Definition – Demand is price inelastic when a change in price causes a smaller percentage change in demand. It occurs where there is a price elasticity of demand (PED) of less than one. Goods which are price inelastic tend to have few substitutes and are considered necessities by users. Diagram of price inelastic demand For …
The Luddite fallacy is the mistaken belief that new technology leads to higher overall unemployment in the economy. New technology may cause disruption and some workers to lose their job, but the improved technology will also create jobs in other sectors of the economy – balancing out any jobs lost. Historical background In the early …
Profit-push inflation is when firms use their market power to put up prices, contributing towards inflation. It is a form of cost-push inflation. Profit-push inflation is sometimes known as ‘greed inflation’ and is related to price gouging. Profit push inflation is not the primary cause of inflation, but it can accelerate existing inflationary pressures. Profit-push …
Definition: Cost-push inflation occurs when we experience rising prices due to higher costs of production and higher costs of raw materials. Cost-push inflation is determined by supply-side factors, such as higher wages and higher oil prices. Cost-push inflation is different to demand-pull inflation which occurs when aggregate demand grows faster than aggregate supply. Cost-push inflation …
Related