Readers Question: The Oil Petroleum and Exporting Countries (OPEC) comprise the main oil procedures in the world. With the aid of diagrams show how OPEC is able to fix the price of oil on the world markets and comment on its recent activity in this area. Suggest what would happen if OPEC kept increasing prices …
The essential element of Keynesian economics is the idea the macroeconomy can be in disequilibrium (recession) for a considerable time. To help recover from a recession, Keynesian economics advocates higher government spending (financed by government borrowing) to kickstart an economy in a slump. Keynesian economics includes Disequilibrium in macroeconomy (insufficient demand) Imperfect labour markets (e.g. …
Definition of creative destruction This refers to the process of how capitalism leads to a constantly changing structure of the economy. Old industries and firms, which are no longer profitable, close down enabling the resources (capital and labour) to move into more productive processes. Creative destruction means that the company closures and job losses are good …
Transfer earnings are the minimum income a worker needs in order to supply their labour. Economic rent is the extra income a worker receives – above the minimum level they need in order to work. Diagram for Economic Rent and Transfer Earnings Definition of Economic Rent Economic Rent refers to income earned from a factor …
X Inefficiency occurs when a firm lacks the incentive to control costs. This causes the average cost of production to be higher than necessary. When there is this lack of incentives, the firm will not be technically efficient. In theory, the firm could have an average cost curve at “Potential AC” but due to organisational slack, …
Is deflation good or bad? Mostly experiences of deflation in western economies have been damaging – deflation has been associated with falling rates of economic growth and higher unemployment. However, it is possible to have a different type of deflation – from rapidly improving productivity; then deflation can be consistent with higher rates of economic …
