Small Simple Dictionary of Economics (Part 7 of 8)

Economics, like other sciences and arts, has its own language. Without knowledge of this language, it is very difficult to understand economics. This has stopped many from following local, national and international economic developments. When I mention that economics is my field of interest, it often creates a sense of uneasiness since, unlike politics and sports, where almost everyone has an opinion, no one has much to say, and the conversation quickly changes to other things. This is unfortunate because economics is everywhere and is one of the most important factors in our lives. It touches almost every activity we undertake. But also, it isn’t easy to have an economics dictionary handy, so I explain about 200 common economic terminologies in a simple way. For some, it may be overly simplified; if that is the case, they can always refer to the Oxford Dictionary of Economics.
Open economy: an economy in which there are economic activities between the domestic community and the outside.

Ordinary share: a form of corporate equity ownership, a type of security. The terms “voting share” or “ordinary share” are also used frequently in other parts of the world; “common stock” is used mainly in the United States.

Organization of Petroleum Exporting Countries (OPEC): a permanent, international organization headquartered in Vienna, Austria, was established in 1960. Its mandate is to coordinate and unify the petroleum policies of its members and to ensure the stabilization of oil markets in order to secure an efficient, economical and regular supply of petroleum to consumers, a steady income to producers, and a fair return on capital for those investing in the petroleum industry.

Paper profit: unrealized capital gain in an investment. It is calculated by comparing the market price of a security to the original purchase price. Gains only become realized when the security is sold.

Peak pricing: a form of congestion pricing where customers pay an additional fee during periods of high demand. Peak pricing is most frequently implemented by utility companies, who charge higher rates during times of the year when demand is the highest.

Pension funds: a fund from which pensions are paid, accumulated from contributions from employers, employees, or both.

Perfect competition: the opposite of a monopoly, in which only a single firm supplies a particular good or service, and that firm can charge whatever price it wants. Here, many firms compete with each other, leading to lower prices for consumers.

Planned economy: the economic system in which decisions regarding production and investment are made by a central authority, usually by a government agency. Thus it may be termed a “command economy.”

Price system: a component of any economic system that uses prices expressed in any form of money for the valuation and distribution of goods and services and the factors of production.

Prime rate: the lowest rate of interest at which money may be borrowed commercially.

Private sector: that part of the economy, sometimes referred to as the citizen sector, which is run by private individuals or groups, usually as a means of enterprise for profit, and is not controlled by the state (areas of the economy controlled by the state being referred to as the public sector).

Profit-sharing: a system in which the people who work for a company receive a direct share of the profits.

Progressive tax: a tax in which the tax rate increases as the taxable amount increases. The term “progressive” refers to the way the tax rate progresses from low to high.

Promissory note: a signed document containing a written promise to pay a stated sum to a specified person or the bearer at a specified date or on demand.

Public company: a company with securities (equity and debt) owned and traded by the general public through the public capital markets. Shares of a public company are openly traded and widely distributed.

Public expenditure: spending made by the government of a country on collective needs and wants such as pensions, provisions, infrastructure, etc. Until the 19th century, public expenditure was limited as laissez-faire philosophies believed that money left in private hands could bring better returns.

Public finance: the study of the role of the government in the economy. The branch of economics assesses the government revenue and government expenditure of the public authorities and the adjustment of one or the other to achieve desirable effects and avoid undesirable ones.

Public sector: the public sector is the part of the economy concerned with providing various government services.

Public utility: an organization that maintains the infrastructure for a public service (often also providing a service using that infrastructure). Public utilities are subject to forms of public control and regulation ranging from local community-based groups to statewide government monopolies.

Purchase tax: a sales tax on nonessential and luxury goods.