Key Concepts

The price paid for the use of borrowed capital. Out of the revenue a firm earns by selling its output, the part that goes to capital for its ser …

The price at which labour services are bought and sold in the market. Labour that is sold and purchased against a wage …

The part of a firm's sale revenue that remains after paying rent to land, interest to capital and wages to labour. It is the earning of the entrepreneur, who bear …

Individuals or institutions that take economic decisions. They include consumers deciding what and how much to consume, producers deciding what and how much to produce, and entities such as the government, corporations and banks deciding how much to spend …

The severe worldwide economic downturn that began in 1929, when output and employment in Europe and North America fell by huge amounts. It exposed the weaknesses of classical economics and provided the inspiration for Keynes's …

The number of people who are not working but are looking for jobs, divided by the total number of people who are either worki …

The four resources combined to produce goods and services: land, labour, capital and entrepreneurship. Each earns an income for its services — rent, wages, inte …

The productive assets used to produce goods and services — factories, machinery, land and other resources. In a capitalist economy these are owned privately, by individuals or firms, rather t …

The resources a firm hires and combines in the process of production — labour, capital and land. After hiring these inputs, the entrepreneur undertakes t …

The natural resources used in production — partly consumed in the process (such as raw materials) and partly fixed (such as plots of land). For its …

The human effort used to carry out production. It is the most important element the entrepreneur needs, is bought and sold in the market at a wage, and e …

The funds and man-made productive assets needed to run an enterprise, which the entrepreneur may supply personally or borrow. For its service …

The function performed by the entrepreneur — the person who exercises control over the major decisions of a firm, bears a large part of its risk and uncertainty, organises the other factors of produ …

Spending by producers on new machinery or new factories that raises the productive capacity of the economy. Profits are often used in the next period for such investment so t …

Labour that is sold and purchased against wages — that is, the sale and purchase of labour services at a price called the wage rate. It is one of the defining feat …

An economy in which most economic activities have private ownership of the means of production, production takes place for selling the output in the market, and there is sale and purchase of labour se …

Production units organised along capitalist lines, in which the entrepreneur hires wage labour, capital and land, undertakes production, and sells the output in the market to earn profit whil …

Production units run according to capitalist principles — using privately owned means of production and wage labour to produce output for sale …

The goods and services a firm produces by combining its inputs, with the aim of selling th …

A single individual, or a group of individuals whose consumption decisions are taken jointly. Households supply labour and other factors to firms and the government and earn wages, salaries, profits, rent and interest; they also save and pay taxes, and their dema …

The State, referred to in this book as the Government. It frames and enforces laws, delivers justice and undertakes production, and it imposes taxes and spends on public infrastructure and services such a …

The fourth major sector of the economy, covering a country's transactions with the rest of the world — exports, imports, and inflows or outflows of capital between the domesti …

Goods and services that the domestic country sells to the rest o …

Goods and services that the domestic economy buys from the rest o …