A
Aggregate demandThe total demand for goods and services in an economy at a given price level in a given time period. AD = C + I + G + (X - M).
Aggregate supplyThe total output of goods and services that producers in an economy are willing and able to supply at a given price level.
Ansoff's MatrixA strategic framework that identifies four growth strategies based on whether products and markets are new or existing: market penetration, market development, product development, and diversification.
Average rate of returnAn investment appraisal method that calculates the average annual profit as a percentage of the initial investment, allowing comparison with alternative investments or interest rates.
B
Balance of paymentsA record of all financial transactions between a country and the rest of the world over a given period, consisting of the current account, capital account, and financial account.
Barriers to changeFactors that hinder or prevent organisational change, such as employee resistance, financial constraints, organisational inertia, or poor communication from management.
Barriers to entryObstacles that make it difficult for new firms to enter a market, such as high start-up costs, strong brand loyalty, legal regulations, or economies of scale enjoyed by existing firms.
Bartlett and Ghoshal modelA framework classifying multinational strategies into four types based on the balance between global integration and local responsiveness: international, multidomestic, global, and transnational.
BenchmarkingThe process of comparing a firm's performance, processes, or products against those of industry leaders or competitors in order to identify best practices and areas for improvement.
Boston MatrixA model that classifies a firm's products into four categories based on market share and market growth: Stars, Cash Cows, Question Marks, and Dogs. It helps firms manage their product portfolio.
BrandingThe process of creating a distinctive name, logo, image, or identity for a product or business in the consumer's mind, used to differentiate it from competitors and build customer loyalty.
Break-even analysisA calculation that determines the level of output at which total revenue equals total costs, resulting in neither profit nor loss. Break-even output equals fixed costs divided by contribution per unit.
BudgetA financial plan that estimates future income and expenditure over a set period. Budgets help control spending, allocate resources, and monitor financial performance.
Budget deficitWhen government spending exceeds government revenue (taxation) in a given year. The shortfall must be financed by borrowing.
Budget surplusWhen government revenue (taxation) exceeds government spending in a given year, allowing the government to repay debt.
Buffer stockA scheme where the government buys and stores surplus goods when supply is high and sells from stocks when supply is low, aiming to stabilise prices.
Business angelA wealthy individual who provides capital and often mentoring to early-stage businesses in exchange for equity or convertible debt.
Business confidenceThe degree of optimism or pessimism that business leaders feel about the future prospects of the economy. High confidence encourages investment and expansion; low confidence leads to caution.
Business cycleThe regular pattern of fluctuations in economic activity over time, consisting of four phases: boom, recession, slump (trough), and recovery (expansion).
Business ethicsThe moral principles and values that guide decision-making and behaviour within a business. Ethical decisions consider what is right and fair, not just what is profitable.
C
Capacity utilisationThe proportion of a firm's maximum output that is actually being achieved, expressed as a percentage. Low utilisation means resources are underused; high utilisation may strain resources.
Cash flow forecastA prediction of the expected cash inflows and outflows over a future period, used to anticipate cash shortages and plan borrowing or investment decisions.
Ceteris paribusA Latin phrase meaning "all other things being equal". Used in economic models to isolate the effect of one variable by holding all others constant.
Circular flow of incomeA model showing how money flows between households and firms. Income flows from firms to households (as wages/rent/profit) and back as spending on goods and services.
Claimant countA measure of unemployment based on the number of people claiming unemployment-related benefits (e.g. Jobseeker's Allowance).
Comparative advantageThe ability of a country to produce a good or service at a lower opportunity cost than another country, forming the basis for mutually beneficial international trade.
Complementary goodA good that is consumed together with another. A rise in the price of one leads to a fall in demand for its complement (negative XED).
Consumer Price IndexA measure of inflation that tracks the average price change of a weighted basket of goods and services bought by a typical household.
Consumer surplusThe difference between what consumers are willing to pay for a good and what they actually pay. Shown as the area below the demand curve and above the market price.
ConsumptionSpending by households on goods and services. The largest component of aggregate demand in most economies.
ContributionThe amount remaining after variable costs are subtracted from sales revenue. Total contribution can be used to cover fixed costs and generate profit.
Core competenciesThe unique strengths, resources, and capabilities that give a business a competitive advantage and are difficult for rivals to imitate, forming the basis of its strategic position.
Corporate cultureThe shared values, beliefs, attitudes, and norms that shape behaviour within an organisation. Culture influences how employees interact, make decisions, and approach their work.
Corporate objectivesThe specific, measurable goals set by senior management for the whole organisation, derived from the mission statement. They guide strategic decision-making.
Corporate social responsibilityThe voluntary actions a business takes to consider and address the social, environmental, and ethical impacts of its operations beyond its legal obligations.
Cost-push inflationInflation caused by increases in the costs of production (e.g. wages, raw materials, energy), which are passed on to consumers as higher prices.
Critical path analysisA project management technique that identifies the sequence of dependent tasks (the critical path) that determines the minimum time needed to complete a project. Any delay on the critical path delays the whole project.
Cross elasticity of demandA measure of the responsiveness of demand for one good to a change in the price of another good. XED = % change in Qd of A ÷ % change in price of B.
Crowd-fundingA method of raising finance by collecting small amounts of money from a large number of people, typically via online platforms, to fund a business idea or project.
Current accountPart of the balance of payments recording trade in goods and services, investment income, and current transfers between a country and the rest of the world.
Cyclical unemploymentUnemployment caused by a downturn in the economic cycle (recession). Demand for labour falls as firms reduce output.
D
Deadweight lossThe loss of economic efficiency when equilibrium is not achieved. Represented as a triangle of lost consumer and producer surplus on a diagram.
Decision treeA mathematical model that maps out different options, possible outcomes, and their probabilities and financial returns, helping managers make objective decisions under uncertainty.
DeflationA sustained decrease in the general price level. Can lead to delayed spending, falling output, and rising real debt burdens.
DelegationThe process of assigning authority and responsibility for a task to a subordinate, while the manager retains overall accountability for the outcome.
DemandThe quantity of a good or service that consumers are willing and able to buy at a given price in a given time period.
DemandThe quantity of a good or service that consumers are willing and able to purchase at a given price in a given time period.
Demand-pull inflationInflation caused by excessive aggregate demand growing faster than aggregate supply. "Too much money chasing too few goods."
Demerit goodA good that is over-consumed in a free market because consumers underestimate its private costs, or it generates negative externalities. E.g. cigarettes, alcohol.
Diminishing marginal utilityThe principle that as a consumer consumes more units of a good, the additional satisfaction from each extra unit decreases.
Diseconomies of scaleThe cost disadvantages that arise when a firm grows too large, causing long-run average costs to rise. Common causes include communication problems, coordination difficulties, and low employee motivation.
DisinflationA reduction in the rate of inflation. Prices are still rising, but at a slower rate than before.
Distribution channelThe route through which a product travels from the producer to the final consumer. Channels may include wholesalers, retailers, agents, or direct selling.
Division of labourBreaking the production process into separate tasks, with each worker specialising in one task, increasing productivity and efficiency.
Dynamic marketA market that is subject to rapid and continuous change due to factors such as evolving consumer tastes, new technology, or increased competition.
E
Economic goodA good that is scarce and has an opportunity cost. Resources must be used to produce it.
Economic growthAn increase in the real GDP of an economy over time. Short-run growth uses spare capacity; long-run growth increases productive potential.
Economies of scaleThe cost advantages that a business gains as it increases its scale of production, causing long-run average costs to fall. Types include purchasing, technical, managerial, and financial economies.
Effective demandDemand backed by the ability to pay. A want becomes effective demand only when the consumer has sufficient purchasing power.
Emerging marketA country that is transitioning from a developing to a more advanced economy, characterised by rapid industrialisation, rising incomes, and growing consumer markets.
EnterpriseThe willingness to take risks and show initiative in starting and running a business. It is considered the fourth factor of production alongside land, labour, and capital.
Equilibrium priceThe price at which quantity demanded equals quantity supplied. There is no tendency for the price to change at this point.
Equilibrium quantityThe quantity bought and sold at the equilibrium price, where demand equals supply.
Ethical tradingBusiness practices that ensure products are sourced and produced in a way that respects workers' rights, provides fair wages, and minimises environmental harm throughout the supply chain.
Ethnocentric approachAn international marketing approach where the home country's practices, products, and strategies are applied uniformly in all foreign markets with little or no adaptation.
Excess demandWhen quantity demanded exceeds quantity supplied at the current price, creating upward pressure on price. Occurs when price is below equilibrium.
Excess supplyWhen quantity supplied exceeds quantity demanded at the current price, creating downward pressure on price. Occurs when price is above equilibrium.
Exchange rateThe price of one currency expressed in terms of another. Affects the price of imports and exports and the current account balance.
Exchange rateThe price of one currency expressed in terms of another. Exchange rate fluctuations affect the cost of imports, the competitiveness of exports, and multinational profits.
Expected valueThe predicted financial return of a decision, calculated by multiplying each possible outcome by its probability and summing the results. It is used in decision tree analysis.
External benefitThe benefit of an economic activity received by third parties not directly involved in the transaction. Also called a spillover benefit.
External costThe cost of an economic activity borne by third parties not directly involved in the transaction. Also called a spillover cost.
ExternalityA cost or benefit that affects a third party not directly involved in the production or consumption of a good. Can be positive or negative.
F
Factors of productionThe four inputs used to produce goods and services: land (natural resources), labour (human effort), capital (machinery/equipment), and enterprise (risk-taking).
Fiscal policyThe use of government spending and taxation to influence aggregate demand and the economy. Expansionary = increase G or decrease T.
Fixed costsCosts that do not change with the level of output in the short run, such as rent, salaries, and insurance. They must be paid regardless of production levels.
Flexible workforceA labour force that can be adapted to meet changing business needs, through methods such as part-time contracts, temporary workers, multi-skilling, and outsourcing.
Foreign direct investmentInvestment made by a firm in one country into business interests in another country, typically by establishing operations or acquiring business assets such as factories or stakes in foreign firms.
FranchiseA business model where a franchisor grants a franchisee the right to operate under its brand name and sell its products or services in exchange for fees and adherence to operational standards.
Free goodA good that is not scarce and has no opportunity cost, such as air. It does not require resources to produce or consume.
Free market economyAn economic system where resource allocation is determined by market forces (supply and demand) with no government intervention.
Free rider problemWhen individuals benefit from a good without paying for it, as they cannot be excluded. This leads to under-provision of public goods by the market.
Frictional unemploymentShort-term unemployment that occurs when workers are between jobs, searching for new employment. Exists even in a healthy economy.
Full employmentThe level of employment where all those willing and able to work at the prevailing wage rate are employed. Some frictional and structural unemployment may still exist.
G
GDP per capitaGDP divided by the total population. Used as an indicator of average living standards, though it does not show distribution of income.
GearingA measure of the proportion of a firm's capital that is financed through long-term borrowing compared to equity. High gearing means greater financial risk but may offer higher returns to shareholders.
Geocentric approachAn international marketing approach that takes a global perspective, developing strategies that balance standardisation with local adaptation to serve worldwide markets effectively.
Global supply chainA network of organisations, resources, and processes involved in the creation and delivery of a product across multiple countries, from raw materials to the final consumer.
GlobalisationThe increasing integration and interdependence of the world's economies through the growth of international trade, investment, and the spread of technology and cultural influences.
GlocalisationA business strategy that combines global standardisation with local adaptation, adjusting products, marketing, or operations to meet the specific needs and preferences of local markets.
Government failureWhen government intervention leads to a worse allocation of resources than the free market would have achieved, or creates new inefficiencies.
Government spendingSpending by the government on public services, infrastructure, and transfer payments. A component of aggregate demand (G).
Gross Domestic ProductThe total value of all goods and services produced within a country's borders in a given time period. The most common measure of national output.
Gross National IncomeGDP plus net income from abroad (income earned by domestic residents overseas minus income earned by foreign residents domestically).
Gross profit marginA profitability ratio calculated as gross profit divided by revenue, expressed as a percentage. It shows the proportion of revenue remaining after direct costs are deducted.
H
Herzberg's two-factor theoryA motivation theory distinguishing between hygiene factors (e.g. pay, conditions) that prevent dissatisfaction and motivators (e.g. achievement, recognition) that actively create satisfaction and motivation.
Human Development IndexA composite measure of development combining GNI per capita, life expectancy, and mean/expected years of schooling. Ranges from 0 to 1.
I
Income elasticity of demandA measure of the responsiveness of demand to a change in income. YED = % change in quantity demanded ÷ % change in income.
Income elasticity of demandA measure of the responsiveness of quantity demanded to a change in consumer income. Positive values indicate normal goods; negative values indicate inferior goods.
Indirect taxA tax placed on goods and services by the government, paid by producers but typically passed on to consumers through higher prices. E.g. VAT, excise duties.
Inferior goodA good for which demand decreases as consumer income rises, as consumers switch to better alternatives. It has a negative income elasticity of demand (YED < 0).
InflationA sustained increase in the general price level of goods and services over time, reducing the purchasing power of money.
InflationA sustained increase in the general price level of goods and services in an economy over time, reducing the purchasing power of money.
Information failureWhen economic agents do not have perfect knowledge, leading to a misallocation of resources. Consumers or producers may make sub-optimal decisions.
InjectionsAdditions to the circular flow of income that increase national income: investment (I), government spending (G), and exports (X).
Interest rateThe cost of borrowing money and the reward for saving. Set by the central bank as a tool of monetary policy.
Interest rateThe cost of borrowing money or the reward for saving, expressed as a percentage. Changes in interest rates affect consumer spending, business investment, and the exchange rate.
International competitivenessThe ability of a country's firms to compete successfully in global markets, influenced by factors such as productivity, exchange rates, costs of production, and innovation.
IntrapreneurshipEntrepreneurial behaviour within an existing organisation, where employees are encouraged to develop new ideas, products, or processes, acting as innovators inside the firm.
InvestmentSpending by firms on capital goods (machinery, equipment, buildings) that will be used to produce goods and services in the future.
Investment appraisalThe process of evaluating whether a proposed investment or project is worthwhile, using techniques such as payback period, average rate of return, and net present value.
J
Joint ventureA business arrangement where two or more firms agree to pool resources for a specific project or business activity while remaining separate entities. It allows risk and cost sharing.
Just-in-timeA lean production method where materials and components are delivered just as they are needed in the production process, reducing the need for stockholding and associated costs.
K
KaizenA Japanese philosophy of continuous improvement involving all employees in making small, incremental changes to processes, products, and systems to increase efficiency and quality over time.
L
Labour Force SurveyAn internationally standardised survey (ILO measure) that counts those without a job who have actively sought work in the past 4 weeks and are available to start.
Labour retentionThe ability of a business to keep its employees over time. High retention reduces recruitment and training costs and helps maintain organisational knowledge.
Law of demandAs the price of a good rises, the quantity demanded falls, and vice versa (ceteris paribus). This gives the demand curve its downward slope.
Law of supplyAs the price of a good rises, the quantity supplied rises, and vice versa (ceteris paribus). This gives the supply curve its upward slope.
Leadership stylesThe different approaches leaders use to direct, motivate, and manage their teams. Common styles include autocratic, democratic, paternalistic, and laissez-faire.
Lean productionAn approach to management that aims to minimise waste and improve efficiency at every stage of the production process while maintaining quality.
Lewin's Force Field AnalysisA change management model that identifies the driving forces (pushing for change) and restraining forces (resisting change) acting on a situation. Change occurs when driving forces outweigh restraining forces.
LiquidityThe ability of a business to meet its short-term financial obligations as they fall due. Common liquidity measures include the current ratio and acid test ratio.
Long-run aggregate supplyAggregate supply in the long run, which is vertical at the full employment level of output. Shows the economy's productive capacity.
M
Marginal propensity to consumeThe proportion of each additional pound of income that is spent on consumption. MPC = change in consumption ÷ change in income.
Marginal propensity to saveThe proportion of each additional pound of income that is saved rather than spent. MPS = change in savings ÷ change in income. MPC + MPS = 1.
Marginal utilityThe additional satisfaction gained from consuming one more unit of a good or service. It tends to diminish as consumption increases.
Market failureWhen the free market fails to allocate resources efficiently, resulting in a misallocation of resources and a loss of economic welfare.
Market growthThe percentage increase in the total size of a market over a given period. A growing market presents opportunities for new and existing firms to increase sales.
Market mappingA technique that positions products or brands on a grid using two key variables (e.g. price and quality) to identify gaps in the market and understand the competitive landscape.
Market orientationA business approach that prioritises identifying and meeting customer needs and wants through market research before developing or modifying products.
Market researchThe systematic gathering, recording, and analysing of data about customers, competitors, and the market. It includes primary research (original data) and secondary research (existing data).
Market shareThe proportion of total market sales held by one business or brand, usually expressed as a percentage. It indicates a firm's competitive position within the market.
Market sizeThe total volume or value of sales in a market over a given period. It can be measured by the number of units sold (volume) or total revenue generated (value).
Marketing strategyA long-term plan that outlines how a business will use its marketing mix to achieve its marketing objectives, taking into account market conditions and competition.
Maslow's hierarchy of needsA motivation theory proposing that human needs are arranged in five levels: physiological, safety, social, esteem, and self-actualisation. Lower-level needs must be met before higher-level needs motivate behaviour.
Mass marketThe largest segment of a market in which products with broad appeal are targeted at the majority of consumers. Mass markets benefit from economies of scale but face intense competition.
Maximum priceA legally imposed price ceiling set below the equilibrium price. Designed to make goods affordable but may cause excess demand and shortages.
MergerThe joining of two or more businesses of roughly equal size to form a new, single entity. Both firms agree to combine their operations and share ownership.
Merit goodA good that is under-consumed in a free market because consumers underestimate its private benefits, or it generates positive externalities. E.g. education, healthcare.
Minimum priceA legally imposed price floor set above the equilibrium price. Designed to protect producers' incomes but may cause excess supply.
Mission statementA brief, formal statement of the core purpose and values of a business. It communicates to stakeholders why the organisation exists and what it aims to achieve.
Mixed economyAn economic system combining elements of both free market and government intervention in the allocation of resources.
Monetary policyThe use of interest rates, money supply, and exchange rates by the central bank to influence aggregate demand. Expansionary = lower interest rates.
Moral hazardWhen one party takes greater risks because they know another party bears the cost. E.g. insured drivers being less careful.
Multinational corporationA large company that operates in multiple countries, with production or service facilities outside its country of origin. MNCs benefit from economies of scale, access to new markets, and lower costs.
Multiplier effectWhen an initial injection into the economy leads to a larger final increase in national income. The multiplier = 1 / (1 - MPC) or 1 / MPW.
N
National debtThe total amount of money owed by the government, accumulated from past budget deficits. Different from the annual budget deficit.
Negative externalityA cost imposed on third parties not involved in the economic transaction. E.g. pollution from a factory affecting local residents.
Net exportsThe value of a country's exports minus the value of its imports (X - M). Positive net exports add to aggregate demand.
Net present valueAn investment appraisal method that calculates the total present value of future cash flows minus the initial investment, using a discount rate to account for the time value of money. A positive NPV suggests the investment is worthwhile.
Net profit marginA profitability ratio calculated as net profit divided by revenue, expressed as a percentage. It shows the proportion of revenue remaining after all costs, including overheads, have been deducted.
Niche marketA small, specialist segment of a larger market where a business targets a specific group of customers with particular needs. Niche markets tend to have less competition but a smaller customer base.
Nominal GDPGDP measured at current prices without adjusting for inflation. Also called money GDP. Can overstate actual growth during inflationary periods.
Normal goodA good for which demand increases as consumer income rises. It has a positive income elasticity of demand (YED > 0).
Normative statementA subjective statement based on opinion or value judgements that cannot be tested. Often contains "should" or "ought". E.g. "The government should reduce taxes."
O
OffshoringThe relocation of a business process or operation from one country to another, typically to take advantage of lower labour costs, favourable regulations, or proximity to new markets.
Opportunity costThe value of the next best alternative foregone when a choice is made. It represents the real cost of any decision.
Organic growthInternal growth achieved by a business expanding its own operations, such as increasing output, opening new stores, or developing new products, rather than through mergers or takeovers.
Organisational structureThe way in which a business arranges its staff and management into a hierarchy, defining roles, responsibilities, and lines of communication and authority.
Output gapThe difference between actual GDP and potential GDP. A positive gap means the economy is overheating; a negative gap means spare capacity exists.
OverdraftA flexible, short-term source of finance that allows a business to withdraw more money from its bank account than it currently holds, up to an agreed limit. Interest is charged on the amount overdrawn.
P
Payback periodThe length of time it takes for an investment to generate enough net cash inflows to recover its initial cost. Shorter payback periods are generally preferred as they reduce risk.
Penetration pricingA pricing strategy where a low price is set when a product is first launched to attract customers and gain market share quickly, with the price raised later once established.
Polycentric approachAn international marketing approach where each foreign market is treated as unique, with products, pricing, and promotion adapted to local tastes, customs, and conditions.
Porter's Generic StrategiesA framework identifying three main strategies for achieving competitive advantage: cost leadership (lowest cost producer), differentiation (unique product), and focus (targeting a narrow market segment).
Positive externalityA benefit received by third parties not involved in the economic transaction. E.g. vaccination reducing disease spread to unvaccinated people.
Positive statementAn objective, factual statement that can be tested and verified or falsified with evidence. E.g. "Inflation is 3%."
Potential outputThe maximum level of output an economy can sustain without generating inflationary pressure. Determined by the quantity and quality of factors of production.
Price elasticity of demandA measure of the responsiveness of quantity demanded to a change in price. PED = % change in quantity demanded ÷ % change in price.
Price elasticity of demandA measure of the responsiveness of quantity demanded to a change in price. Calculated as the percentage change in quantity demanded divided by the percentage change in price.
Price elasticity of supplyA measure of the responsiveness of quantity supplied to a change in price. PES = % change in quantity supplied ÷ % change in price.
Price mechanismThe system by which changes in price allocate scarce resources through three functions: rationing, signalling, and incentivising.
Price skimmingA pricing strategy where a high price is initially set for a new or innovative product and then gradually lowered over time as competition increases or the novelty diminishes.
Private benefitThe benefit of an economic activity received by the individual or firm directly involved in the transaction.
Private costThe cost of an economic activity borne by the individual or firm directly involved in the transaction.
Producer surplusThe difference between the price a producer receives and the minimum price they would be willing to accept. Shown as the area above the supply curve and below the market price.
Product differentiationThe process of making a product distinct from competitors through design, branding, quality, or features, giving consumers a reason to choose it over alternatives.
Product life cycleThe stages a product passes through from its introduction to decline: development, introduction, growth, maturity, and decline. Each stage has different marketing and cash-flow implications.
Product orientationA business approach that focuses on the production process and the quality of the product itself, rather than on identifying and responding to customer needs.
Production possibility frontierA curve showing the maximum possible combinations of two goods that can be produced with available resources. Points inside are inefficient; points outside are unattainable.
PromotionThe methods a business uses to communicate with customers and persuade them to buy its products, including advertising, sales promotion, personal selling, public relations, and digital marketing.
ProtectionismGovernment policies that restrict or restrain international trade to protect domestic industries from foreign competition. Methods include tariffs, quotas, subsidies, and regulations.
Public goodA good that is non-excludable (cannot prevent non-payers from using it) and non-rivalrous (one person's use does not reduce availability for others). E.g. street lighting, national defence.
Q
Quality managementA systematic approach to ensuring that products or services consistently meet or exceed customer expectations, through methods such as TQM, quality circles, and benchmarking.
QuotaA physical limit placed on the quantity of a particular good that can be imported into a country over a given period, restricting foreign competition.
R
Ratio analysisThe use of financial ratios to assess a firm's performance in areas such as profitability, liquidity, and gearing. Ratios are most useful when compared over time or against competitors.
Real GDPGDP adjusted for inflation, giving a more accurate picture of actual output changes over time. Measured at constant prices.
RecessionTwo or more consecutive quarters of negative economic growth (falling real GDP). Associated with rising unemployment and falling living standards.
RecruitmentThe process of attracting and identifying suitable candidates for a job vacancy. It can be internal (within the firm) or external (outside the firm).
RegulationGovernment rules and laws that control the behaviour of firms and individuals. E.g. pollution limits, minimum wage, product standards.
ReshoringThe process of bringing business operations or manufacturing back to the company's home country, often driven by rising overseas costs, quality concerns, or a desire for shorter supply chains.
RevenueThe total income a business receives from selling its goods or services over a given period. Calculated as selling price multiplied by quantity sold.
S
ScarcityThe fundamental economic problem: unlimited wants exceed finite resources, forcing choices to be made about how to allocate resources.
Scenario planningA strategic planning method in which managers create and analyse multiple plausible future situations to prepare the business for different outcomes and reduce the impact of uncertainty.
Short-run aggregate supplyAggregate supply in the short run, which slopes upward as firms respond to higher prices by increasing output. Shifts when input costs change.
SMART targetsObjectives that are Specific, Measurable, Achievable, Realistic, and Time-bound. Setting SMART targets helps ensure goals are clear and progress can be tracked.
Social benefitThe total benefit of an economic activity, including both private benefits and external benefits. Social benefit = private benefit + external benefit.
Social costThe total cost of an economic activity, including both private costs and external costs. Social cost = private cost + external cost.
Sources of financeThe various methods a business can use to raise money, broadly classified as internal (e.g. retained profit, sale of assets) or external (e.g. bank loans, share capital, venture capital).
Span of controlThe number of subordinates that a manager directly supervises. A wide span means more subordinates; a narrow span means fewer, allowing closer supervision.
SpecialisationWhen individuals, firms, or countries concentrate on producing a limited range of goods in which they have an advantage, increasing efficiency and output.
StakeholderAny individual or group that has an interest in or is affected by the activities of a business, including employees, customers, shareholders, suppliers, the government, and the local community.
Stakeholder conflictA situation where the interests of different stakeholder groups clash, requiring the business to prioritise or compromise between competing demands.
Stock controlThe management of inventory levels to ensure a business holds enough stock to meet demand without incurring excessive storage costs or risking stockouts.
Structural unemploymentUnemployment caused by a mismatch between workers' skills and the skills demanded by employers, often due to changes in the structure of the economy.
SubsidyA payment by the government to producers to lower costs of production, encourage output, and reduce the market price. Shifts the supply curve to the right.
Substitute goodA good that can be used in place of another. A rise in the price of one leads to an increase in demand for its substitute (positive XED).
SupplyThe quantity of a good or service that producers are willing and able to offer for sale at a given price in a given time period.
SupplyThe quantity of a good or service that producers are willing and able to offer for sale at a given price in a given time period.
Supply-side policyGovernment policies aimed at increasing the productive capacity of the economy (shifting LRAS right). E.g. education, deregulation, tax reform.
SWOT analysisA strategic planning tool that evaluates a firm's internal Strengths and Weaknesses and external Opportunities and Threats, used to inform decision-making and strategy formulation.
T
TakeoverThe acquisition of one company by another, often by purchasing a controlling share of its stock. Takeovers can be friendly (agreed) or hostile (opposed by the target firm's board).
TariffA tax imposed on imported goods, raising their price to make them less competitive compared to domestically produced alternatives. Tariffs are a common form of protectionism.
TaxationCompulsory payments levied by the government on individuals and businesses. Direct taxes (e.g. income tax, corporation tax) are charged on income or profit; indirect taxes (e.g. VAT) are charged on spending.
Taylor's scientific managementA management theory proposing that workers are primarily motivated by money and that productivity is maximised by breaking tasks into small, repetitive steps, closely supervising workers, and offering piece-rate pay.
Total quality managementA management philosophy where quality is the responsibility of every employee in the organisation, not just the quality control department. It involves continuous improvement at all levels.
Tradable permitsGovernment-issued permits allowing firms to pollute a set amount. Firms can buy and sell permits, creating a market-based incentive to reduce pollution.
Trade creditAn arrangement where a supplier allows a business to receive goods or services now and pay for them at a later date, typically 30 to 90 days, providing short-term finance.
Trade deficitWhen the value of a country's imports exceeds the value of its exports, resulting in a negative balance of trade.
Trade liberalisationThe removal or reduction of government restrictions on international trade, such as tariffs and quotas, to encourage the free flow of goods and services between countries.
Trade surplusWhen the value of a country's exports exceeds the value of its imports, resulting in a positive balance of trade.
TrainingThe process of improving employees' skills and knowledge to help them perform their jobs more effectively. Types include on-the-job training, off-the-job training, and induction.
Transfer pricingThe pricing of goods, services, or assets transferred between divisions of the same multinational corporation, often set to minimise tax liabilities across different jurisdictions.
U
UnemploymentWhen people who are willing and able to work at the prevailing wage rate cannot find employment.
Unique selling pointA feature or characteristic that distinguishes a product or service from its competitors and provides a clear reason for customers to buy it. Also known as a USP.
UtilityThe satisfaction or benefit a consumer derives from consuming a good or service.
V
Variable costsCosts that change in direct proportion to the level of output, such as raw materials and piece-rate labour. Total variable costs rise as production increases.
Variance analysisThe process of calculating and investigating the differences between budgeted figures and actual results. Favourable variances are better than expected; adverse variances are worse.
Venture capitalFinance provided by specialist investors to businesses with high growth potential in exchange for an equity stake. It involves high risk but offers both funding and expertise.
W
WithdrawalsLeakages from the circular flow of income that reduce national income: savings (S), taxation (T), and imports (M). Also called leakages.