Definition of social cost – Social cost is the total cost to society. It includes private costs plus any external costs. Example of driving to work Costs of paying for petrol (personal cost) Costs of increased congestion (external cost) Pollution and worse air quality (external cost) The social cost includes all the above. (Petrol + …
Economic growth means an increase in national income/national output. If we have a slower rate of economic growth – living standards will increase at a slower rate. For example, in the post-war period, western economies grew at 2.5% to 4.% per year. However, since the early 2000s, growth rates have slowed down. This process of …
Definition: The environmental Kuznets curve suggests that economic development initially leads to a deterioration in the environment, but after a certain level of economic growth, a society begins to improve its relationship with the environment and levels of environmental degradation reduces. From a very simplistic viewpoint, it can suggest that economic growth is good for …
Supernormal profit is all the excess profit a firm makes above the minimum return necessary to keep a firm in business. Supernormal profit is calculated by Total Revenue – Total Costs (where total cost includes all fixed and variable costs, plus minimum income necessary for the owner to be happy in that business.) Normal profit …
The government may wish to regulate monopolies to protect the interests of consumers. For example, monopolies have the market power to set prices higher than in competitive markets. The government can regulate monopolies through: Price capping – limiting price increases Regulation of mergers Breaking up monopolies Investigations into cartels and unfair practises Nationalisation – government …
Economic growth means an increase in real GDP – which means an increase in the value of national output/national expenditure. Economic growth is an important macro-economic objective because it enables increased living standards, improved tax revenues and helps to create new jobs. Aspects of economic growth Causes of economic growth Costs/benefits of economic growth Policies …
Negative externalities occur when the consumption or production of a good causes a harmful effect to a third party. Examples of negative externalities Loud music. If you play loud music at night, your neighbour may not be able to sleep. Pollution. If you produce chemicals and cause pollution as a side effect, then local fishermen …
A look at the main macroeconomic objectives (economic growth, inflation and unemployment, government borrowing) and possible conflicts between these different macro-economic objectives. The main macro-economic objectives Economic growth – positive and sustainable growth (The UK, long-run trend rate is around 2.5%) Low inflation (UK target 2% +/-1) – Low unemployment / Full employment (e.g. around …