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 …
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 …
Definition Third World Debt: Third world debt is the external debt that governments in developing countries owe to foreign banks and foreign governments. Many of the countries with third world debt, gained their independence post-1945. Some countries like Indonesia acquired debts from the colonial rulers (Dutch) but for most countries their debt accumulated during the 60s, …
Definition of the Accelerator Effect The accelerator effect states that investment levels are related the rate of change of GDP. Thus an increase in the rate of economic growth will cause a correspondingly larger increase in the level of investment. But, a fall in the rate of economic growth will cause a fall in investment …
Definition of Bertrand Competition A market structure where it is assumed that there are two firms, who both assume the other firm will keep prices unchanged. Therefore, each firm has an incentive to cut prices, but this actually leads to a price war. If products are perfect substitutes this assumes the price will be driven …