Economic Terms

This is the feature of consumer preferences that says 'more is always better' i.e. consumers will always receive more utility from consuming two chocolate bars rather than one, provided they like consuming chocolate bars. This preference helps explain why consumers continually prefer to buy goods in large quantities reguarly.

People who are covered by an insurance policy are likely to exercise less care and attention than people who aren’t covered.

A loan taken out to buy a property with the property title deed (a legal document that confirms who owns the property) transferred to the lender and retained as security until the loan and any interest are repaid in full.

The process by which expenditure generates a trail of subsequent expenditure so that the resultant change in national income will exceed the amount initially expended.

Below is a diagram to show how the mulitplier effect in an a economy is realised. For instance if there was an increase in investment from a firm to increase the size of the office by £1million, this would lead to a greater than £1million increase in aggregate demand due to the multiplier. Firstly that £1million would go to the building company in charge of expanding the office, who would then use that money to pay for the nominal wages of the individual builders in charge of the project. This would then make up part of worker's disposable income and this would be spent on consumer goods such as food and clothes. All this extra spending would contribute towards a higher level of national income.

A measure of money supply based on the total notes and coins in circulation i.e. cash. This is refereed to as M0 and was circa £60 billion in 2013 (circa 3% of broad money).

Is a strategy profile such that every player's strategy is a best response to the strategies of all the other players. In a Nash Equilibrium no player can unilaterally deviate to obtain more profits. However there are some games in which have either no Nash Equilibrium or multiple nash equilibria.

Below is a 2x2 payoff matrix and the equilibrium concept to this game. In this instance both players are playing their best response at (Defect, Defect). For more information on this game and how it's solved see the Prisoners' Dilemma Game.

The amount of money borrowed by the Government by issuing Gilt Edged Securities.

Below is a table to show the level of UK national debt that has been accumlated as the government has been running a large budget deficit.

The total value of goods and services in an economy over a given period of time. This can measured in a number of different ways e.g. GDP, GNP , etc. There are three approaches to obtaining the value of goods and services -expenditure, income or output.

Where a government acquires complete ownership of a firm or industry e.g. education, healthcare, roads.

A market where there is only room for one firm to operate due to substantial capital requirements or 100% ownership of a key resource. There are very few remaining examples in the UK due to the break up and privatisation of state monopolies since WW2. It an also be graphically represented by the minimum efficient scale being large relative to the size of the market and therefore only one firm to be able to reach the MES.

Below is a diagram to show how a natural monopoly rises in a market. In this instance only one firm is able to reach the MES point to fully exploit all the economies of scale in the market. To break up this natural monopoly, more competition needs to be added. But with that extra competition comes higher average costs, reduced average costs and as a result higher prices for consumers as the diagram shows. So in many cases a natural monopoly is often beneficial for a market from both consumers and producers point of view.