Economics, 3rd Edition

805

GLOSSARY

ability-to-pay principle 

the idea that taxes should be levied 

on a person according to how well that person can shoulder 

the burden

abnormal profit 

the profit over and above normal profit

absolute advantage 

absolute advantage exists where a 

producer can produce a good using fewer factor inputs than 

another

absolute poverty 

a level of poverty where an individual does 

not have access to the basics of life – food, clothing and shelter

accounting profit 

total revenue minus total explicit cost

actual spending, saving or investment 

the realized or 

ex post outcome resulting from actions of households and firms

ad valorem tax 

a tax levied as a percentage of the price of 

a good