If countries specialize in the production of certain goods and then trade with other countries there will be an increase in economic welfare. Countries will specialize in those goods where they have a comparative advantage. Absolute Advantage This occurs when one country can produce a good with fewer resources than another. E.G. if USA can …
To overcome market failure, the government may place laws and regulations which prohibit certain behaviour and actions. Regulations can limit or prevent: Demerit goods (alcohol, drugs, smoking) Goods with negative externalities (burning of coal) Abuse of monopoly power. Exploitation of labour. Examples of laws and regulation Legal age for smoking (18) Prohibition on certain classes …
Definition of an economic boom A boom is a period of rapid economic expansion resulting in higher GDP, lower unemployment, a higher inflation rate and rising asset prices. Booms usually suggest the economy is overheating creating a positive output gap and inflationary pressures. A boom suggests the economy is growing at a faster rate than …
After sales service refers to the treatment of customers in the aftermath of a sale. For example, after being sold a bike, after sales service may involve free bike maintenance for a number of weeks. After sales service is an important part of non-price competition often found in oligopoly. After sales service can be a …
Definition The Balance of Payments shows a countries transactions with the rest of the world. It notes inflows and outflows of money and categorises them into different sections. The two sections of the Balance of Payments are: Current Account. – Trade in goods/services/investment incomes/transfers) Financial (Capital) account. – Foreign direct investment, capital flows, portfolio investment Balance …
The infant industry argument states that developing countries are justified to put tariffs on imports if they are seeking to develop new industries and diversify their economy. In particular, there is a justification for placing tariffs on industries where a country has a latent comparative advantage. This means that if they can develop infrastructure and economies …
Definition of Buffer Stock Scheme A buffer stock scheme is a government plan to stabilise prices in volatile markets. This requires intervention in buying and selling. Prices for agricultural products are often volatile because: Supply can vary due to the weather. Demand is inelastic Supply is fixed in the short term See: Why are prices …
Readers Question: Can you please discuss the nature of the current account deficit and the exchange rate in the UK along with the theory that would suggest there is a relationship between the exchange rate and the current account. A current account deficit implies the value of imports of (goods/services/investment incomes) is greater than the …