RULE Dual Degree Economics Entrance key terms

A measure of how strongly the quantity demanded responds to a change in price, computed as the percentage change in quantity divided by the percentage change in price. Values above one in absolute value indicate elastic demand.

The rate at which a consumer is willing to trade one good for another while staying on the same indifference curve. It equals the absolute slope of the indifference curve at a given bundle.

A curve showing all combinations of two goods that give a consumer the same level of satisfaction. Its slope reflects the trade-off the consumer accepts between the goods.

The set of affordable bundles of goods given prices and income, written as the sum of price times quantity for each good equalling total income. It defines the boundary of the consumer's feasible choices.

The difference between what a consumer is willing to pay for a good and what is actually paid. It measures the welfare gain from a purchase and is the area below demand and above price.

The loss of total welfare caused when a market produces a quantity different from the efficient level, for example under a tax, monopoly, or price control. It is the area of lost surplus between the curves.

The principle that adding more of one input while holding others fixed eventually yields smaller and smaller additions to output. It explains why short-run cost curves become steeper.

The change in total cost from producing one additional unit of output. In competitive markets, profit maximisation occurs where price equals marginal cost.

A situation in which an unregulated market does not allocate resources efficiently, typically because of externalities, public goods, market power, or asymmetric information. It provides a rationale for policy intervention.

A cost or benefit from a transaction that falls on people who are not parties to it. Negative externalities lead to overproduction and positive ones to underproduction relative to the social optimum.

The value of the best alternative forgone when a choice is made. It includes both explicit money costs and implicit costs such as time or foregone income.

The ability to produce a good at a lower opportunity cost than another producer. It explains why specialisation and trade can benefit both parties even when one is absolutely more productive.

The ability to produce more output than another producer using the same quantity of inputs. It differs from comparative advantage, which concerns relative opportunity costs.

The total market value of final goods and services produced within a country's borders in a given period. It is the standard headline measure of the size of an economy.

Nominal values are measured at current prices, while real values are adjusted for price changes and reflect purchasing power. Comparing real values across years removes the effect of inflation.

A sustained increase in the general price level, reducing the purchasing power of money. It is commonly measured by the percentage change in a consumer price index.

An index tracking the cost of a fixed basket of goods and services bought by a typical household. Its rate of change is a common estimate of inflation.

The share of the labour force that is without work but actively seeking employment. It excludes people not looking for work and therefore understates slack in the labour market.

The recurring pattern of expansion and contraction in economy-wide activity over time. Recessions are typically identified by consecutive quarters of falling real output.

The use of government spending and taxation to influence aggregate demand and economic activity. Expansionary fiscal policy raises spending or cuts taxes to stimulate the economy.

Central bank actions to influence money supply, interest rates, and credit conditions, usually aimed at price stability and output stability. Its main tool is often the policy interest rate.

The process by which an initial change in spending leads to a larger change in total output, as recipients spend part of the additional income. The size depends on the marginal propensity to consume.

The fraction of an extra unit of disposable income that households spend on consumption rather than save. It drives the size of the spending multiplier.

The instantaneous rate of change of a function with respect to a variable, defined as the limit of a difference quotient. It is the slope of the tangent line at a point.

The derivative of a multivariable function with respect to one variable while all others are held constant. It is used to measure marginal effects in economic models.

The process of finding a maximum or minimum of a function, often by setting first derivatives to zero and checking second-order conditions. It underlies models of utility and profit maximisation.

A variable introduced to solve constrained optimisation problems, representing the shadow value of relaxing the constraint by one unit. In consumer theory it equals the marginal utility of income.

A rectangular array of numbers arranged in rows and columns. Matrices compactly represent systems of linear equations and are manipulated through operations such as addition, multiplication, and inversion.

A set of equations that must hold at the same time, usually solved for common unknown values. In economics they often describe equilibrium where supply equals demand.

A state in which no agent has an incentive to change behaviour given what others are doing. In markets it usually means quantity supplied equals quantity demanded at a market-clearing price.

The analysis of how an equilibrium changes when an underlying parameter, such as a tax or income, changes. It compares one equilibrium with another rather than tracing the adjustment path.

A variable whose value is determined by the outcome of a random process, described by a probability distribution. It may be discrete or continuous.

The probability-weighted average of all possible values of a random variable. It summarises the central tendency of a distribution over repeated draws.

The expected squared deviation of a random variable from its mean, measuring spread. Its square root is the standard deviation, expressed in the same units as the variable.

A symmetric, bell-shaped probability distribution fully described by its mean and variance. Many estimators are approximately normal in large samples, which underpins common statistical tests.

The result that the sampling distribution of a sample mean approaches a normal distribution as the sample size grows, regardless of the underlying population distribution. It justifies large-sample inference.

The estimated standard deviation of a sample statistic, showing how much it would vary across repeated samples. It is used to build confidence intervals and test statistics.

A regression method that estimates coefficients by minimising the sum of squared residuals. Under standard assumptions it yields unbiased, consistent estimates of linear relationships.

Distortion of an estimated coefficient caused by leaving out a relevant variable that is correlated with both the included regressor and the outcome. It makes estimates inconsistent.

The proportion of variation in the dependent variable explained by a regression model. It ranges from zero to one and rises mechanically when more regressors are added.

A conclusion that an estimated effect is unlikely to have arisen by chance under a stated null hypothesis, judged against a chosen significance level. It does not by itself imply economic importance.

Correlation describes how two variables move together, whereas causation means one variable genuinely influences another. Observed association may reflect reverse causation or confounding factors.

A reasoned objection to a claim that identifies weak assumptions, missing evidence, or alternative explanations. Engaging with it strengthens the credibility of an economic argument.

A concise sentence that states the central claim of an essay and previews the line of reasoning. It should be specific, arguable, and placed near the beginning.

Cohesion is the linking of sentences through connectors and reference words, while coherence is the logical unity of the whole text. Both are needed for a clearly flowing argument.

Words such as may, suggests, or is likely to that soften claims to match the strength of the evidence. Appropriate hedging makes academic writing more precise and credible.