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Construction Economics - Summary and Glossary
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A summary and glossary on construction economics based on lectures at UWE.
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ECONOMICS GLOSSARYOpportunity Costs
- The value of the alternative forgone by choosing a particular activity
Classical economics
- Markets function best without government interference
Neo-classical economics
- Governments are involved to increase output & employment
Microeconomics
- Study of individual decision-making by both individuals & firms
Macroeconomics
- Study of economy-wide phenomena resulting from group decision-
making in entire markets
Economic Contribution
- The gross changes in a region’s existing economy that can be
attributed to a given industry
Normal Profit
- Minimum level of profit needed for a company to remain
competitive in a market
Economic Profit
- Difference between the revenue received from sale of output and
normal profit of input used
Free Market Economy
- Prices are determined by unrestricted competition between
privately-owned businesses without government intervention
- Free enterprise – Producers/Consumers have complete freedom of
choice over range of products bought & sold
- Encourages efficiency
Centrally Planned Economy (Command Economy)
- Production, investment, prices & incomes are determined centrally
by the government
- Promotes equity
Law of Demand
- As the price of good decreases,
the quantity demanded will
increase
Law of Supply
, ECONOMICS GLOSSARY
- As the price of good increases, the quantity supplied will increase
Equilibrium Price
- The price at which the quantity demanded and supplied are equal
Public Sector
- organizations that are owned and operated by the government and
exist to provide services/public goods for its citizens and do not seek
to generate a profit.
- Money raised from taxation
Public Expenditure
- Capital investments & output of goods and services by central
government, local authorities & nationalised industries &
corporations.
Public Goods
- Goods for which the principles of exclusion and rivalry do not apply,
& can be jointly consumed by many individuals simultaneously, at
no additional cost
- Inability to exclude free-riders
- Eg: Lighthouses, Streetlights
Merit Goods
- Goods and services that the government feels that people will
under-consume, and subsidised or provided free at the point of use
to other organizations
- Eg: Education, Health care
Private Sector
- Part of the economy that is run by private individuals and
companies for profit and is not state controlled
- Money raised from shareholders and retained earnings
Partnering:
1. Project Partnering
- Client & contractor work on an individual project
2. Strategic Partnering
- Client & contractor work on a series of projects
3. Integrated Project Delivery
- A contractual agreement between a client, design professional &
contractor
4. Private Finance Initiative (PFI)
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