concepts

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Cost Benefit Analysis Education

Readers Question: Outline the technique of cost-benefit analysis. How can it be applied to the assessment of investment in education projects and what are its strengths and weaknesses? See: Procedure of CBA  Potential Benefits of Education SpendingIncreased Labour Productivity in the long run. i.e. more literate and numerate workforce should be more efficient enabling higher rates of economic growth Decreased Unemployment. In a modern economy, it is important workers have relevant skills. Structural unemployment is often caused by a lack of skills and training. Education aims to reduce structural…

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Price Controls In China – A good Idea?

With Chinese inflation rising to over 7% many people are suggesting – Why Not Use Price Controls to Stop Food Inflation? China and other Asian economies have seen a particular marked rise in food inflation. This creates various problems. Firstly, it particularly affects the rural poor who experience a decline in living standards. Secondly, the rise in food prices indirectly increase the cost of production for the manufacturing sector; many firms feed workers directly. Imposing price controls enables the government to keep a lid on prices making life more affordable. This…

Benefits of Monopoly Monopoly

Benefits of Monopoly Monopoly

Readers Question: What is the benefits of monopoly. Identify and explain these benefits that brings to the market. I need examples related to the benefits too. I have written a few posts about the benefits of monopoly’s and mergers in the pastBenefits of Mergers Are Monopolies always bad? Does Microsoft have too much market power?(more…)

Economics of Scale

Economics of Scale

Economies of scale occurs when increased output leads to lower long run average costs.Diagram of Economics of ScaleNote Economies of Scale occurs upto Q2. After Q2 dis-economies of scale starts to occur Basically as a firm expands it receives increasing returns to scale. To understand why economies of scale occur it is useful to think about large companies and how they benefit from their size. (more…)

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Cannibalise definition

To cannibalise your assets means that you create a new product which eat into sales of your old products. For example, suppose Microsoft have good sales for its X Box. If it introduced a new superior product, like the ‘X box mark 2’. Nobody would want to buy the old X Box. Therefore, sales of the existing X box would plummet. So although its sales of the X Box mark 2 might increase, they are at the expense of the original. This is what we mean by ‘cannibalise’ in business. In…