Economics Vocabulary

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Directions: You need to create an electronic document that you can use to help you revise
definitions. Your options for a document include Microsoft Word or PowerPoint, Google Doc,
Google Presentation, Prezi, etc. You want to be able to use this to review from. For instance,
using a presentation format you could include the Economic Term on one slide followed by the
explanation of the term in the second slide.
(Note: page numbers refer to ​Economics for the IB Diploma, Second Edition by Ellie Tragakes​.)

Every term must include a definition and at least one of the following:
● diagram (graph)
● picture
● example
● sentence where the term is used correctly

 Definitions by Syllabus Unit Topic

Unit 0.1: Introduction to Economics
Unit 0.2: Growth, Development, and Trade using PPC
Unit 1.1 Competitive Markets: Demand and Supply
Unit 1.2 Elasticity
Unit 1.3 Government intervention:
Unit 1.4 Market Failure
Unit 1.5 Theory of the Firm (HL only)
Unit 3.1: International Trade
Unit 3.2: Exchange Rates
Unit 2.1: Macroeconomics (Measuring an economy/development)
Unit 2.2: Aggregate Demand, Supply, and Equilibrium
Unit 0.1: Introduction to Economics
pp 1 - 16
1. Economics
2. Microeconomics
3. Macroeconomics
4. Goods
5. Services
6. Free Good
7. Economic Good
8. Positive Economics Statements
9. Normative Economic Statements
10. Scarcity
11. Opportunity Costs
12. Factors of Production
13. Production Possibilities Curve (PPC) or Production Possibilities Frontier (PPF)
14. Ceteris Paribus
15. Circular Flow of Income model (CFM), page 216
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Unit 0.2: Growth, Development, and Trade using PPC

1. Ceteris Paribus
2. Productively efficient
3. Allocatively efficient
4. Actual output
5. Actual growth
6. Potential output
7. Potential growth
8. Less Economically Developed Countries (LEDC), p 440
9. More Economically Developed Countries (MEDC), p 440
10. Poverty cycle (poverty trap), p 444
11. Millenium Development Goals (MDG), p 448
12. Gross Domestic Product (GDP), p 452
13. Gross National Income (GNI), p 452
14. Development
15. Human Development Index (HDI)
16. Specialization, p 355
17. Free trade, p 356
18. Absolute Advantage, p 356
19. Comparative Advantage, p 358
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Unit 1.1 Competitive Markets: Demand and Supply

Unit 1.1.1
1. Competitive markets, p 21
2. Demand
3. Ceteris Paribus,​ p 21
4. Law of Demand
5. Market demand, p 23
6. Determinants of Demand (non-price determinants)
7. Inferior Good
8. Normal Good
9. Complementary Good
10. Substitute Good
11. Change in Quantity Demand (explain this phrase)
12. Change in Demand (explain this phrase)
Unit 1.1.2
1. Supply
2. Law of Supply
3. Market supply
4. Determinants of Supply (non-price determinants)
5. Competitive supply, p 28-29
6. Joint supply, p 29
7. Subsidy
8. Change in Quantity Supply (explain this phrase)
9. Change in Supply (explain this phrase)
Unit 1.1.3
1. Market equilibrium
2. Surplus
3. Shortage
4. Equilibrium price = market-clearing price = market price, p 31
5. Prices as signals (explain this phrase), p 40
6. Prices as incentives (explain this phrase), p 40
7. Allocative efficiency
8. Consumer surplus
9. Producer surplus
10. Social surplus (community surplus or social welfare), p 43-44

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Unit 1.2 Elasticity
1.2.1 (PED)
1. Price Elasticity of Demand
2. formula for PED
3. Price inelastic
4. Price elastic
5. Unit elastic
6. Perfectly price inelastic demand (p 50)
7. Perfectly price elastic demand (p 50)
8. Determinants of PED
9. Total revenue (TR)
10. formula of TR
11. Primary commodities

1.2.2 (XED, YED, PES)

1. Cross-Price Elasticity of Demand (XED)
2. formula for XED
3. values for XED
4. Substitutes and value of XED
5. Complements and value of XED
6. Income-Price Elasticity of Demand (YED)
7. formula for YED
8. Necessities (and value of YED)
9. Luxuries (and value of YED)
10. Inferior goods (and value of YED)
11. Price elasticity of supply (PES)
12. formula for PES
13. values of PES
14. Determinants of PES (p 68-69)

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Unit 1.3 Government intervention:
1. Indirect Taxes
2. Excise taxes
3. Direct taxes
4. Specific taxes
5. Ad valorem taxes (percentage taxes)
6. Consumer surplus
7. Producer surplus
8. Subsidy
9. Welfare Loss
10. Price controls
11. Price ceiling (maximum price)
12. Shortage
13. Non-price rationing
14. Underground (or parallel) markets
15. Rent controls
16. Food price controls
17. Price floor (minimum price)
18. Price supports
19. Minimum wage
20. Surplus
21. Buffer Stock

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Unit 1.4 Market Failure
1. Pareto Optimality
2. Allocative efficiency
3. Market Failure
4. Public Goods
5. Merit goods
6. Demerit goods
7. Externalities
8. Positive Externality of Production
9. Positive Externality of Consumption
10. Negative Externality of Production
11. Negative Externality of Consumption

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Unit 1.5 Theory of the Firm (HL only)
pages 139-143
1. Short run
2. Long run
3. Total product
4. Marginal product
5. Average product
6. Law of diminishing returns
pages 144-146
7. Costs of production
8. Explicit costs
9. Implicit costs
10. Economic costs
11. Fixed costs
12. Variable costs
13. Total costs
14. Average costs
15. Average fixed costs (AFC)
16. Average variable costs (AVC)
17. Average total costs (ATC)
18. Marginal cost (MC)

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Unit 3.1: International Trade
p 354
1. International Trade
2. Exports
3. Imports
4. Specialization
5. Factor Endowments
6. Economies of Scale
7. Absolute Advantage
8. Comparative Advantage
9. Free Trade
10. Protectionism
11. World Trade Organization (WTO)
12. Tariff
13. Producer inefficiency
14. Consumer Surplus
15. Deadweight loss
16. Import Quota
17. Quota Rents
18. Subsidy
19. Export Subsidy
20. Voluntary Export Restraint (VER)
a. Export Quota
21. Diversification
22. Dumping
23. Anti-dumping

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Unit 3.2: Exchange Rates
1. Exchange Rate (p 366)
2. Floating Exchange Rate system
3. Appreciation
4. Depreciation
5. Causes of changes in exchange rates (list and define all 6 reasons)
a. interest rate
b. inflation
c. income
d. taste
e. speculation
f. foreign currency reserves
6. Fixed Exchange Rate (p 372)
7. Devaluation
8. Revaluation
9. Managed exchange rates
10. Pegging exchange rates (p 375)

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Unit 2.1: Macroeconomics (Measuring an economy/development)
pp 216
1. Aggregate output
2. Circular Flow of Income diagram (CFM) with leakages and injections
3. Consumer expenditure (Household expenditure)
4. Leakages
5. Injections
6. Savings
7. Investments
8. Taxes
9. Government spending
10. Imports
11. Exports
12. Output method
13. Value added (p 187)
14. Income method
15. Expenditure method
16. Gross Domestic Product (GDP)
17. Gross National Product (GNP)
18. nominal vs real GDP (real Output)
19. Net National Product (NNP)
20. GDP ​per capita
21. National Income
22. Business cycle
23. Economic development
24. Human Development Index (HDI)

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Unit 2.2: Aggregate Demand, Supply, and Equilibrium
1. Aggregate Demand (AD)
2. Aggregate Supply (AS)
3. Macroeconomic equilibrium
4. Inflation
5. Deflation
6. Short run AS (SRAS)
7. Long run AS (LRAS)
8. Inflationary Gap
9. Deflationary Gap
10. Neo-classical LRAS
11. Keynesian LRAS
12. Full employment level of output (Yf)
13. Business cycle (definition and diagram)
a. Recession
b. Recovery
c. Growth
d. Potential output (related to PPC and Business cycle and LRAS)

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