Supply refers to the quantity of a good that the producer plans to sell in the market. Supply will be determined by factors such as price, the number of suppliers, the state of technology, government subsidies, weather conditions and the availability of workers to produce the good. Movement along the supply curve As price increases …
Definition of Monopsony A monopsony occurs when a firm has market power in employing factors of production (e.g. labour). A monopsony means there is one buyer and many sellers. It often refers to a monopsony employer – who has market power in hiring workers. This is a similar concept to monopoly where there is one …
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 …
This is when governments give a guarantee to savers that if their bank goes bankrupt, the government will pay them all or some of their savings. The government offers bank deposit protection to increase the confidence in the banking system. If people felt banks could go bankrupt during a financial crisis – then they could …
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 …
Definition of Efficiency Wage Theory / Hypothesis The idea of the efficiency wage theory is that increasing wages can lead to increased labour productivity because workers feel more motivated to work with higher pay. Therefore if firms increase wages – some or all of the higher wage costs will be recouped through increased staff retention …
Readers Question: why some countries are more successful in attracting Foreign Direct Investment than others? Foreign direct investment (FDI) means companies purchase capital and invest in a foreign country. For example, if a US multinational, such as Nike built a factory for making trainers in Pakistan; this would count as foreign direct investment. In summary, …
Definition of leverage ratio The leverage ratio is the proportion of debts that a bank has compared to its equity/capital. There are different leverage ratios such as Debt to Equity = Total debt / Shareholders Equity Debt to Capital = Total debt / Capital (debt+equity) Debt to Assets = Total debt / Assets Leverage ratios …