Economics beyond the syllabus.

There is never enough of everything to satisfy every want, so choices have to be made.

It is the reason economics exists at all. With unlimited resources there would be nothing to allocate.

A school has one sports hall. Netball and drama both want Tuesday evening; someone has to decide.

The value of the next best thing you gave up in order to do what you chose.

The real cost of a decision is rarely the money. It is what that money, time or effort could otherwise have done.

A degree costing £9,535 a year also costs three years of salary you did not earn. That forgone salary is the bigger number.

Anything that changes the payoff of a choice and so changes how likely someone is to make it.

Almost every economic argument is really an argument about incentives. Change the payoff and behaviour follows.

Charging 5p for a carrier bag cut English usage dramatically — not because people learned anything, but because the payoff changed.

The extra cost of producing exactly one more unit.

Firms decide at the margin, not on averages. The question is never 'is this profitable overall' but 'is one more worth it'.

A cinema showing a film has almost zero marginal cost for one more viewer — the film is already running.

The extra benefit from one more unit of something.

Rational decisions happen where marginal benefit meets marginal cost — not where total benefit is highest.

The first slice of pizza is worth a lot to you. The sixth is worth much less. That decline is diminishing marginal benefit.

How strongly one thing responds when another thing changes.

It converts a vague claim ('people will buy less') into a number you can act on.

If a 10% price rise cuts sales 20%, elasticity is −2: demand is highly responsive.

The percentage change in quantity demanded divided by the percentage change in price.

It decides whether raising a price raises or lowers total revenue.

Petrol is inelastic in the short run — prices jump and people still drive to work.

How much demand for something changes when incomes change.

It separates the goods people buy more of as they get richer from the ones they abandon.

Restaurant meals rise sharply with income. Supermarket own-brand value ranges fall.

How demand for one good responds to a price change in another good.

It reveals whether two products are substitutes or complements — which decides who your competitors really are.

Raise the price of Coke and Pepsi sales rise: positive cross elasticity, so they are substitutes.

The gap between what you would have been willing to pay and what you actually paid.

It measures the benefit buyers get from a market existing, not just the money that changes hands.

You would have paid £80 for the concert ticket. It cost £45. Your surplus is £35.

The gap between the price a seller receives and the lowest price they would have accepted.

Together with consumer surplus it measures the total gain a market creates.

A farmer would sell at £2/kg but the market pays £3/kg. That £1 is producer surplus.

Value that simply disappears when a market produces less than the efficient quantity — gained by nobody.

It is how economists measure the cost of a tax, a monopoly or a price control.

A monopolist restricts output to raise price. The trades that never happen are pure loss.

When a free market, left alone, produces an outcome that wastes resources.

It is the economic case for government action — and the test any intervention has to pass.

Nobody would privately fund street lighting, yet everyone benefits from it.

A cost or benefit that lands on someone who was not part of the transaction.

Prices only guide behaviour well when they include every cost. Externalities are the costs prices miss.

A factory's emissions harm people downwind who never bought anything from it.

Something non-rival (my using it does not reduce yours) and non-excludable (you cannot stop people using it).

These two properties break the normal market: nobody can profitably sell what nobody can be excluded from.

National defence. Flood barriers. A lighthouse.

Something considered more valuable than people's own choices suggest, so society encourages consumption.

It is one of the few places economics openly overrides individual preference — which makes it contested.

Education and vaccination are usually subsidised or compulsory.

One side of a deal knows something important that the other side does not.

It can shrink or destroy a market entirely, even when both sides genuinely want to trade.

A used-car seller knows the car's history. You do not.

When hidden information *before* a deal means the wrong people are most likely to take it.

It explains why some markets unravel: the good side quietly exits until only the bad side remains.

Cheap health insurance attracts the people expecting to claim, pushing the price up, driving out the healthy.

When being protected from a risk changes how carefully you behave.

It is about hidden action *after* a deal, not hidden information before it — the two are easy to confuse.

Fully insured, you might leave the bike unlocked for two minutes. Uninsured, you would not.

The study of decisions where your best move depends on what other people do.

Supply and demand assumes you are too small to matter. Game theory handles the cases where you are not.

Two supermarkets setting prices are playing a game, not responding to an anonymous market.

A set of strategies where no player can do better by changing their own strategy alone, given what everyone else is doing.

It predicts where strategic situations settle. Crucially it does not mean the outcome is good for anyone.

Both firms cut prices and both earn less — but neither can raise price alone without losing all its customers.

A move that gives you a better result than your alternatives no matter what the other player does.

When one exists the decision is easy — which is exactly what makes some bad outcomes so hard to escape.

In the classic prisoner's dilemma, confessing beats staying silent whatever the other prisoner does.

A game where both players have a dominant strategy, and both following it leaves both worse off than cooperating would have.

It shows individually rational choices producing a collectively terrible result — with no irrationality anywhere.

Two petrol stations both discount, both lose margin, and neither dares stop first.

Everything you could actually choose, given your money, time and constraints.

Most disagreements about 'bad decisions' are really disagreements about what was in the set.

Two students face the same university list but different opportunity sets once travel costs are counted.

A way of ranking outcomes by how much someone prefers them.

It is a ranking, not a measurement — utility is not happiness and cannot be compared between people.

Preferring tea to coffee means tea has higher utility for you. It says nothing about how much you enjoy it versus someone else.

The assumption that people choose the option they most prefer, given what they know and can afford.

It is a modelling starting point, not a claim about human nature — and knowing that is the whole point of behavioural economics.

Rational choice predicts you compare prices. It does not predict you being swayed by which one is listed first.

People try to decide sensibly but have limited time, attention and computing power, so they use shortcuts.

It is a middle path: not perfectly rational, not random. Predictably imperfect.

Nobody reads all 40 pages of the terms. You skim, then accept.

Losing something feels roughly twice as bad as gaining the same thing feels good.

It explains behaviour that looks irrational — holding losing investments, refusing fair bets — as a consistent pattern.

Losing £50 stings more than finding £50 pleases, though the amounts are identical.

An irrelevant number you saw first drags your later estimate towards it.

It means the order information arrives changes the answer — which is why 'was £120, now £60' works.

Shown a £900 watch first, the £300 one feels reasonable. Shown alone, it feels expensive.

Placing disproportionate weight on rewards available right now compared with later ones.

It explains the gap between what people plan and what they do, without either being irrational at the time.

You plan to revise on Saturday. On Saturday, today wins.

A change to how choices are presented that shifts behaviour without removing any option or changing payoffs.

It is the practical output of behavioural economics — and controversial precisely because it works without consent.

Auto-enrolment into a workplace pension. You may opt out; almost nobody does.

Economics that builds in how people actually decide, rather than assuming perfect rationality.

It does not say people are stupid. It says the errors are systematic, so they can be predicted and designed for.

Knowing people undervalue the future, pensions are opt-out rather than opt-in.

A product becomes more valuable to each user as more people use it.

It produces winner-takes-most markets, because the leader's advantage compounds rather than eroding.

A messaging app with two users is useless. With everyone you know, it is hard to leave.

Average cost per unit falls as output rises.

It explains why some industries end up with a few huge firms rather than many small ones.

A chip factory costs billions whether it makes one chip or a billion. Volume spreads the fixed cost.

Beyond some size, average cost per unit starts rising again.

It sets a natural limit on firm size — coordination, communication and management get harder.

A company big enough to need four layers of approval to change a price.

Anything that makes it hard for a new firm to start competing.

Profits only attract competitors if entry is possible. Barriers are what let high profits persist.

Banking licences, patents, huge upfront capital, or an established network of users.

The ability to raise price above marginal cost without losing all your customers.

It is the practical definition of 'not a competitive market', and the thing competition regulators measure.

A train operator on a route with no alternative can price well above cost.

Many firms selling similar but not identical products, each with a little pricing power.

It describes most of the real economy far better than either perfect competition or monopoly.

Coffee shops. Dozens nearby, but yours is closer, or nicer, or knows your order.

A market dominated by a few firms, each large enough that its decisions affect the others.

This is where game theory becomes essential — rivals must think about each other explicitly.

UK supermarkets, mobile networks, or the handful of firms running airline routes.

A market with one dominant *buyer* rather than one dominant seller.

It is the overlooked half of market power, and it pushes prices and wages down rather than up.

A town where one large employer is realistically the only place to work.

Charging different customers different prices for essentially the same thing.

It converts consumer surplus into producer surplus — and can also let firms serve customers they otherwise could not.

Student railcards, airline seats priced by booking date, cinema concession tickets.

The informed side takes a costly action that credibly communicates what it knows.

For a signal to work it must be cheaper for the good type than the bad type. Otherwise everyone would send it.

A hard degree may signal ability partly because finishing it is harder for weaker candidates.

The *uninformed* side designs choices that make people reveal what they know.

It is signalling in reverse, and it explains a lot of contract and product design.

Insurance offering a low-premium/high-excess option that only confident low-risk drivers pick.

Someone makes decisions on your behalf but does not share your interests or bear your consequences.

It underlies corporate governance, employment contracts, politics and most bonus schemes.

Shareholders want long-run value; a manager paid on this year's profit may not.

The costs of making a deal happen: finding, negotiating, checking and enforcing.

They explain why firms exist at all — sometimes organising inside a company is cheaper than buying in a market.

Hiring an employee rather than renegotiating a contract with a freelancer every morning.

Spending resources to capture a bigger slice of existing value rather than creating new value.

It is costly even when it fails, because the effort produced nothing either way.

Lobbying for a rule that blocks competitors, rather than improving the product.

Growth works by new methods destroying old ones, not by everything improving gently.

It reframes disruption as the mechanism of progress rather than a failure of it — while being honest that people lose.

Streaming displaced DVD rental entirely. The gains and the job losses were the same process.

The skills, knowledge and health that make a person more productive.

It treats education and training as investment with a return, not consumption.

An apprenticeship raises lifetime earnings — that increase is the return on the capital built.

Output produced per unit of input, usually per hour worked.

Over the long run it is essentially the only thing that raises living standards.

One farmer feeding hundreds rather than a family is a productivity story.

The part of output growth not explained by adding more labour or more capital.

It is the residual where technology, know-how and organisation hide — and the hardest part to raise.

Same workers, same machines, better process: output rises. That is TFP.

The total market value of everything produced inside a country in a period.

It is the headline measure of an economy's size — and it deliberately ignores unpaid work, inequality and depletion.

A volunteer-run food bank adds real value but almost nothing to GDP.

GDP adjusted so that price changes are stripped out.

It answers whether more was actually produced, rather than whether prices simply rose.

If output is flat and prices rise 5%, nominal GDP grows and real GDP does not.

GDP measured at current prices, with inflation left in.

Confusing nominal with real is one of the most common — and most misleading — errors in economic reporting.

A country reporting 8% nominal growth with 7% inflation grew about 1% in reality.

A sustained rise in real output, usually measured per person.

Small differences compound: 1% versus 3% a year transforms living standards within a generation.

At 2% growth an economy roughly doubles in 35 years; at 1%, in 70.

A general rise in prices across the economy, which lowers what each pound buys.

It quietly redistributes: bad for savers and lenders, good for borrowers with fixed-rate debt.

At 5% inflation, £100 under the mattress buys about £95 worth of goods a year later.

A general fall in prices.

It sounds appealing and is usually dangerous: people delay purchases, and the real burden of debt rises.

If prices will be lower next year, buying the sofa now is the worse deal — so nobody does.

People who are out of work, available to work, and actively looking.

The definition matters: those who have stopped looking are not counted, which can flatter the figure.

Someone who gave up searching after a year leaves the count without finding a job.

The unemployment that remains even in a healthy economy, from people moving between jobs and skills not matching vacancies.

It implies zero unemployment is neither achievable nor desirable as a target.

A graduate spending two months choosing between offers is part of it.

Total spending on domestic goods and services: households, firms, government and net exports.

Most short-run policy — rate cuts, tax changes, stimulus — works by shifting it.

A tax cut leaves households more to spend, pushing aggregate demand right.

Total output firms are willing to produce at each price level.

It sets the limit on what demand stimulus can achieve: push beyond capacity and you get inflation, not output.

If every factory is already at capacity, extra spending raises prices alone.

Government use of taxation and spending to influence the economy.

It is the lever controlled by elected politicians, which makes it powerful and slow.

Furlough payments during the pandemic were fiscal policy on a huge scale.

Central bank actions — mainly setting interest rates — to influence demand and inflation.

In the UK it is deliberately insulated from politics, because governments face a temptation to keep rates too low.

The Bank of England raising Bank Rate to slow price rises.

The price of borrowing money, or the reward for lending it, per year.

It is the price that links today and the future, so it touches saving, mortgages, investment and currencies at once.

A rise in Bank Rate raises tracker mortgage payments within weeks.

The total money circulating in an economy, including bank deposits.

Most money is created by commercial banks lending, not printed by the state — which surprises most people.

When a bank grants a £200,000 mortgage it creates a new deposit of that size.

A central bank creating reserves to buy financial assets, mainly government bonds, to push longer-term rates down.

It is what central banks reach for when rates are already near zero and cannot fall further.

The Bank of England bought hundreds of billions of gilts after 2008 and again in 2020.

An initial change in spending causing a larger total change, because one person's spending is another's income.

Its size decides whether stimulus is powerful or wasteful — and it is genuinely disputed.

£1bn of road building becomes wages, which become spending in shops, and so on.

The total amount a government owes from past borrowing.

It is a stock, not a flow — confusing it with the annual deficit is a standard mistake.

A country can cut its deficit every year and still watch total debt rise.

The gap in one year between what a government spends and what it raises.

Deficits add to debt; surpluses reduce it. The flow feeds the stock.

Spending £1,100bn while raising £1,000bn is a £100bn deficit that year.

A record of a country's trade in goods and services plus income flows with the rest of the world.

A persistent deficit means a country is consuming more than it produces, funded by selling assets or borrowing.

The UK has run a current account deficit for decades, financed by inflows of foreign capital.

The full record of transactions between one country and the rest of the world.

By construction it balances — a deficit in one account is matched by a surplus in another.

Money spent on imports returns as foreign purchases of UK assets.

Something you own that is expected to produce value.

Assets minus liabilities equals equity. That identity underpins every balance sheet ever written.

Cash, shares, a house, a patent, a delivery van.

Something you owe.

Two people with identical assets can be in completely different positions once liabilities are counted.

A mortgage, a credit card balance, an unpaid supplier invoice.

What is left over after liabilities are subtracted from assets — the owner's stake.

It is the residual claim: equity holders are paid last, which is why they demand the highest return.

A £300,000 house with a £270,000 mortgage leaves £30,000 of equity.

A loan you can trade. The issuer promises fixed payments and the return of the principal at the end.

Bondholders are lenders, not owners — they get paid before shareholders but never share in the upside.

A UK government gilt paying 4% a year for ten years.

The return on a bond expressed as a percentage of its current price.

Yield moves inversely to price. If the price falls, the fixed payments represent a higher return.

A bond paying £5 a year costing £100 yields 5%. If the price drops to £80, it yields 6.25%.

The fixed interest payment a bond makes, set when it is issued.

The coupon never changes; the yield does. Keeping them apart is essential.

A £100 bond with a 4% coupon pays £4 a year regardless of what happens to its price.

The date a bond or loan is repaid in full.

Longer maturities are more sensitive to interest rate changes, so they carry more price risk.

A 30-year bond swings far more in price than a 2-year one when rates move.

A share of ownership in a company.

Owning shares means owning a slice of future profits — and being last in the queue if things go wrong.

One share of a company with a million shares is a millionth of it.

A share of profit paid out to shareholders in cash.

Paying it returns cash to owners; retaining it funds growth. Neither is automatically better.

A company earning £100m might pay £40m as dividends and reinvest £60m.

The profit from selling something for more than you paid.

It is only realised when you sell — and until then it is a paper number, taxed differently from income.

Buying at £10 and selling at £14 gives a £4 capital gain.

The total value of a company's shares: share price multiplied by number of shares.

It is what the market thinks the equity is worth — not what the company owns, and not what it earns.

10 million shares at £25 gives a £250m market cap.

The first sale of a company's shares to the public, listing it on an exchange.

It converts private ownership into tradeable stock, raising capital but bringing disclosure and scrutiny.

A private firm listing on the London Stock Exchange.

The whole collection of investments someone holds.

What matters is how the parts behave together, not how each behaves alone.

Shares, bonds, cash and a pension considered as one position.

Spreading money across investments that do not move together, cutting risk without cutting expected return.

It is the closest thing to a free lunch in finance — and it cannot remove risk that hits everything at once.

Owning 200 companies means one bankruptcy barely registers.

The extra expected return demanded for holding something risky rather than something safe.

It is the price of bearing uncertainty, and it is expected — not promised.

Shares have historically returned several percent a year more than government bonds.

How much a price swings around, usually measured as standard deviation.

It is the standard proxy for risk, though it treats upside surprises as risk too.

A fund described as '16% vol' typically moves about 16% either way in a year.

How quickly something can be sold near its fair value.

Solvent institutions still fail if they cannot convert assets to cash in time. Liquidity kills faster than losses.

Shares sell in seconds. A house takes months, and faster means cheaper.

Using borrowed money to increase the size of a position.

It multiplies gains and losses equally — and forced selling at the bottom is what turns losses into ruin.

£30,000 deposit on a £300,000 flat: a 10% price fall wipes out the whole deposit.

Earning returns on your past returns as well as on your original money.

It is unimpressive for years and then dominant. Time matters more than the amount you start with.

£100 a month at 7% for 40 years becomes far more than the £48,000 you paid in.

What a future sum is worth today, once you account for the return you could earn meanwhile.

It makes amounts arriving at different times comparable — the foundation of every valuation.

£1,000 in five years at 5% is worth about £784 today.

The rate used to convert future money into today's money.

Small changes swing valuations enormously, which is why arguments about it are really arguments about value.

Raising the rate from 5% to 8% sharply cuts the present value of distant cashflows.

The present value of everything a project brings in, minus everything it costs.

Positive NPV means the project adds value at that discount rate. It is the standard investment test.

Spend £1m now, receive £250,000 a year for six years: whether that is worth doing depends entirely on the rate.

The price of one currency in terms of another.

It changes the price of every import and export at once, so it moves inflation and competitiveness together.

A weaker pound makes holidays abroad dearer and UK exports cheaper.

A sustained period of rising prices and optimism.

Rising prices change behaviour — risk feels smaller precisely when it may be growing.

A stock index climbing for several years with only shallow dips.

A sustained fall in prices, conventionally 20% or more from the peak.

Most long-run returns are earned by people who stayed invested through these.

Markets fell sharply in early 2020 before recovering within months.

A fund that simply holds everything in an index rather than trying to pick winners.

Low costs compound just as returns do — which is why cheap tracking beats most active managers over time.

A FTSE All-Share tracker holding every listed company in proportion.

A fund whose shares trade on an exchange throughout the day like a normal stock.

It gives instant diversification with the liquidity of a single share.

Buying one ETF share to own a slice of hundreds of global companies.

A private investment fund, open to institutions and wealthy individuals, that can go both long and short and use leverage.

Its defining feature is freedom from the constraints on ordinary funds — and fees to match.

A fund betting one supermarket will beat another while holding no view on the market overall.

Making a riskless profit from the same thing trading at two different prices.

The act of exploiting it removes it, which is precisely why prices stay consistent across markets.

If gold is cheaper in London than New York, buying and selling simultaneously closes the gap.

The risk that a borrower fails to repay.

It is the whole reason interest rates differ between borrowers — the extra is compensation for possible default.

A government bond yields less than a struggling company's bond of the same maturity.