Glossary of IB Economics Terms

To excel in IB Economics, students need to have a good understanding of Economics Terminology. This is can be rather daunting for most students. In this page, we created a glossary of IB Economics terms to help students search for Economics definitions in just a few clicks. We hope you will find this tool useful.

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IB Economics Terms

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There are currently 5 names in this directory beginning with the letter P.

Production possibilities curve (or frontier or boundary)

Shows the maximum amount of good Y an economy is able to produce for each amount of X it chooses to produce if it fully and efficiently employs all of its scarce resources with its given level of technology.

Productive Efficiency

When production takes place with minimum average (unit) costs, implying that production takes place with minimal resource waste.

Profit Maximisation

The assumed goal of the typical firm; firms will choose that level of output for which economic profits are maximum, which requires at marginal revenue is equal to marginal cost and that marginal cost is rising.

Public goods

Goods which are non-excludable and non-rival. Since they are non-excludable consumers have the incentive to conceal their preferences and behave as tree riders. Public goods are a case of market failure and typical examples include national defense, traffic lights, lighthouses, etc

Purchasing power parity (PPP) theory

A theory of long –run equilibrium exchange rate determination: in the absence of trade barriers, transportation costs and cross-border capital flows and if all goods were tradable then the market exchange rate would gravitate towards its PPP value, i.e. it would reflect cost-of-living differences.