Here are Economics Terms beginning with I

Please  note these economics dictionary definitions
are all copyright of BusinessEconomics.com and  no one is allowed to use them without express written confirmation from  BusinessEconomics.com.

Copyright BusinessEconomics.com

Identification problem refers the problems of identifying economic relationships between two variables due to the influence of other factors that influence the relationship. For example, the relationship between price and quantity demanded is difficult to identify since variables such as the price of other goods, household incomes also affect the quantity demanded.

Idle balances are money holdings by economic agents in the hope that prices of securities such as shares and bonds will fall so that they can be purchased at the lower prices. Better known as speculative demand for money.

Imperfect competition refers a market structure where firms can raise their prices without losing all their customers. It covers monopolistic competition, oligopoly, duopoly and monopoly.

Implicit costs are the implied costs to a firm of using a factor of production but which are not directly paid for. For example, if a firm owns land worth £10,000 but is not directly paying for it, the implied cost of the land at a rental yield at 10% margin would be £1,000.

Import substitution industrialization is a strategy of encouraging the growth of domestic industrial manufacturing by reducing imports of foreign manufactured goods.

Import substitution policy is a policy of encouraging domestic production at the expense of foreign production by discouraging imports. Examples include the use of a devaluation of the exchange rate and the use of tariffs.

Incidence of taxation refers to the  distribution of the burden of a sales tax between consumers and producers. For example if a $10n sales tax results in a rise in the price of the good by $6 then the consumer burden is 60% and the producer burden is 40%.

Income consumption curve shows how a consumer's consumption of two goods changes as their income rises.

Income effect of a change in the price of a good refers to the effect on consumption of a good resulting from the change in real income that results from a change in the price of the good. for example, If the price of a good falls then the consumer's real income increases leading to a rise in the consumption of a normal good. For inferior goods the real income effect of a fall in the price of the good in negative.

Income elasticity of demand for a product is the percentage change in quantity demand divided by the percentage change in income. For normal good,s it is positive in sign so increased income leads to a rise in consumption, while for inferior goods it is negative as increased income leads to a fall in consumption.

Increasing opportunity costs means that as more of one good is produced the amount of other goods foregone increases.

Independence means the optimal decision for one firm does not depend on the decision taken by other firms.

Independent risks are risks that have zero correlation, so the the probability of risk A occurring is unaffected by the probability of risk B occurring.

Index - an economic series can be changed into an index number with a base year of 100 so a rise of 10% in the value of the series is represented by a change in the index to 110 while a fall of 10 would be represented by a fall in the index from 100 to 90.

Indifference curve shows different combinations of two goods between which the consumer is indifferent , that is, give the consumer the same level of satisfaction or utility. An indifference curve is normally drawn as convex to the origin.

Indifference curve map shows lots of indifference curves in a graph with the quantity of Good one on the horizontal axis and quantity of the other good on the vertical axis. The further an indifference curve is from the origin the greater the level of satisfaction.

Indirect tax- a tax on expenditure such as Value Added Tax or a sales tax. While the tax is paid by the consumer it is the supplier of the good or service that is responsible for payment to the tax authorities.

Indivisibilities refers to the fact that factors of production cannot be divided up into smaller units. For example, a firm cannot use 1.5 machines it can either use one or two machines. Also it is not possible to employ 1.5 units of labor.

Induced investment refers to increased investment that occurs to meet increased consumer demand.

Induction or inductive reasoning designing an economic theory based up the basis of specific empirical observations. Inductive reasoning is is probabilistic; it only states that the given the premises, the conclusion is probable. An example of inductive reasoning:the price of wheat has risen from $100 to $200 per ton. It is also
observed that  a drought occurred in the country. Linking these two  facts in a statement of principle: "a drought will tend to cause wheat prices to  rise" is inductive reasoning

Industrial policies are policies that encourage the greater investment in manufacturing and industry or increases the productivity level of industries. Such as government investment in infrastructure, tariffs on imported manufactured good, tax breaks and subsidies.

Inelastic demand usually refers to inelastic price elasticity of demand whereby the percentage change if price is sammer that the percentage change in price. For example, a rise in price of 10% leads to a 5% fall in demand for the good. In this instance the price elacity of demand is -0.5. As such the total revenue received by the prodiucer rises for price rises and falls for price falls.

Infant industry a new industry in which a country has the potential to have a comparative advantage but is currently unable to compete unless it receives subsidies or tariff protection which will give it time to realise its comparative advantage.

Inferior good a good for which the income elastcity of demand is negative, that is, a rise in the consumers real income leads to a fall in the demand for the good.

Inflationary gap is the amount by which aggregate demand exceeds output at the full employment level of output in an economy.

Informal sector is a broad term covering the part of the economy where economic production and exchange is occurring but for which there are recorded monetary payments being made. This part of the economy is neither taxed or moniroted by the authrities and is not included in the GDP figure. Sometime referred to as the "black market" or "shadow economy."

Infrastucture refers to the basic physical capital and services required to keep an economy or enterprise functioning. It refers to things such as the roads, water supply, telecommunications, electricity etc that are required for the successful operation of a firm and economy.

Injections are exports, investment and government expenditure. There are independent of the cirucular flow of incume unlike conmsumeption which is endogenously determined by the level of nationalm income.

Injections muliplier the multiple by which an increaes in injections raies the national income. for example if a $100 million increase in government expenditure increases national income bu $300 million then the multiplier is 3.

Input-output analysis a quantitative framework for looking at the relationships between the inputs and outputs in an economy. The inter-relationships between differnt sectors of the economy can be shown as the inputs of one sector become outputs of another sector. Each column of the input-output matrix reports the monetary value of an  industry's inputs and each row represents the value of an industry's outputs.

Insiders or insider-outsider theory examines the behavior of economic agents in markets where some participants have more privileged positions than others. In labor economics insiders are those who already posses jobs in a firm and use their privileged position to secure higher wages to the detriment of the outsiders who are seeking a job.

Interdependence exists when the optimal decision for one economic agent depends on the decision taken by another economic agent. Under oligopoly theory the optimal decision for Firm A depends upon the decision made by firm B whose optimal decision in turn depends upon the decision taken by firm A.

Interest rate is the rate payable on a loan or borrowing expressed as an annual pecentage.

Interest rate transmission mechanism is the mechanism by which a change in the rate of interest affects aggregate demand in an economy. For example a cut in interest rates is likely to boost both comsumptiona nd investment but also by wealkening the exchange rate it may also induce a rise in exports.

Intermediate exchange rate regime is a system bewteen a fixed and floating exchange rate regime, with the government intervening to buy or sell the local currency without rigidly fixing it.

Internal balance refers to a situation where the economy is at the full employment level of output but with generating inflation.

Internal rate of return is the discount factor on an investment that makes the net present value of the investment equal to zero.

International trade multiplier the amount by which national income eventially increases for a given increase in exports. For example if exports increases by $100 million and national income increases y $200 million then the export multiplier is 2.

Intervention price - the price at which the aiuthorities will intervene  to guarantee the price of a product. For exaple under the Coomonm Agricularal Policy od the price of wheat is set at €300 per tonnne, then the authorities will purchase and excess production that is unsold that price.

Investment the production of an item such as a building, equipment or machine that is to be used for future production. When it comes to measuring Gross doenstic Product investment is defined as Gross Fixed Capital Formation plus additions to stocks (i.e goods that are unsold) or minus decreases in stocks.

IS-LM model a model invented by Sir John Hicks as an interpreation of the work of John Maynarfd Keynes. The IS represents Investment-Saving curve wjile the LM curve represents the Liquidty Money curve.

Isocost line a line which depicts the different combinations of two factors capital and labor that a firm can employ given the price of the two factors of production (usually labor and capital)  and the budget of the firm.

Isoquant a curve which showns different combinations of capital and labout that can produce a given level of output.

Copyright BusinessEconomics.com