Archives: Terms

Definition of Accounting Profit Accounting Profit is defined as total revenue minus total explicit costs. That means it only considers costs that reduce the account balance, such as variable costs and fixed costs. It does not take into account any implicit costs, such as opportunity costs. Example To illustrate this, […]

Definition of Absolute Poverty Absolute poverty is defined as a state of extreme deprivation in which people lack the basic necessities of life, such as food, shelter, and clothing. That means it is a measure of poverty that is based on the absolute minimum amount of resources needed to survive. […]

Definition of Absolute Advantage Absolute Advantage is defined as the ability of an individual, company, or country to produce a good or service at a more efficiently than its competitors. That means it is the ability to produce more of a good or service with the same amount of resources […]

Definition of Abnormal Profit Abnormal Profit is defined as the profit earned by a firm that is above and beyond the normal rate of return. That means it is the profit earned by a firm that is higher than the average rate of return for firms in the same industry. […]

Definition of the Ability-to-Pay Principle The ability-to-pay principle is an economic concept that states that taxes should be levied according to the taxpayer’s ability to pay. That means the amount of taxes an individual or business pays should be based on their available financial resources. This principle is often used […]

Definition of Money Market The money market is a financial market where short-term debt instruments are traded, usually between commercial banks or other financial institutions. That means it is a market for borrowing and lending money for up to one year. These instruments include Treasury bills, commercial paper, certificates of […]

Definition of Property Rights Property Rights are the legal rights of individuals or organizations to own, use, and transfer property. That means they are the legal rules determining who has the right to use, control, and benefit from a particular asset. These rights can be established by law, custom, or […]

Definition of Negative Income Tax A Negative Income Tax (NIT) is a system of taxation where people with low incomes receive payments from the government instead of paying taxes. That means it is a type of income supplement paid to people who earn below a certain threshold, funded by those […]

Definition of Poverty Rate The poverty rate is defined as the percentage of people living below the poverty line. That means it is the proportion of people in a given population who cannot meet their basic needs for food, clothing, and shelter. Example To illustrate this, let’s look at the […]