Essential Economic Principles Defined
Political Logrolling Defined
The process where political representatives trade votes or support to gain a majority, often when deciding whether to act, is called: Logrolling.
Normal Goods and Income Elasticity
Regarding a normal good, which has positive income elasticity (demand increases with income): The statement “price is always decreasing demand” is not the definition of a normal good.
Bertrand Model Behavior
What is the pattern of behavior in each iteration in the Bertrand model?: Set a lower price
Comparing Market Structures in Economics
Perfect Competition
- Sellers: Numerous sellers, none of which can significantly influence market prices.
- Product: Homogeneous products with no differences among them from the consumer’s perspective.
- Price: Determined by the market, reflecting supply and demand; sellers are price takers.
- MR (Marginal Revenue): Equal to the market price, as each additional unit sold at the market price adds equally to total revenue.
- Curves: Includes demand and supply curves; the demand curve is perfectly elastic, reflecting
Innovation, Market Structure, and Industry Dynamics
Innovation, Market Structure, and Dynamics
Market structure determines the intensity of innovation activity. Conversely, innovation activity determines market structure.
Market Structure and Innovation Intensity
- Monopoly:
- Favors appropriability.
- Yields extra profits.
- Generates scale economies in R&D.
- Favors access to financial resources.
- Competition:
- Stimulates innovation activity since firms have to get rid of competitive pressure.
- Avoids the “quiet life” syndrome.
- Encourages the “fast second” strategy.
Global Socioeconomic Challenges and Development
External Debt
Historically, certain countries have acted as creditor centers for peripheral nations, often with creditors like the IMF and central banks. Recently, debt has been increasing, mirroring the political and monetary interests of debtor countries. Many peripheral economies depend on monoculture plantations. This reliance on a single product creates precarious situations. Droughts, price drops, or other issues can leave these countries without alternative currency sources.
Fair Trade
One
Read MoreUnemployment Benefits and Passive Policy
Passive Unemployment Policy and Benefits
Passive policy involves the protection of the unemployed through economic benefits designed to ensure coverage of their needs as they seek to re-enter the labor market. Currently, the main objective of this policy is not merely to provide income during unemployment. The primary goal is for the unemployed to find jobs and be reintegrated into the labor market during the time they receive unemployment benefits.
Interrelationship Between Active and Passive Policies
To
Read MoreFundamental Economic Concepts and Market Principles
Core Economic Concepts and Definitions
Economic Activity Components
- Production: Economic activities involve the creation of goods and services to satisfy human needs.
- Distribution: Economic activities include the allocation of goods and services within society.
- Consumption: Economic activities directly satisfy human needs through the use of goods and services.
Schools of Economic Thought
- Mercantilism: Focus on international trade.
- Physiocracy: Emphasis on agriculture.
- Classical School: Focus on agriculture