Economic Terms

Is when a counterparty in a financial transaction fails to meet the obligations set aside in a loan contract by failing to pay the principal of the loan or the accompanying interest payments. NPLs are norally an indicator of how badly the bank is performing and therefore how exposed to risks and losses it is. However, what is classed as an NPL greatly depends on the location of the bank used. According to the BASLE Capital Accord “A loan is nonperforming when payments of interest and principal are past due by 90 days or more."

This is when firms engage in efforts other than reducing prices to attract consumers. This is because normally firms in an oligopoly face a kinked-demand curve, in which reducing prices will not allow oligopolists to capture the entire market. Therefore by distinguishing their product from rival's they will be able to set the profit maximising price without the fear of retaliation from rivals.

Below is an expample of how the chocolate maker Cadbury's tries to distinguish itself from a heavily saturated market without becoming embroiled in a destructive price war. It has a three-tiered system where the products must be visually and functinally different from other chocolate bars on the market As well as an alternative form of branding and service provision.

The full employment level of real output identified by the position of the vertical LRAS curve.

Below is a diagram to ilustrate this point for an economy. This is the point at which an economy is on track to achieve its potential growth as all resources in the economy are being utilised.

 

The demand for this type of good increases as income rises. The opposite of an inferior good.

Below is a diagram to show the demand curve for a normal good and how the demand curve changes to changes in income. If the real income increases this causes the demand for normal goods to rise, this is because consumers have a large amount of income to buy the goods that they wish to purchase. A decrease in real income will cause the demand curve to shift in as consumers have to switch to inferior goods as their ability to purchase normal goods is reduced.

The demand for this type of good increases as income rises. The opposite of an inferior good.

Below is a diagram to show the demand curve for a normal good and how the demand curve changes to changes in income. If the real income increases this causes the demand for normal goods to rise, this is because consumers have a large amount of income to buy the goods that they wish to purchase. A decrease in real income will cause the demand curve to shift in as consumers have to switch to inferior goods as their ability to purchase normal goods is reduced.

When the difference between a firm's total revenue and total cost is equal to zero. Therefore, this is the minimum level of profit needed for a company to remain competitive in the market.

The diagram below shows how an individual firm breaks even by charging a price equal to their average cost of production and therefore firm's do not get to enjoy any supernormal profit.

A statement concerning an economic issue that is based on a value judgement rather than factual evidence. Such statements are simply matters of opinion and cannot be proven or disproved.

A small action taken by the government to try and nudge people towards a certain course of action. Therefore this concept argues that positive reinforcement and indirect suggestions to try to achieve non-forced compliance can influence the motives, incentives and decision making of groups and individuals, at least as effectively – if not more effectively – than direct instruction, legislation, or enforcement.