A raw material or agricultural product produced in the primary sector and traded with little or no processing, such as crude oil, copper, wheat or coffee.
69 of the Economics glossary’s terms, each with the part of the syllabus where you first meet it.
The extended response exam taken at SL and HL, in which students answer one two-part question, (a) worth 10 marks and (b) worth 15, from a choice of three.
The data response exam taken at SL and HL, in which students answer one question from a choice of two, using a text with data in seven parts worth 40 marks in total.
The HL-only policy paper, with two compulsory questions based on data, each containing calculations and short answers followed by a policy recommendation.
An illegal market in which a good subject to a price control is bought and sold at a price above the legal maximum, usually because the control has caused a shortage.
The international climate treaty adopted in December 2015 under which countries aim to keep global warming well below 2 °C and set their own national emissions pledges.
A legal right that gives the inventor of a new product or process the sole right to make, use and sell it for a fixed period, usually 20 years.
Payments to landowners or communities for managing land in a way that provides environmental benefits to others, such as protecting forest that stores carbon and keeps water supplies clean.
A table showing the outcome (payoff) for each player of every combination of the strategies the players can choose.
Per person: a total, such as GDP, GNI or spending, divided by the population, used to compare averages between countries or over time.
The change in a variable expressed as a percentage of its original value: the new value minus the original value, divided by the original value, multiplied by 100.
The unit for the arithmetic difference between two percentages: a rate that rises from 4% to 6% has risen by 2 percentage points, which is a 50% increase.
A market structure with very many small firms selling identical (homogeneous) products, with free entry and exit and perfect information, so that each firm is a price taker.
The assumption that all consumers and producers have complete and accurate knowledge of the prices, quality and characteristics of every good and service, at no cost.
Demand for which any rise in price above the current level causes quantity demanded to fall to zero, so that PED is infinite and the demand curve is horizontal.
Supply for which producers will supply any quantity at a given price but none at a lower price, so that PES is infinite and the supply curve is horizontal.
Demand for which quantity demanded does not change at all when price changes, so that PED is zero and the demand curve is vertical.
Supply for which quantity supplied does not change when price changes, so that PES is zero and the supply curve is vertical.
A good that cannot be stored for long without losing its value, such as fresh fruit, fish or cut flowers, so that its supply cannot respond quickly to price.
A direct tax on the income of individuals, such as wages, salaries, rent, interest and dividends, usually charged at rates that rise with income.
A curve showing the relationship between the unemployment rate and the inflation rate: the short-run curve slopes downward (a trade-off); the long-run curve is vertical at the natural rate of unemployment.
An indirect tax set to equal the external cost of a good at the socially optimal output, so that producers or consumers pay the full social cost and output falls to where MSB = MSC.
An economic system in which the government owns most resources and central planners decide what, how and for whom to produce, rather than market prices.
A proposal for one specific course of action that a government should take, justified with theory and data and weighed against its costs and alternatives.
The principle that those who cause pollution should bear its costs, for example through taxes, charges or the purchase of permits.
The set of three commentaries submitted for internal assessment, one on each of the microeconomics, macroeconomics and global economy units, marked out of 45.
Cross-border purchases of financial assets such as shares and bonds that do not give the buyer a controlling interest in the firm or institution that issued them.
The part of economics that describes and explains how the economy works using statements that can be tested against evidence, without value judgments about what ought to happen.
A benefit of producing or consuming a good that is enjoyed by third parties who do not pay for it, so the good is underproduced or underconsumed.
An external benefit created when a good is consumed, enjoyed by third parties, so that marginal social benefit is greater than marginal private benefit, as with vaccination or education.
An external benefit created when a good is produced, enjoyed by third parties, so that marginal social cost is less than marginal private cost, as when a firm trains workers who later move to other firms.
The real GDP an economy can produce when all its factors of production are employed at normal, sustainable rates; shown by the long-term growth trend.
The condition of lacking the income or resources needed for a minimum acceptable standard of living, judged against basic needs or against the typical living standards of a society.
A self-reinforcing situation in which low incomes lead to low saving, low investment and poor health and education, which keep productivity and incomes low, so poverty persists over time and across generations.
An agreement between countries to give each other’s goods preferential access to their markets, usually through lower tariffs, compared with the access given to non-members.
The tendency to give too much weight to costs and benefits that occur now compared with those in the future, leading to choices people later regret, such as undersaving.
A legal maximum price set by the government below the equilibrium price, above which a good or service may not be sold; it creates excess demand (a shortage).
Demand for which the percentage change in quantity demanded is larger than the percentage change in price, so that PED is greater than 1, ignoring the minus sign.
Supply for which the percentage change in quantity supplied is larger than the percentage change in price, so that PES is greater than 1.
A measure of the responsiveness of the quantity demanded of a good to a change in its own price, ceteris paribus: the percentage change in quantity demanded divided by the percentage change in price.
A measure of the responsiveness of the quantity supplied of a good to a change in its price, ceteris paribus: the percentage change in quantity supplied divided by the percentage change in price.
A legal minimum price set by the government above the equilibrium price, below which a good or service may not be sold; it creates excess supply (a surplus).
Demand for which the percentage change in quantity demanded is smaller than the percentage change in price, so that PED lies between 0 and 1, ignoring the minus sign.
Supply for which the percentage change in quantity supplied is smaller than the percentage change in price, so that PES lies between 0 and 1.
A firm with market power that can set its own price, facing a downward-sloping demand curve, so that it can sell more only by lowering its price.
The system in which the interaction of demand and supply sets prices, and changes in prices guide the decisions of consumers and producers about what, how much and for whom to produce.
A firm that has no influence over the market price and must accept the price set by market demand and supply, as in perfect competition.
A period of repeated price cuts by rival firms, each trying to win market share from the others, which can push prices down to or below average cost.
A raw material or agricultural product produced in the primary sector and traded with little or no processing, such as crude oil, copper, wheat or coffee.
The part of the economy that extracts or grows natural resources, including agriculture, fishing, forestry and mining.
A situation in which one party (the agent) acts on behalf of another (the principal) but has different objectives and better information, so the agent may not act in the principal’s interest.
A game in which each player's dominant strategy leads to an outcome that is worse for both players than the one they would reach if they could trust each other to cooperate.
A good that is both rivalrous and excludable: one person’s consumption leaves less for others, and people who do not pay can be prevented from consuming it.
The transfer of ownership of a firm or industry from the public sector (the government) to the private sector, usually by selling shares or assets.
The difference between the price producers receive for a good and the lowest price at which they are willing to supply it; the area above the supply curve and below the price.
Making a product different from rival products, in reality or in the minds of consumers, through design, quality, branding, packaging, location or service.
A curve showing the maximum combinations of two goods or services an economy can produce when all its resources are fully and efficiently employed, with given resources and technology.
The situation where goods are produced at the lowest possible cost, so that no more of one good can be produced without producing less of another; shown by any point on the PPC.
The situation in which a firm does not produce at the lowest possible average cost, either because its output is not at minimum AC or because it wastes resources.
Output per unit of input over a period of time; labour productivity is output per worker or per hour worked.
The difference between a firm’s total revenue and its total costs; it is also the factor income earned by entrepreneurship.
The business objective of producing the output at which the difference between total revenue and total cost is greatest, where marginal revenue equals marginal cost.
A tax whose average rate rises as income rises, so that people with higher incomes pay a larger percentage of their income in tax.
Legally recognised and enforceable rights of individuals and firms to own, use, sell and earn income from assets such as land, buildings and businesses.
A tax whose average rate stays the same at every level of income, so that everyone pays the same percentage of their income in tax.
A government response to asymmetric information that makes sellers disclose, or itself publishes, information about products, for example compulsory labelling, quality ratings or published inspection results.
A good that is both non-rivalrous and non-excludable, so one person’s use does not reduce the amount available to others and non-payers cannot be prevented from using it, for example national defence.
A long-term contract in which a private firm finances, builds and often operates public infrastructure, such as a hospital, and the government pays it over many years.
The quantity of goods and services that a given amount of money can buy; inflation reduces it and deflation increases it.
An exchange rate at which a given basket of goods and services costs the same in two countries; values converted at PPP rates allow for differences in price levels.