An explanation of how wages are determined in a perfectly competitive labour market. A perfectly competitive labour market will have the following features Many firms Perfect information about wages and job conditions. Firms are offering identical jobs Many workers with the same skills Diagram of wage determination The equilibrium wage rate in the industry is …
Main topics in macroeconomics Balance of payments Policies to reduce current account deficit Budget deficit Policies to reduce budget deficit Economic growth Causes of Boom and Bust Cycles Policies to increase economic growth Theories of economic growth Recessions Environmental economics Fiscal policy Globalisation Exchange rates Effect of an appreciation Effect of devaluation European Union The …
Since 1978 the Chinese economy has maintained economic growth at an average of nearly 8%. By western standards this is remarkable. The UK, by contrast, has grown at an average rate of 2.5%. However, despite the impressive figures, there are many serious economic problems resulting from economic growth. Chinese GDP In particular, the growth rate …
Common Agricultural Policy (CAP) is EU’s policy on agricultural. Stated Aims of CAP To Increase Productivity To Increase Farm’s incomes To Stabilize markets To assure the availability of supplies To ensure reasonable prices for consumers The most important is the second aim of increasing farm incomes Why Subsidise Agriculture? The declining income of farmers. With …
Definition: Decreasing Returns to Scale This occurs when an increase in all inputs (labour/capital) leads to a less than proportional increase in output. For example, if a car firm increases its variable inputs (capital, raw materials and labour) by 50%, but the output of cars, increases by only 35%, then we say there are decreasing …
A demerit good is defined as a good which can have a negative impact on the consumer – but these damaging effects may be unknown or ignored by the consumer. Demerit goods also usually have negative externalities – where consumption causes a harmful effect on a third party. Examples of demerit goods Alcohol Cigarettes Drugs …
Definition: A natural monopoly occurs when the most efficient number of firms in the industry is one. A natural monopoly will typically have very high fixed costs meaning that it is impractical to have more than one firm producing the good. An example of a natural monopoly is tap water. It makes sense to have …
Definition of substitute goods – Substitute goods are two alternative goods that could be used for the same purpose. Substitutes present the consumer with alternative choices. If the price of one good increases, then demand for the substitute is likely to rise. Therefore, substitutes have a positive cross elasticity of demand. Graph of two substitute …