Glossary of Economic Terms
Most of the definitions provided here have been taken from the book:
Pindyck, R. S. and Rubinfeld, D. L. (2001). Microeconomics. 5th Edition. Prentice Hall.
You can hear the correct pronunciation of words at e.g. http://www.wordreference.com/ or http://www.m-w.com/
- Accounting (or accountancy)
- Contabilidad
- The occupation of maintaining and auditing records and preparing financial reports for a business.
- Accounting cost
- Coste contable
- Actual expenses plus depreciation charges for capital equipment. It does *not* include the opportunity cost. See economic cost.
- Accounting profit
- Beneficio contable
- The difference between a firm's revenues and its (accounting) costs, including accounting depreciation but excluding any opportunity cost. See economic profit.
- Ad valorem tax
- Impuesto ad valorem
- A tax levied in proportion to the value of the property being taxed. Ad valorem simply means "based on value". See specific tax and subsidy.
- Asset
- Activo
- A useful or valuable resource.
- Average cost
- Coste medio
- Production cost per unit of output.
- Average revenue
- Ingreso medio
- Revenue divided by the number of units sold, i.e., price per unit.
- Average total cost
- Coste total medio
- Firm's total cost divided by its level of output.
- Average variable cost
- Coste variable medio
- Variable cost divided by the level of output.
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- Barrier to entry
- Barrera de entrada
- Condition that impedes entry by new competitors.
- Budget constraint
- Restricción presupuestaria
- Constraints that consumers face as a result of their limited incomes.
- Budget line
- Recta presupuestaria
- All combinations of goods for which the total amount of money spent is equal to income.
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- Complements
- Productos complementarios
- Two goods for which an increase in the price of one leads to a decrease in the quantity demanded of the other. See substitutes.
- Completely inelastic demand
- Demanda completamente inelástica (ó rígida)
- Consumers will buy a fixed quantity of a good regardless of its price. See price elasticity of demand and infinitely elastic demand.
- Constant-cost industry
- Industria de costes constantes
- Industry whose long-run supply curve is horizontal. See Increasing-cost industry and Decreasing-cost industry.
- Consumer surplus (individual)
- Excedente de un consumidor individual
- Difference between what a consumer is willing to pay for a good and the amount actually paid. See consumer surplus (market) and producer surplus.
- Consumer surplus (market)
- Excedente de los consumidores
- Net benefit to all consumers purchasing a good. Equal to area under the demand curve above the price. See consumer surplus (individual) and producer surplus.
- Cross-price elasticity of demand
- Elasticidad-precio cruzada de la demanda
- Percentage change in the quantity demanded of one good resulting from a 1-percent increase in the price of another. See substitutes and complements .
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- Deadweight loss
- Pérdida irrecuperable de eficiencia
- Total loss of welfare, i.e. the net loss of total (consumer plus producer) surplus -taking into account the revenue to the government, if there's any. See surplus, Consumer surplus (market), and Producer surplus (market).
- Decreasing-cost industry
- Industria de costes decrecientes
- Industry whose long-run supply curve is downward sloping. See Increasing-cost industry and Constant-cost industry.
- Demand
- Demanda
- The total quantity of a good or service that (potential) consumers would be willing to buy at a given price. See supply.
- Demand curve
- Curva de demanda
- Relationship between the quantity of a good that consumers are willing to buy and the price of the good.
- Depreciation
- Depreciación
- The decline in value of a capital asset as it is used over time. *Accounting* depreciation (that which is legally allowed by the relevant body or piece of legislation) may be, and usually is, different from the depreciation that should be used to make economic decisions (i.e. the most accurate estimate of how the value of an asset decreases over time).
- Diminishing marginal utility
- Utilidad marginal decreciente
- Principle dictating that as more of a good is consumed, the consumption of additional amounts will yield smaller additions to utility. See marginal utility.
- Diseconomies of scale
- Deseconomías de escala
- There are economies of scale if an increase in output implies a more-than-proportional increase in costs, i.e. if doubling output implies more than a doubling of cost. See economies of scale and returns to scale.
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- Economic cost
- Coste económico
- Cost to a firm of utilising economic resources in production, including the opportunity cost. See accounting cost.
- Economic profit
- Beneficio económico
- The difference between a firm's revenues and its (economic) costs (which include economic depreciation and opportunity costs). See accounting profit.
- Economics
- Economía
- Economics is the social science that studies the production, distribution, and consumption of goods and services. It studies how people make (or should make) choices under conditions of scarcity and the results of those choices for society.
- Economies of scale
- Economías de escala
- There are economies of scale if an increase in output implies a less-than-proportional increase in costs, i.e. if output can be doubled for less than a doubling of cost. See diseconomies of scale and returns to scale.
- Elasticity
- Elasticidad
- Percentage change in one variable resulting from a 1-percent increase in another. See price elasticity of demand.
- Engel curve
- Curva de Engel
- Curve relating the quantity of a good consumed to income.
- Equilibrium (or market-clearing) price
- Precio de equilibrio (ó precio que vacía el mercado)
- Price that equates the quantity supplied to the quantity demanded.
- Equal marginal principle
- Principio equimarginal
- Principle dictating that utility is maximised when the consumer has equalised the marginal utility per dollar of expenditure across all goods.
- Excess demand
- Exceso de demanda (escasez)
- See shortage.
- Excess supply
- Exceso de oferta (excedente)
- See surplus.
- Expenses
- Gastos (concepto contable)
- Amounts *paid* for goods and services. This is a term used mainly in accounting (as opposed to cost, which is mainly an economic term). See accounting costs and economic costs.
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- Factors of production
- Factores de producción
- Inputs into the production process (e.g. labour, capital, and materials).
- First-degree price discrimination
- Discriminación de precios de primer grado
- Practice of charging each customer her reservation price. See price discrimination, second-degree price discrimination and third-degree price discrimination.
- Fixed cost
- Coste fijo
- Cost that does not vary with the level of output, and that can be eliminated only by going out of business. See variable cost.
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- Giffen good
- Bien Giffen
- Good whose demand curve slopes upward (i.e. more demand with higher prices) because the (negative) income effect is larger than the (negative) substitution effect. Giffen goods are, in particular, inferior goods
- Goods
- Bienes, mercancías, género...
- Articles of commerce.
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- Income
- Renta, ingresos
- Income effect
- Efecto renta
- Change in consumption of a good resulting from an increase in purchasing power, with relative price held constant. See substitution effect.
- Income elasticity of demand (IED)
- Elasticidad-renta de la demanda
- Percentage change in the quantity demanded of a good resulting from a 1-percent increase in income.
- If IED < 0, the good is inferior.
- If IED > 0, the good is normal. If the good is normal, then
See elasticity, inferior good, normal good, necessity, luxury good and Giffen good.
- Increasing-cost industry
- Industria de costes crecientes
- Industry whose long-run supply curve is upward sloping. See Decreasing-cost industry and Constant-cost industry.
- Indifference curve
- Curva de indiferencia
- Curve representing all combinations of market baskets that provide a consumer with the same level of satisfaction.
- Indifference map
- Mapa de curvas de indiferencia
- Graph containing a set of indifference curves showing the market baskets among which a consumer is indifferent.
- Inferior good
- Bien inferior
- A good for which consumption falls as an individual's income rises. Income elasticity of demand for inferior goods is negative. See normal good, necessity, luxury good and Giffen good.
- Infinitely elastic demand
- Demanda infinitamente elástica
- Consumers will buy as much of a good as they can get at a single price, but for any higher price the quantity demanded drops to zero. Naturally, for any lower price the quantity demanded is also infinite. See price elasticity of demand and completely inelastic demand.
- Inflation
- Inflación
- An increase in the price level of goods and services.
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- Long run
- Largo plazo
- Amount of time needed to make all production inputs variable. See short run.
- Luxury good
- Bien de lujo
- A luxury good is a (normal) good for which demand increases more than proportionally as income rises. Income elasticity of demand for inferior goods is greater than 1. Normal goods are necessities or luxury goods. See normal good, necessity and inferior good.
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- Macroeconomics
- Macroeconomía
- Branch of economics that deals with aggregate economic variables, such as the level and growth rate of national output, interest rates, unemployment, and inflation.
- Marginal benefit
- Beneficio marginal
- The marginal benefit of an activity is the increase in total benefit that results from carrying out one additional unit of the activity. If no activity is mentioned, it is usually understood that marginal benefit refers to the benefit obtained from consuming one additional unit of a good.
- Marginal cost
- Coste marginal
- The marginal cost of an activity is the increase in total cost that results from carrying out one additional unit of the activity. If no activity is mentioned, it is usually understood that marginal cost is the cost of producing one additional unit of a good.
- Marginal expenditure
- Gasto marginal
- Additional cost of buying one more unit of a good.
- Marginal rate of substitution (MRS)
- Relación marginal de sustitución (RMS)
- Amount of a good that a consumer is willing to give up in order to obtain one additional unit of another good.
- Marginal rate of technical substitution (MRTS)
- Relación marginal de sustitución técnica (RMST)
- Amount by which the quantity of one input can be reduced when one extra unit of another input is used, so that output remains constant.
- Marginal revenue
- Ingreso marginal
- Change in revenue resulting from a 1 unit increase in output.
- Marginal utility
- Utilidad marginal
- Additional satisfaction obtained from consuming one additional unit of a good.
- Market
- Mercado
- Collection of buyers and sellers that, through their actual or potential interactions, determine the price of a product or set of products.
- Market basket (or bundle)
- Cesta de mercado
- List with specific quantities of one or more goods.
- Market mechanism
- Mecanismo de mercado
- Tendency in a free market for price to change until the market clears.
- Market power
- Poder de mercado
- Ability of a seller or buyer to affect the price of a good.
- Market price
- Precio de mercado
- Price prevailing in a competitive market.
- Microeconomics
- Microeconomía
- Branch of economics that deals with the behaviour of individual economic units -consumers, firms, workers, and investors- as well as the markets that these units comprise.
- Monopoly
- Monopolio
- Market with only one seller.
- Monopoly power
- Poder de monopolio
- The ability of a firm to profitably charge a price higher than marginal cost.
- Monopsony
- Monopsonio
- Market with only one buyer.
- Monopsony power
- Poder de monopsonio
- Buyer's ability to affect the price of a good.
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- Natural monopoly
- Monopolio natural
- Firm that can produce the entire output of the market at a cost lower than what it would be if there were several firms.
- Necessity
- Bien de primera necesidad
- A necessity is a (normal) good for which demand increases as income rises, though less than proportionally. Income elasticity of demand for necessities is greater than 0 (i.e. necessities are normal goods) and less than 1. Normal goods are necessities or luxury goods. See normal good, luxury good and inferior good.
- Nominal price
- Precio nominal
- Absolute price of a good, unadjusted for inflation.
- Normal good
- Bien normal
- A good for which consumption increases as an individual's income rises. Income elasticity of demand for normal goods is positive. Normal goods can be necessities (income elasticity of demand in between 0 and 1) or luxury goods (income elasticity of demand greater than 1). See luxury good, necessity and inferior good.
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- Opportunity cost
- Coste de oportunidad
- The opportunity cost of a certain decision is the value of the next best alternative that must be given up because of that decision. Another definition is that opportunity cost is the value of the best alternative foregone when a decision is made. Example: the opportunity cost of using a building that belongs to you to set up your own business is the rent that you could obtain if you leased the building to another person. By using the building yourself, you are effectively losing the rent you could obtain if you leased it, so this is in effect a cost of using the building -the cost of missing the best alternative option. The key to using the concept of opportunity cost correctly lies in recognising exactly what taking a given action prevents us from doing. The value of the best alternative option that we must forgo to undertake a certain activity (e.g. the value of leasing the building, which is never received if you decide to use the building yourself) is the opportunity cost of conducting such an activity.
- Oligopoly
- Oligopolio
- Market in which only a few firms compete with one another, and entry by new firms is impeded. See monopoly, monopsony, and oligopsony.
- Oligopsony
- Oligopsonio
- Market with only a few buyers. See monopoly, monopsony, and oligopoly.
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- Price discrimination
- Discriminación de precios
- Practice of charging different prices to different consumers for similar goods. See first-degree price discrimination, second-degree price discrimination and third-degree price discrimination.
- Price elasticity of demand
- Elasticidad-precio de la demanda
- Percentage change in quantity demanded of a good resulting from a 1-percent increase in its price. See elasticity.
- Price elasticity of supply
- Elasticidad-precio de la oferta
- Percentage change in quantity supplied resulting from a 1-percent increase in price. See elasticity.
- Price support
- Mantenimiento de precios
- Price set by government above free-market level and maintained by governmental purchases of excess supply.
- Producer surplus (market)
- Excedente de los productores
- Sum (over all units exchanged in a market) of differences between market price of a good and marginal cost of production. Equal to area above the supply curve up to the market price. See consumer surplus (individual) and consumer surplus (market).
- Profit
- Beneficio
- See accounting profit and economic profit .
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- Rational person
- Persona racional
- Someone with well-defined goals who tries to fulfill those goals as best he or she can.
- Real price
- Precio real
- Price of a good relative to an aggregate measure of prices; price adjusted for inflation.
- Reservation price
- Precio de reserva
- The highest price someone is willing to pay to obtain any good or service, or the lowest payment someone would accept for giving up a good or performing a service.
- (increasing, constant, or decreasing) Returns to scale
- Rendimientos de escala (crecientes, constantes, ó decrecientes)
- Rate at which output increases as inputs are increased proportionally. There are increasing returns to scale if output more than doubles when all inputs are doubled, constant returns to scale if output doubles when all inputs are doubled, and decreasing returns to scale if output less than doubles when all inputs are doubled. See economies of scale and diseconomies of scale.
- Revenue
- Ingresos, rentas
- The entire amount of income before any deductions are made.
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- Second-degree price discrimination
- Discriminación de precios de segundo grado
- Practice of charging different prices per unit for different quantities of the same good or service. See price discrimination, first-degree price discrimination and third-degree price discrimination.
- Short run
- Corto plazo
- Period of time in which quantities of one or more production factors cannot be changed. See long run.
- Shortage (excess demand)
- Escasez (exceso de demanda)
- Situation in which the quantity demanded exceeds the quantity supplied. See surplus.
- Social monopoly
- Monopolio social
- Intervention in a monopoly by which the government sets a ceiling price that induces the monopolist to produce the largest possible output.
- Specific tax
- Impuesto específico
- Tax of a certain amount of money per unit sold. See ad valorem tax and subsidy.
- Subsidy
- Subsidio
- Payment reducing the buyer's price below the seller's price; i.e., a negative tax. See specific tax.
- Substitutes
- Productos sustitutivos
- Two goods for which an increase in the price of one leads to an increase in the quantity demanded of the other. See complements.
- Substitution effect
- Efecto sustitución
- Change in consumption of a good associated with a change in its price,
- with the level of utility held constant (Hicks) or, alternatively,
- with the purchasing power held constant (Slutsky).
See income effect.
- Sunk cost
- Gasto irrecuperable (ó coste hundido)
- Expenditure that has been made and cannot be recovered.
- Supply
- Oferta
- The total quantity of a good or service that is available for purchase at a given price. See demand.
- Supply curve
- Curva de oferta
- Relationship between the quantity of a good that producers are willing to sell and the price of the good.
- Surplus (excess supply)
- Excedente (exceso de oferta)
- Situation in which the quantity supplied exceeds the quantity demanded. See shortage.
- Surplus (economic surplus from taking a certain action)
- Excedente (excedente económico obtenido por llevar a cabo una cierta actividad)
- The economic surplus from taking any action is the benefit of taking the action minus its cost.
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- Tariff
- Arancel
- Tax on an imported good. See specific tax.
- Theory of consumer behaviour
- Teoría del comportamiento del consumidor
- Description of how consumers allocate incomes among different goods and services to maximise their well-being.
- Third-degree price discrimination
- Discriminación de precios de tercer grado
- Practice of dividing consumers into two or more groups with separate demand curves and charging different prices to each group. See price discrimination, first-degree price discrimination and second-degree price discrimination.
- Trade-off
- Disyuntiva, solución de compromiso
- A situation where there is a need to make a compromise between two (or more) options or criteria that are -at least to some extent- mutually exclusive, i.e. getting more of one implies getting less of the other. In other words, you have to balance one thing against the other. Example: when choosing a job, there is usually a trade-off between quality of life and salary; jobs that give you great quality of life tend to be low paid, and the other way around. A trade off is a choice that occurs as a compromise. A giving up of one thing in return for another.
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- Utility
- Utilidad
- Numerical score representing the satisfaction that a consumer gets from a given market basket.
- Utility function
- Función de utilidad
- Formula that assigns a level of utility to individual market baskets.
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- Variable cost
- Coste variable
- Cost that varies as output varies. See fixed cost.
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- Zero economic profit
- Beneficio económico nulo
- Normal return on investment, i.e. the profit that could be gained if the same capital were invested in an alternative business of similar risk.
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