing the definition and thinking about what you are writing will go a large way to helping you remember it. Again, take care that you are using the word in the right way. For example, when we talk about a complement do we mean “Your hair looks nice” or “Two goods in joint demand”?

Don’t complete it all in one go, but do it steadily as we go through each unit.

1

Introduction: the Foundations of Economics

English Home Language DefinitionSocial Science

Economics

Macroeconomics

Microeconomics

Positive Statements

Normative Statements

Ceteris Paribus

Scarcity

Choice

Factors of Production

Land2

Labour

Capital

Entrepreneurship

Resource allocation

Opportunity cost

Economic good

Free good

Utility

Production Possibility frontier (PPF)

Public sector

Private sector

Economic growth

3

Economic development

Sustainable development

SECTION 1: Microeconomics

1.1 Competitive Markets: Demand and Supply

English Home Language DefinitionMarket

Price mechanism

Demand

Law of Demand

Substitutes

Complements

Income

Expectations

4

Normal Goods

Inferior Goods

Supply

Law of Supply

Equilibrium

Equilibrium Price

Quantity

Consumer surplus

Producer surplus

Allocative efficiency

1.2 Elasticities

English Home Language DefinitionPrice Elasticity of Demand (PED)

5

Elastic Demand

Inelastic Demand

Unitary elasticity

Perfectly Elastic

Perfectly inelastic

Cross Elasticity of Demand (XED)

Income Elasticity of Demand (YED)

Price Elasticity of Supply (PES)

1.2 Government Intervention

English Home Language DefinitionIndirect tax

Specific tax6

Ad valorem tax

Incidence of tax

Subsidy

Price ceiling (maximum price)

Shortage

Parallel market

Price floor (minimum price)

Surplus

1.4 Market Failure

English Home Language DefinitionMarket Failure

Externalities

7

Positive externalities

Merit goods

Negative externalities

Demerit goods

Welfare loss

Public goods

Non-rival

Non-excludable

Free rider

Common access resource

Sustainability

Tradable permits (carbon credits)

Asymmetric information8

Monopoly power

1.5 Theory of the Firm (HL only)

English Home Language DefinitionShort run

Long run

Fixed factor

Variable factor

Total product

Average product

Marginal product

Law of diminishing returns

Economic costs

9

Fixed costs

Variable costs

Total costs

Average costs

Marginal costs

Increasing returns to scale

Decreasing returns to scale

Constant returns to scale

Economies of Scale

Diseconomies of scale

Total revenue

Average revenue

10

Marginal revenue

Profit

Economic profit (abnormal profit/supernormal profit)

Normal Profit

Subnormal profit/economic loss

Profit Maximisation

Perfect Competition

Homogenous

Barriers to entry

Shut-down price

Break-even price

Productive efficiency

11

Allocative efficiency

Deadweight loss

Monopoly

Natural Monopoly

Revenue maximisation

Dynamic efficiency

Monopolistic Competition

Differentiated product

Non-price competition

Oligopoly

Collusive oligopoly

Non-collusive oligopoly

Interdependence

12

Cartel

Concentration ratio

Tacit collusion

Price discrimination

SECTION 2: Macroeconomics

2.1 The level of overall economic activity

English Home Language DefinitionNational income

National output

National expenditure

13

Gross Domestic Product (GDP)

Gross National Product (GNP) or Gross National Income (GNI)Nominal GDP

Real GDP

Per capita GDP

Green GDP

Business cycle

Potential output

Actual output

Recession

2.2 Aggregate demand and aggregate supplyEnglish Home Language Definition

Aggregate demand

Investment

14

Price level

Aggregate supply

Short-run aggregate supply

Long-run aggregate supply

Full employment

Natural rate of unemployment

Macroeconomic equilibrium

Inflationary gap

Recessionary gap

Keynesian multiplier

2.3 Macroeconomic objectivesEnglish Home Language Definition

15

Unemployment

Unemployment rate

Full Employment

Underemployment

Hidden unemployment

Structural unemployment

Frictional unemployment

Seasonal unemployment

Cyclical unemployment (demand-deficient unemployment)Inflation

Deflation

Disinflation

Consumer price index

16

Core inflation

Underlying inflation

Demand-pull inflation

Cost-push inflation

Phillips Curve

Economic growth

Actual growth

Potential growth

Equity

Absolute poverty

Relative poverty

Direct tax

Indirect tax17

Progressive Tax

Regressive Tax

Proportional Tax

Average rate of tax

Marginal rate of tax

Lorenz Curve

Gini Coefficient

Transfer payments

2.4 Fiscal policyEnglish Home Language Definition

Demand-side policies

Fiscal policy

Expansionary fiscal policy

18

Contractionary fiscal policy

Budget surplus

Budget deficit

Public debt

Automatic fiscal stabilisers

Crowding out

2.5 Monetary policyEnglish Home Language Definition

Monetary policy

Central Bank

Expansionary monetary policy

Contractionary monetary policy

Interest rate

19

2.6 Supply-side policiesEnglish Home Language Definition

Supply-side policies

Interventionist supply-side policies

Infrastructure

Human capital

Market-based supply side policies

Privatisation

Deregulation

Labour market reform

Tax reform

SECTION 3: International Economics

3.1 International trade

English Home Language Definition20

Trade/free trade

Factor endowment

Absolute Advantage

Comparative advantage

Trade protection

Tariffs

Subsidy

Quotas

Administrative barriers

Dumping

Infant Industry

Diversification

World Trade Organisation

21

3.2 Exchange ratesEnglish Home Language Definition

Exchange rate

Fixed Exchange Rate

Floating Exchange Rate

Speculation

Managed exchange rate

3.3 Balance of paymentsEnglish Home Language Definition

Balance of payments

Current Account

Balance of trade

Current account surplus

Current account deficit

Capital Account22

Financial account

Expenditure-switching policies

Expenditure reducing policies

Marshall-Lerner condition

The J-curve effect

3.4 Economic integration

English Home Language DefinitionPreferential trade agreement

Trading bloc

Free trade area

Customs union

Common market

23

Trade creation

Trade diversion

Monetary union

3.5 Terms of trade (HL only)

English Home Language DefinitionTerms of trade

SECTION 4: Development Economics

4.1 Economic development

English Home Language DefinitionEconomic growth

Economic development

Physical capital

Human capital24

Poverty cycle/trap

Millennium Development Goals

4.2 Measuring development

English Home Language DefinitionPurchasing Power Parity exchange rates

Composite indicators

Human Development Index (HDI)

4.3 The role of domestic factors

English Home Language DefinitionMicro-credit

Corruption

Capital flight

4.4 The role of international trade25

English Home Language DefinitionImport substitution

Export promotion (export led growth)

Trade liberalization

4.5 The role of foreign direct investment (FDI)English Home Language Definition

Foreign direct investment

Multinational corporation

4.6 The role of foreign aid and multilateral development assistance

English Home Language DefinitionBilateral aid

Multilateral aid

Official Development Assistance (ODA)

NGO

Humanitarian aid26

Development aid

Grants

Soft loans

Project aid

Programme aid

Tied aid

International Monetary Fund (IMF)

World Bank

4.7 The role of international debt

English Home Language DefinitionForeign debt

Debt rescheduling

Debt forgiveness27

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