Definition – Opportunity cost is the next best alternative foregone. If we spend that £20 on a textbook, the opportunity cost is the restaurant meal we cannot afford to pay. If you decide to spend two hours studying on a Friday night. The opportunity cost is that you cannot have those two hours for leisure. …
Definition of Productive efficiency Productive efficiency is concerned with producing goods and services with the optimal combination of inputs to produce maximum output for the minimum cost. To be productively efficient means the economy must be producing on its production possibility frontier. (i.e. it is impossible to produce more of one good without producing less …
Taxation on goods, income or wealth influence economic behaviour and the distribution of resources. For example, higher taxes on carbon emissions will increase cost for producers, reduce demand and shift demand towards alternatives. Higher income tax can enable a redistribution of income within society, but may have an impact on reducing the incentives to work …
There are different ways for the government to raise tax revenue. While tax is often unpopular, economists set criteria for what makes a ‘good’ and ‘fair’ tax. This includes – fairness, easy to collect, non-distortionary and increases social welfare. Principles of a good tax include Vertical equity – Fair. Vertical equity is concerned with setting …
Individuals choice of job/career/occuption will depend on how attractive the job is compared to the alternatives. Individuals will be influenced by various factors such as the wage levels, skills required and the likely satisfaction gained in the job. The supply of labour to particular occupations will depend on several factors. Wages. All things being equal, …
The fundamental economic problem is the issue of scarcity and how best to produce and distribute these scare resources. Scarcity means there is a finite supply of goods and raw materials. Finite resources mean they are limited and can run out. Unlimited wants mean that there is no end to the quantity of goods and …
Definition: Non-price competition involves ways that firms seek to increase sales and attract custom through methods other than price. Non-price competition can include quality of the product, unique selling point, superior location and after-sales service. Models of perfect competition suggest the most important issue in markets is the price. And for a homogenous product like …
A look at factors that determine an individuals supply of labour and the market supply of labour. Higher wages usually will encourage a worker to supply more labour because work is more attractive compared to leisure. Therefore the supply curve for labour tends to be upwardly sloping. However, a worker isn’t just interested in earning …