Archives: Terms

Definition of Pre-Tax Profits Pre-tax profits, also known as earnings before taxes (EBT), refer to the income earned by a business or individual before accounting for income tax expenses. This figure indicates the profitability of a business from its core operations plus any additional income but before subtracting the fiscal […]

Definition of Pre-commitment Pre-commitment refers to the strategy or action of committing oneself to a course of action ahead of time to achieve a specific goal or outcome. This approach typically involves making decisions that bind oneself or limit future choices to ensure that certain objectives are met. Pre-commitment strategies […]

Definition of Purchasing Power Parity (PPP) Purchasing Power Parity (PPP) is an economic theory that compares different countries’ currencies through a “basket of goods” approach. According to this theory, two currencies are in equilibrium (at par) when a basket of goods is priced the same in both countries, taking into […]

Definition of Power of a Test The power of a test in statistics is the probability that the test will reject a false null hypothesis. Essentially, it measures a test’s ability to detect an effect when there is one. The power of a test is denoted as 1 – β […]

Definition of Market Power Market power refers to the ability of a firm, or a small group of firms, to influence the price and output of goods or services within a particular market. Essentially, it describes a firm’s capacity to set prices above the competitive level without losing customers to […]

Definition of Poverty Poverty is defined as the state in which an individual or group lacks the financial resources and essentials for a minimum standard of living. It means having insufficient income to acquire the basic needs such as food, shelter, clothing, and healthcare. Poverty is both a social and […]

Definition of Pound The term “pound” can refer to different things depending on the context. Predominantly, it is known as a unit of currency or a unit of weight measurement. The pound sterling (GBP) is the official currency of the United Kingdom and its territories. Additionally, a pound (lb) is […]

Definition of Potential Output Potential output, also known as potential GDP, refers to the highest level of economic output that a country can sustain over the long term without causing inflation. It represents the productive capacity of an economy when all resources—labor, capital, and technology—are used efficiently. Essentially, potential output […]

Definition of Potential Competition Potential competition refers to the threat or possibility that new competitors may enter a particular market and challenge the existing firms. Unlike actual competition where companies are already in the market and actively competing, potential competition involves firms that are not yet present but have the […]

Definition of Posterior In economics and statistical analysis, the term “posterior” refers to the updated probability distribution of an uncertain parameter after observing new data. It is a fundamental concept in Bayesian statistics, where the “prior” represents the initial beliefs about a parameter before observing any data, and the “posterior” […]