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 of Capital accumulation This is the process of acquiring additional capital stock which is used in the productive process. Capital accumulation can involve Investment in physical fixed capital (e.g. factories, machines) Portfolio investment – purchase of bonds, shares and cryptocurrencies Investment in assets, such as housing. Measuring capital accumulation Capital accumulation can be calculated …
Purchasing Power Parity PPP is a theory which suggests that exchange rates are in equilibrium when they have the same purchasing power in different countries. Purchasing power parity will involve looking at a basket of goods to determine effective living costs. The purchasing power parity is determined by dividing a basket of goods in one …
Definition of financial intermediaries A financial intermediary is a financial institution such as bank, building society, insurance company, investment bank or pension fund. A financial intermediary offers a service to help an individual/ firm to save or borrow money. A financial intermediary helps to facilitate the different needs of lenders and borrowers. For example, if …
A recession is a period of negative economic growth – a fall in output accompanied by rising unemployment. Recessions tend to occur in cycles of 8-10 years, though there is no hard and fast rule. Attempting to predict a recession by the number of years is not guaranteed to work. Recessions in UK Source: ONS …
Global trade has become so efficient that it is often cheaper for firms to import goods from across the other side of the globe rather than from local, domestic producers. Should we favour local buying or just buy the cheapest from across the globe. Advantages of local buying Lower carbon emissions due to less transport …
The network effect occurs when a good or service becomes more valuable as more people use it. Network effect explained If you own a telephone, but no one else does, the good is of no value. As more people join the telephone network, the more valuable the telephone becomes to yourself. If you buy a …
Comparative advantage occurs when one country can produce a good or service at a lower opportunity cost than another. This means a country can produce a good relatively cheaper than other countries The theory of comparative advantage states that if countries specialise in producing goods where they have a lower opportunity cost – then there …