The invisible hand is a concept that – even without any observable intervention – free markets will determine an equilibrium in the supply and demand for goods. The invisible hand means that by following their self-interest – consumers and firms can create an efficient allocation of resources for the whole of society. How does the …
The Laffer Curve states that if tax rates are increased above a certain level, then tax revenues can actually fall because higher tax rates discourage people from working. Equally, the Laffer Curve states that cutting taxes could, in theory, lead to higher tax revenues. It starts from the premise that if tax rates are 0% …
The wealth effect examines how a change in personal wealth influences consumer spending and economic growth. Rising wealth has a positive impact on consumer spending. Wealth is a stock concept. At a particular time, your wealth is fixed. Wealth is comprised of savings, bonds, property and assets. A major form of wealth in the UK …
The gig economy refers to the segment of the labour market which concentrates on short-term / temporary jobs and contracts. Often these workers can have more than one job, e.g taxi driver who works both for a traditional taxi company and Uber. Like a musician who goes from one gig to the next, the gig …
An exchange rate index is a way of measuring the performance of a currency against a basket of other currencies. An exchange rate index shows the percentage change in the value of the currency against its main competitors. It sets the index to 100 for a particular base year. This enables users to make percentage …
The economic trade cycle shows how economic growth can fluctuate within different phases, for example: Boom (A period of high economic growth usually causing inflation) Peak (top of the trade cycle, where growth rates may start to fall) Economic downturn/recession (where the growth rate falls and may become negative – leading to a fall in national output) …
Profit is the surplus revenue after a firm has paid all its costs. Profit can be seen as the monetary reward to shareholders and owners of a business. In a capitalist economy, profit plays an important role in creating incentives for business and entrepreneurs. For an incumbent firm, the reward of higher profit will encourage …
Sainsbury’s and Asda have announced a plan for a merger. They argue it will lead to lower prices for customers, no job losses and is necessary to deal with the threat of new discounters like Lidl and Aldi and the impending arrival of Amazon. Others are more cautious arguing that the new firm will have …