The network effect occurs when a good or service becomes more valuable as more people use it. Network effect explained If you own a telephone, but no one else does, the good is of no value. As more people join the telephone network, the more valuable the telephone becomes to yourself. If you buy a …
The nominal value is the actual value stated on note, coin or government bond. Nominal value can also be referred to as the face value. Nominal values imply there has been no correction for the effect of inflation or market prices. Nominal value vs market value A government sells bonds with a nominal value of …
Definition of Non-renewable/depletable Resources An economic resource that cannot be replaced once used. Examples of non-renewable resources include: Oil Coal Minerals like zinc, magnesium, lithium. Clean Water supplies – clean water is potentially non-renewable. For example, radiation from a nuclear power plant disaster could make water radioactive for generations. Genetic Pool. If species become extinct …
Normal profit is a situation where a firm makes sufficient revenue to cover its total costs and remain competitive in an industry. In measuring normal profit, we include the opportunity cost of working elsewhere. When a firm makes normal profit we say the economic profit is zero. Normal profit = total revenue – total costs …
Nudge theory suggests consumer behaviour can be influenced by small suggestions and positive reinforcements. Proponents of nudge theory suggest that well-placed ‘nudges’ can reduce market failure, save the government money, encourage desirable actions and help increase the efficiency of resource use. Critics argue nudges can be misused and become a form of social engineering or …
The output gap is a measure of the difference between actual output (Y) and potential output (Yf). A positive output gap means growth is above the trend rate and is inflationary. A negative output gap means an economic downturn with unemployment and spare capacity The output gap = Y- Yf Diagram for Output Gap The …
Definition of Pareto efficiency Pareto efficiency is said to occur when it is impossible to make one party better off without making someone worse off. A Pareto improvement is said to occur when at least one individual becomes better off without anyone becoming worse off. Pareto efficiency will occur on a production possibility frontier. When …
Penetration pricing is a strategy used by a firm who wishes to enter a new market and gain a high market share through selling at a low price. The aim of penetration pricing is to attract a loyal customer base through offering the most competitive price in the market and undercutting rivals and well-known brands. …