Economics Vocabulary

Gross Domestic Product (GDP)

/ɡrəʊs dəˈmestɪk ˈprɒdʌkt/

The total monetary value of all goods and services produced within a country's borders in a given period.

Opportunity Cost

/ˌɒpəˈtjuːnɪti kɒst/

The value of the best forgone alternative when a decision is made.

Inflation

/ɪnˈfleɪʃ(ə)n/

A sustained increase in the general price level of goods and services in an economy over time.

Fiscal Policy

/ˈfɪsk(ə)l ˈpɒlɪsi/

Government use of taxation and public spending to influence economic activity.

Ceteris Paribus

/ˈketərɪs ˈpærɪbəs/

Latin for "all else being equal"; the assumption that all variables other than those under study are held constant.

Elasticity

/ɪˌlæsˈtɪsɪti/

A measure of how sensitive one economic variable is to changes in another, expressed as a percentage change ratio.

Externality

/ˌekstəˈnælɪti/

A cost or benefit experienced by a party not directly involved in a transaction, not reflected in market prices.

Market Failure

/ˈmɑːkɪt ˈfeɪljə/

A situation where the free market fails to allocate resources efficiently, leading to a welfare loss.

Marginal Utility

/ˈmɑːdʒɪn(ə)l juːˈtɪlɪti/

The additional satisfaction gained from consuming one more unit of a good or service.

Comparative Advantage

/kəmˈpærətɪv ˈædvɑːntɪdʒ/

The ability to produce a good at a lower opportunity cost than another producer, forming the basis for mutually beneficial trade.

Moral Hazard

/ˈmɒr(ə)l ˈhæzəd/

The tendency for an insured or protected party to take greater risks because they do not bear the full consequences of those risks.

Keynesian Economics

/ˈkeɪnziən ˌiːkəˈnɒmɪks/

A macroeconomic theory arguing that aggregate demand is the primary driver of economic output and that government intervention can stabilise the business cycle.

Gini Coefficient

/ˈdʒiːni kəʊɪˈfɪʃ(ə)nt/

A measure of income or wealth inequality within a population, ranging from 0 (perfect equality) to 1 (maximum inequality).

Adverse Selection

/ˈædvɜːs sɪˈlekʃ(ə)n/

A market phenomenon where buyers and sellers have different information, causing the lower-quality side of the market to dominate.

Game Theory

/ɡeɪm ˈθɪəri/

The mathematical study of strategic decision-making among rational agents whose outcomes depend on each other's choices.