Summary: Capitalism is the dominant economic system because the concept of private property and freedom to pursue economic choices are deeply embedded in human nature. Also, alternatives based on co-operation, sharing and state control have many flaws and limitations making capitalism least worst option for many. Definition of capitalism Capitalism is an economic system where …
Perfect competition is a market structure where many firms offer a homogeneous product. Because there is freedom of entry and exit and perfect information, firms will make normal profits and prices will be kept low by competitive pressures. Features of perfect competition Many firms. Freedom of entry and exit; this will require low sunk costs. …
What policies can a government use to reduce pollution? Pollution is a negative externality – a cost to society. To reduce pollution, the government can use four main policies – tax to raise the price, subsidise alternatives, regulations to ban certain pollutants and pollution permits. Government policies to reduce pollution Tax. e.g. Carbon tax, which …
A multinational company is a global operation with the production and distribution of its goods located in numerous countries. Typically multinationals have different stages of the supply chain located in different countries. This enables the firm to specialise production in countries where it has a comparative advantage. The firm gains many benefits of being global …
Readers Question: Does job creation come from public or private sector? The public sector is government (national and local). Public sector jobs include doctors, police, teachers and civil servants. The private sector is private enterprises – retail, manufacturing, local services. Public sector jobs as a share of total employment UK 23.5% (2013) US 14.6% (2008) …
The US has recently placed tariffs on Chinese imports and is threatening to further increase tariffs in the next few weeks. The effect of these tariffs is to increase domestic prices, provide some benefits to domestic producers, but also cause costs to US exporters. There is a strong risk that these tariffs will cause loss …
Investment influences the rate of economic growth because it is a component of aggregate demand (AD) and more importantly influences the productive capacity of the economy. (LRAS) An increase in investment should be a boost to economic growth. Readers Question: Discuss the importance of investment in increasing economic growth. Investment means expenditure on capital spending, …
The concept of hidden taxes is that taxpayers may remain unaware that they are paying the tax because it is included in the price and the tax is not visible. Examples of hidden taxes include Indirect taxes – VAT, sales tax, excise duty, Insurance tax, air passenger duty. Corporation tax – a tax on company …