Money
an item which is generally acceptable as a means of payment
Commercial banks
banks which aim to make a profit by providing a range of banking services to households and firms
Central bank
a government-owned bank which provides banking services to the government and commercial banks and operates monetary policy
Liquidity
being able to turn an asset into cash quickly without a loss
Disposable income
income left after income tax has been deducted and state benefits received
Wealth
a stock of assets including money held in bank accounts, shares in companies, government bonds, cars and property
Rate of interest
a charge for borrowing money and a payment for lending money
Average propensity to consume (APC)
the proportion of household disposable income which is spent
Consumption
expenditure by households on consumer goods and income
Savings ratio
the proportion of household disposable income that is saved
Average propensity to save (APS)
the proportion of household disposable income that is saved
Mortgage
a loan to help buy a house
Earnings
the total pay received by a worker
Wage rate
a payment which an employer contracts to pay a worker. It is the basic wage a worker receives per unit of time or unit of output
National minimum wage (NMW)
a minimum rate of wage for an hour's work, fixed by the government for the whole economy
Elasticity of demand for labour
a measure of the responsiveness of demand for labour to a change in the wage rate
Elasticity of supply of labour
a measure of the responsiveness of supply of labour to a change in the wage rate
Specialisation
the concentration on particular products or tasks
Division of labour
workers specialising in particular tasks
Trade union
an association which represents the interests of a group of workers
Collective bargaining
representatives of workers negotiating with employers' associations
Industrial action
when workers disrupt production to put pressure on employers to agree to their demands
Industry
a group of firms producing the same product
Primary sector
covers industries which extract natural resources
Secondary sector
covers manufacturing and construction industries
Tertiary sector
covers industries which provide services
Quaternary sector
covers service industries that are knowledge based
Internal growth
an increase in the size of a firm resulting from it enlarging existing plants or opening new ones
External growth
an increase in the size of a firm resulting from it merging or taking over another firm
Horizontal merger
the merger of firms producing the same product and at the same stage of production
Vertical merger
the merger of firms producing the same product, but at a different stage of production
Backward Vertical merger
a merger with a firm at an earlier stage of the supply chain
Forward Vertical merger
a merger with a firm at a later stage of the supply chain
Conglomerate merger
a merger between firms producing different products
Internal economies of scale
lower long run average costs resulting from a firm growing in size
External economies of scale
lower long run average costs resulting from an industry growing in size
Internal diseconomies of scale
higher long run average costs arising from a firm growing too large
External diseconomies of scale
higher long run average costs arising from an industry growing too large
Total cost
the total amount that has to be spent on the factors of production used to produce a product
Average total cost
total cost divided by output
Fixed costs
cost which do not change with output in the short run
Average fixed cost
total fixed cost divided by output
Variable cost
costs that change with output
Average variable cost
total variable cost divided by output
Price
the amount of money that has to be given to obtain a product
Total revenue
the total amount of money received from selling a product
Average revenue
the total revenue divided by the quantity sold
Profit satisficing
sacrificing some profit to achieve some goals
Profit maximisation
making as much profit as possible
Market structure
the conditions which exist in a market including the number of firms
Competitive market
a market with a number of firms that compete with each other
Monopoly
a market with a single supplier
Barrier to entry
anything that makes it difficult for a firm to start producing the product
Barrier to exit
anything that makes it difficult for a firm to stop producing the product
Scale of production
the size of production units and the methods of production used