Economic Terms

Is the government department responsible for for formulating and developing public finance and economic policy and controlled by The Chancellor of the Exchequer (currently George Osborne).

Her Majesty’s Revenue and Customs. Its main responsibility is the administration and collection of UK taxes.

Goods where the features of products are similar e.g gas and water.

If all firms produce exactly the same product there can be no price competition and only non-price competition such as product differentiation and advertising campaigns. This is because buyers have an unlimited option when purchasing this type of good and therefore if all goods are the same, the sole reason for buying a product from a specific firm is solely based on price and if the costs of production are the same undercutting rivals will not steal the market share and sales.

Horizontal integration occurs when there is a merger between two firms in the same industry operating at the same stage of production. For example two firms both producing products in the primary sector merging that would be an example of this type of integration. This enables firms to benefit from economies of scale and build up a more efficient distribution network. A real life example was in 2013 when US Airways merged with American Airlines to benefit from managerial economies of scale to raise efficiency and productivity, as well as increasing the level of market power for the newly merged firm.

Short-term money flows between financial assets caused by institutions attempting to generate profits by trading foreign currency, commodities and financial assets. Profits arise from successful speculation (investing when there is an expectation that prices will rise and produce a profit) and arbitrage (making a profit by identifying opportunities to buy an asset in one market and immediately sell it in another market at a higher price).

Capital flows moving to countries with higher interest rates and changes in exchange rates. For instance if the interest rates of a country rise higher relative to that of other countries, investors will implace their money in the financial sector of that country to maximise the return on their investment. These flows occur very quickly and will also cause the exchange rate to strengthen too. If the interest rates cut capital would flow out of the economy and cause the domestic currency to weaken.

The productive potential of a single or group of workers. The value of human capital is equal to the future value of earnings and production.

A summary measure of average achievement in key dimensions of human development i.e. a long and healthy life, being knowledgeable and having a decent standard of living. This measure is then used to rank countries into four tiers of human development: low, medium, high or very high.

Below is a table to illustrate how five different countries rank in these key dimensions of human development and therefore the meausre of human development for those countries. As can be seen from the table the UK is classed as having a very high level of human development as the HDI measure is over 0.8. Whereas Nigeria has medium level of human development as the HDI measure is below 0.7.

 

 

Are fundamental for human survival purpose. Therefore is something you should have and you cannot do without e.g. water and food.

Are a human desire to get something additional. Wants are unlimited.