Definitions of Economics by Jim Stanford for preparations of Master of Economics or other Business Studies. These definitions is also useful for anyone who do business.
Post-Keynesian Economics: A modern heterodox school of economic thought which emphasizes the more non-neoclassical or radical aspects of John Maynard Keynes’ theories. Post-Keynesians pay primary attention to the monetary system, and the impact of monetary behaviour and policies on employment, output, and other economic indicators.
Poverty: A state of having inadequate income or other resources to support a household or group of households at a basic standard of living. Poverty can be measured in absolute or relative terms.
Poverty Rate: The proportion of individuals or households in a jurisdiction which are defined as poor, according to either absolute or relative definitions of poverty.
Pre-Funded Pension: A pension plan in which funds are accumulated and invested throughout an individual’s working life in order to pay for the subsequent disbursement of pension benefits after that person has retired. Pre-funded pensions can be individual or collective (ie. pooled) in nature; individual pre-funded pensions are similar to individual savings accounts.
Preferences: According to neoclassical economic theory, individuals’ preferences regarding the sorts of consumer goods they most enjoy will exercise an ultimate influence on both the composition of output in the economy, and the prices paid for final products and factors of production.
Price Level: The overall average level of nominal prices in the economy can be calculated, most often as a weighted average of the prices of individual goods and services (with weightings reflecting the importance of each product in overall spending or output). Price levels can be calculated for consumer spending, for wholesale trade, for producer inputs, or for any other category of production. The most common measures of the overall price level are the consumer price index and the gross domestic product deflator.
Primary Products: Products which are harvested directly from the natural environment, with minimal subsequent processing, are considered primary products. These typically include agricultural, fishing, forestry, mineral, and energy products.
Private Equity: A form of business in which the company’s entire equity base is owned by one or a small group of individual investors. Under the private equity model, the company does not issue shares onto the stock market, and hence is not usually required to release public financial statements or comply with other securities regulations. Private equity firms are generally considered to be more ruthlessly focused on generating shorter-term cash profits from their operations than joint stock companies.
Product Markets: The markets where produced goods and services are bought and sold (distinguished from markets for factors of production).
Production: The process by which human labour (or “work”) is applied, usually with the help of tools and other forms of capital, to produce useful goods or services.
Production, for Profit: Under capitalism, most production is undertaken by private companies (of various forms), with the goal of generating a profit to the company’s owners. Profit is attained when the company’s output is sold, generating revenue that exceeds the costs of production (including labour).
Productivity: In general, productivity measures the effectiveness or efficiency of productive effort. Productivity can be measured in many different ways. Physical productivity measures the actual amount of a good or service produced (eg. tons of steel, or number of haircuts).
Productivity can also be measured in terms of the value of output. Most commonly, productivity is measured as the amount of output produced over a certain period of work (eg. output per hour); this is considered a measure of labour productivity. But other approaches are also possible, including measurements of capital productivity (output relative to the value or physical quantity of invested capital) and “total factor productivity” (which is an abstract statistical measurement of the overall effectiveness of production).
Profit: This is the surplus left over after a company sells its output, and pays off the cost of production (including labour costs, raw materials, and a proportional share of its capital equipment). Its calculation is: revenue – cost = profit.
Program Spending: Government spending which is undertaken to provide useful public programs. Program spending includes both direct government production of services (like health care or education), and transfer payments which are intended to supplement the income of households (through programs like unemployment insurance or public pensions). Program spending does not include government debt service charges.
Progressive Tax: A tax is considered progressive if a larger proportionate share of its total burden falls on individuals with higher average incomes.
Public Goods: True public goods are those which cannot be provided to one group of consumers, without being provided to any other consumers who desire them. Thus they are “non-excludable.” Examples include radio and television broadcasts, the services of a lighthouse, national security, and a clean environment. Private markets typically underinvest in the provision of public goods, since it’s very difficult to collect revenue from their consumers. More broadly, public goods can refer to any goods or services provided by government as a result of an inability of the private sector to supply those products in acceptable quantity, quality, or accessibility.
Public Investment: Real investment spending by government or public institutions on structures, infrastructure, machinery and equipment, and other real capital.
Public-Private Partnerships (PPPs): A form of financing public investment, and sometimes the direct provision of public services, in which finance is provided by private investors (in return for interest), and private firms are involved in the management of the construction or operation of the publicly-owned facility. PPPs have been heavily criticized for increasing the cost of public projects and generating undue profits for private investors.
Real GDP: The value of total gross domestic product (that is, all the goods and services produced for money in the economy) adjusted for the effects of inflation. In theory, real GDP represents the physical quantity of output.
Real Interest Rate: The interest rate on a loan, adjusted for the rate of inflation. The real interest rate represents the real burden of an interest payment. Real interest rates must be positive for the lender to attain any real income from the loan.
