Capitalism is an economic system based on free markets and limited government intervention. Proponents argue that capitalism is the most efficient economic system, enabling improved living standards. However, despite its ubiquity, many economists criticise aspects of capitalism and point out is many flaws and problems. In short, capitalism can cause – inequality, market failure, damage …
Readers Question: What is the role and function of price in the economy? The price of goods plays a crucial role in determining an efficient distribution of resources in a market system. Price acts as a signal for shortages and surpluses which help firms and consumers respond to changing market conditions. If a good is …
The catch-up effect (or convergence theory) suggests that poorer countries will experience a higher rate of economic growth and, over time, get closer to the income levels of the developed world. In other words, there will be a reduction in the gap between the rich and the poor because low-income countries have more opportunities to …
How does a recession/economic downturn influence how firms will set the price of goods and services? A recession is a period of negative economic growth – falling real incomes and rising unemployment. In a recession, consumers are likely to have lower income and be more sensitive to prices. There is also the threat of unemployment …
Definition Trade liberalisation involves removing barriers to trade between different countries and encouraging free trade. Trade liberalisation involves: Reducing tariffs Reducing/eliminating quotas Reducing non-tariff barriers. Non-tariff barriers are factors that make trade difficult and expensive. For example, having specific regulations on making goods can give an unfair advantage to domestic producers. Harmonising environmental and safety …
A look at the economics reasons for high youth unemployment (16-25) in many western economies. In the UK, youth unemployment has averaged higher than the main unemployment rate. This is is a similar situation to the US and European economies. The reasons for youth unemployment include Lack of qualifications. Young people without any skills are …
Resource scarcity is defined as a situation where demand for a natural resource is exceeding the supply – leading to a decline in available resources. When we talk about scarce resources, we usually imply that current use is unsustainable in the long-term. Scarcity can involve non-renewable resources, such as oil, precious metals and helium. It …
Readers Question: To what extent do the official UK figures for unemployment accurately reflect economic reality? The unemployment rate measures those who are officially seeking work but unable to find employment. However, the official unemployment rate does not include those who are not working and are classed as economically inactive. For example, economically inactive can …