Readers Question: What is the importance of economics? Economics is concerned with the optimal distribution of resources in society. The subject involves Understanding what happens in markets and the macroeconomy. Examining statistics about the state of the economy and explaining their significance Understanding different policy options and evaluating their likely outcomes. Examples of the importance …
The elasticity of supply measures the responsiveness of a change in quantity supplied to a change in price. If price increases – firms generally find it more profitable to supply a good. So an increase in price leads to higher supply. However, if it is difficult to increase supply (e.g. shortage of capacity, difficulty to …
In economics a shortage occurs when demand is greater than supply, causing unfulfilled demand. A shortage can occur due to Temporary supply constraints, e.g. supply disruption due to weather or accident at a factory. Fixed prices – and unexpected surge in demand, e.g. demand for fuel in cold winter. Government price controls, such as maximum …
A demerit good is defined as a good which can have a negative impact on the consumer – but these damaging effects may be unknown or ignored by the consumer. Demerit goods also usually have negative externalities – where consumption causes a harmful effect on a third party. Examples of demerit goods Alcohol Cigarettes Drugs …
Definition: Trade barriers are government policies which place restrictions on international trade. Trade barriers can either make trade more difficult and expensive (tariff barriers) or prevent trade completely (e.g. trade embargo) Examples of Trade Barriers Tariff Barriers. These are taxes on certain imports. They raise the price of imported goods making imports less competitive. Non-Tariff …
Definition of automation Automation refers to the process of automatically producing goods through the use of robots, control systems and other appliances with a minimal direct human operation. Within manufacturing industries, automation has led to increased labour productivity as fewer workers are needed to produce the same number of manufactured goods. A perceived downside of …
Microeconomics is concerned with the economic decisions and actions of individuals and firms. Within the broad church of microeconomics, there are different theories that emphasise certain assumptions and expectations of economic behaviour. The most important theory is neo-classical theory, which places emphasis on free-markets and the assumption individuals are rational and seek to maximise utility. …
Supply-side policies are government attempts to increase productivity and increase efficiency in the economy. If successful, they will shift aggregate supply (AS) to the right and enable higher economic growth in the long-run. There are two main types of supply-side policies. Free-market supply-side policies involve policies to increase competitiveness and free-market efficiency. For example, privatisation, …