NSSCO Economics (6145) key terms

The condition where resources available to satisfy human wants are limited, while wants are unlimited. It forces individuals, firms and governments to make choices about how to allocate resources.

The value of the next best alternative given up when a choice is made. It is measured in terms of the forgone option, not in money, and applies to all economic decisions.

The resources used to produce goods and services: land (natural resources), labour (human effort), capital (man-made aids to production) and entrepreneurship (organising and risk-taking). Each earns a return: rent, wages, interest and profit respectively.

A curve showing the maximum combinations of two goods an economy can produce when all resources are fully and efficiently used. Points inside the curve indicate inefficiency or unemployment; points beyond are unattainable.

An economic system in which resources are allocated mainly through the price mechanism, with private individuals and firms deciding what to produce. Government intervention is limited compared with a planned economy.

An economic system combining private enterprise with government ownership or regulation of some resources. Namibia is an example, with private business alongside state-owned enterprises and government provision of services.

The quantity of a good or service that consumers are willing and able to buy at a given price over a period of time. Willingness alone is not demand unless backed by the ability to pay.

The principle that, other things being equal, the quantity demanded of a good falls as its price rises and rises as its price falls. This gives a downward-sloping demand curve.

The quantity of a good or service that producers are willing and able to offer for sale at a given price over a period of time. It depends on price, costs of production and other factors.

The price at which the quantity demanded equals the quantity supplied, so there is no tendency for price to change. It is shown by the intersection of the demand and supply curves.

The system by which changes in prices signal information and provide incentives that allocate resources in a market economy. Rising prices attract producers and discourage buyers, and falling prices do the reverse.

A measure of how responsive quantity demanded is to a change in price, calculated as the percentage change in quantity demanded divided by the percentage change in price. Demand is elastic if the value exceeds one and inelastic if it is below one.

A measure of how responsive quantity supplied is to a change in price, calculated as the percentage change in quantity supplied divided by the percentage change in price. Supply tends to be more elastic over longer time periods.

A measure of how responsive quantity demanded is to a change in consumer income, calculated as the percentage change in quantity demanded divided by the percentage change in income. A negative value indicates an inferior good.

The amount a firm receives from selling its output, calculated as price multiplied by quantity sold. Whether revenue rises or falls after a price change depends on the price elasticity of demand.

The process of combining factors of production to create goods and services that satisfy human wants. It includes both tangible goods and intangible services.

A cost that does not change with the level of output in the short run, such as rent or insurance. Fixed costs must be paid even when output is zero.

A cost that changes directly as the level of output changes, such as raw materials and wages of production workers. Variable costs are zero when output is zero.

The addition to total cost from producing one more unit of output. It is calculated as the change in total cost divided by the change in quantity produced.

Total cost divided by the quantity of output produced, covering both fixed and variable costs per unit. Firms compare it with price to judge whether they are making a profit.

The fall in average cost per unit that results from increasing the scale of production. They arise from specialisation, bulk buying and better use of machinery, and are a source of lower prices.

A market structure with many small firms selling an identical product, free entry and exit, and perfect information, so each firm is a price taker. The firm faces a horizontal demand curve.

A market structure in which a single firm supplies the whole market and there are high barriers to entry, giving the firm power to set prices. Output tends to be lower and prices higher than under competition.

A market structure dominated by a few large firms whose decisions affect one another, often leading to interdependence and non-price competition. Examples include banking and mobile telecommunications.

Anything generally accepted as a medium of exchange, a unit of account, a store of value and a standard of deferred payment. It removes the need for barter and reduces the cost of exchange.

A financial institution that accepts deposits from the public, makes loans and provides payment services in order to earn profit. It creates credit when it lends out deposits.

The institution responsible for issuing currency, controlling the money supply, supervising banks and acting as lender of last resort. In Namibia this role is performed by the Bank of Namibia.

The total market value of all final goods and services produced within a country's borders in a given period, usually a year. It is a key measure of national income and economic activity.

An increase in a country's real output of goods and services over time, usually measured as the annual percentage change in real gross domestic product. It raises the economy's production possibility curve.

A sustained rise in the general price level of an economy over a period of time, which reduces the purchasing power of money. It is commonly measured by changes in the consumer price index.

The situation where people who are willing and able to work at the going wage cannot find jobs. It is measured as a percentage of the labour force and has economic and social costs.

The use of interest rates, money supply and credit controls by a central bank to influence economic activity and control inflation. Raising interest rates tends to reduce spending and borrowing.

The use of government taxation and spending to influence the level of economic activity. Expansionary policy raises spending or cuts taxes, while contractionary policy does the opposite.

A record of all economic transactions between a country and the rest of the world over a period, comprising the current account and the financial account. Persistent deficits can put pressure on the exchange rate.

The price of one country's currency expressed in terms of another currency. It is determined by demand and supply in the foreign exchange market and affects the price of imports and exports.

The exchange of goods and services between countries, based on specialisation and comparative advantage. It allows countries to obtain goods they cannot produce efficiently themselves.

An improvement in the living standards and well-being of a population, including income growth but also better health, education and reduced poverty. It is broader than economic growth alone.

The part of the economy owned, controlled or financed by government, including ministries, state-owned enterprises and public services. It provides goods that the market may not supply adequately.