Agricultural markets have often been the recipients of tariff protection. This involves Tariffs on cheaper imports Quotes on imports Government subsidies to domestic farmers Reasons for Agricultural Protection Farmers have lower incomes than the rest of the population and don’t tend to benefit from economic growth (low income elasticity of demand for food) Farmers often …
The FTSE All-Share Index, originally known as the FTSE Actuaries All Share Index, is a stock market index which aims to capture 98% of the full value of the London Stock Exchange. This means it is an accurate reflection of the overall stock market. The index is a capitalisation-weighted index. This means that companies are …
Definition of allocative efficiency This occurs when there is an optimal distribution of goods and services, taking into account consumer’s preferences. A more precise definition of allocative efficiency is at an output level where the Price equals the Marginal Cost (MC) of production. This is because the price that consumers are willing to pay is …
Definition: The announcement effect refers to the fact that behaviour can be changed merely by announcing a future policy change. For example, if the government say that petrol tax will increase in 6 months time, people may start spending less money now; they may also look for alternatives to the car. Announcement effects will be …
Dumping refers to the situation when a country sells exports very cheaply to another country. For example, the European Union had a large surplus of food items, due to the Common Agricultural Policy. These goods were then sold very cheaply – ‘dumped’ on other world markets. This causes big problems for farmers in these countries …
Pollution is seen as an example of market failure. In particular, pollution is an example of a negative externality – a cost imposed on a third party. For example, when driving a car, other people suffer from the emissions e.g. global warming, air pollution. Therefore, in a free market, there tends to be the overconsumption …
Antitrust is predominantly an American term referring to laws regulating the abuse of monopoly power. Monopolies have various disadvantages for society and consumers. In particular: Higher prices Less choice Less incentives to cut costs and develop new products Monopsony buying power and employment of labour Antitrust laws came into effect in the nineteenth century due …
Arbitrage occurs when an investor can make a profit from simultaneously buying and selling a commodity in two different markets. For example, gold may be traded on both New York and Tokyo stock exchanges. If the market price temporarily diverges and gold becomes cheaper on Japanese markets, then an arbitrageur could buy in Tokyo and …