What is the primary sector? The primary sector is concerned with the extraction of raw materials. It includes fishing, farming and mining. In less developed economies, the primary sector will comprise the biggest part of the economy. Typically as an economy develops, increased labour productivity will enable workers to leave the agricultural sector and move …
Explain the role of the main economic groups: consumers, producers and the government. Within an economy, there are three main groups of agents. Producers Consumers Government 1. Consumers Individuals and households who provide labour to firms and purchase goods and services. Consumers pay income tax on wages and pay indirect taxes on purchases, for example, …
Readers Question: What’s the relationship between a countries economy and it’s stock market? Is it always true that the stock market reflects a country’s economic conditions? Generally speaking, the stock market will reflect the economic conditions of an economy. If an economy is growing then output will be increasing and most firms should be experiencing …
A merger occurs when two firms join together to form one. The new firm will have an increased market share, which helps the firm gain economies of scale and become more profitable. The merger will also reduce competition and could lead to higher prices for consumers. The main benefit of mergers to the public are: …
Definition: Static efficiency is concerned with the most efficient combination of existing resources at a given point in time. For example, static efficiency involves the concept of productive efficiency – producing at the lowest point on the short run average cost curve – given existing resources and factor inputs. Static efficiency is also concerned with …
Definition of allocative efficiency This occurs when there is an optimal distribution of goods and services, taking into account consumer’s preferences. A more precise definition of allocative efficiency is at an output level where the Price equals the Marginal Cost (MC) of production. This is because the price that consumers are willing to pay is …
Government price controls are situations where the government sets prices for particular goods and services. Types of price controls Minimum prices – Prices can’t be set lower (but can be set above) Maximum price – Limit to how much prices can be raised (e.g. market rent) Buffer stocks – Where government keep prices within a certain …
Evolutionary economics is a branch of economics which views the economy through a dynamic model of constant change, adaptation, chaos and revival. Evolutionary economics was coined by radical economist Thorstein Veblen (1857-1929). Veblen was interested in psychological factors that often gave better explanations for economic behaviour than traditional rational choice theory. For example, Veblen noted …