Automation refers to the implementation of technology that reduces the need for manual labour and allows technology to make automatic decisions based on computer algorithms. Automation usually involves replacing workers with computer technology, leading to higher labour productivity. The advantage for firms is that it can reduce the cost of running a business. It may …
Definition of automation Automation refers to the process of automatically producing goods through the use of robots, control systems and other appliances with a minimal direct human operation. Within manufacturing industries, automation has led to increased labour productivity as fewer workers are needed to produce the same number of manufactured goods. A perceived downside of …
Definition Trade diversion occurs when tariff agreements cause imports to shift from low-cost countries to higher-cost countries. Trade diversion is considered undesirable because it concentrates production in countries with a higher opportunity cost and lower comparative advantage. Trade diversion may occur when a country joins a free trade area with a common external tariff. Example …
Traditionally, the key measures of economic performance in macroeconomics include: Economic growth – real GDP growth. Inflation – e.g. target CPI inflation of 2% Unemployment – target of full employment Current account – satisfactory current account, e.g. low deficit. Other measures of economic performance can include: Government borrowing/national debt Real disposable incomes Income inequality (Gini …
Barriers to entry are factors that make it difficult for new firms to enter the market. Barriers to entry will make a market less competitive. If barriers to entry are very high then the market will invariably become a monopoly. Examples of barriers to entry Tap water – Economies of Scale. This means as firms …
The catch-up effect (or convergence theory) suggests that poorer countries will experience a higher rate of economic growth and, over time, get closer to the income levels of the developed world. In other words, there will be a reduction in the gap between the rich and the poor because low-income countries have more opportunities to …
Microeconomics is concerned with the economic decisions and actions of individuals and firms. Within the broad church of microeconomics, there are different theories that emphasise certain assumptions and expectations of economic behaviour. The most important theory is neo-classical theory, which places emphasis on free-markets and the assumption individuals are rational and seek to maximise utility. …
An entrepreneur is an individual who sets up and grows a business. They combine different factors of production (such as – land, labour and capital) to try and create a new profitable business venture. Entrepreneurs are themselves an important ‘factor of production’ and an essential aspect of a functioning free market economy. Importance of entrepreneurs …