Arbitrage occurs when an investor can make a profit from simultaneously buying and selling a commodity in two different markets. For example, gold may be traded on both New York and Tokyo stock exchanges. If the market price temporarily diverges and gold becomes cheaper on Japanese markets, then an arbitrageur could buy in Tokyo and …
Capital goods are fixed assets which are used in the productive process in order to produce a finished ‘consumer’ good. Capital goods are not bought for their own utility; they are bought in order to be used in the productive process. Examples of Capital Goods Factories Offices Machines Printing press Combine harvester Assembly line In …
Definition of composite demand Demand for a good that has multiple different uses. e.g. People may demand oil because it can be used to create either petrol or plastics. Examples of composite demand People may demand wheat for producing bread, biofuels or feeding livestock. Land can be used for farming or building houses. Steel could …
Explanation of why government intervention to try and correct market failure may result in government failure. Summary Market failure is a socially inefficient allocation of resources in a free market. Market failure can occur for various reasons Externalities Demerit/merit goods Public goods Monopoly power Government failure occurs when government intervention results in a more inefficient …
Definition and explanation of different types of goods Free good – no opportunity cost Private – Good with opportunity cost, rivalry and excludable Public good – non-rivalry, non-excludable Free Good A free good is a good needed by society but available with no opportunity cost. It is a good without scarcity. For example, air is …
Definition of a Veblen Good. A Veblen good is a good where demand rises as price rises because people feel its higher price reflects greater status. Readers Question: I once ran across a term and now can’t find it. It’s the economic theory that consumers will purchase a product or service which cost more money …
Definition of beggar my neighbour policy: This is an economic policy that seeks to promote a country’s economy at the expense of another country. It assumes that economics is a zero-sum game. In other words, if you want more income, you have to take it from other countries. It should be noted that most economists …
Q. Use economics and political theory to explain why the fire and rescue service should be provided by the state. I don’t want the answer….I just don’t understand what this means. This revolves around a fundamental debate in economics – How much should the government intervene in the economy? Ideally, goods and services would be …