A contract providing that price will equal measured costs plus an agreed percentage mark-up for profit. This procedure is criticized because it gives the producer no incentive to keep down costs; rather, the incentive is to increase costs needlessly, thereby increasing the profit margin also. Cost-plus pricing is often used, however, in projects, for example in military spending, where the customer wants the product urgently and there is great uncertainty about costs. Under these circumstances a cost-plus contract may give a lower expected price than a fixed-price contract, because any fixed price agreed would include a substantial risk-premium for the producer.

• average revenue
• avoidable cost
• avoidance, tax
• axiom
• axis
• back door
• backward-bending supply curve
• backward integration
• BACS
• bad debt
• bad debt provision
• balance
• balanced budget
• balanced budget amendment
• balanced budget multiplier
• balanced growth
• balance of payments
• balance-of-payments crisis
• balance of trade
• balance-sheet
• balances with the Bank of England
• balancing item
• ballot, strike
• bands, exchange rate
• bank