Definition An economic good is a good or service that has a benefit (utility) to society. Also, economic goods have a degree of scarcity and therefore an opportunity cost. This is in contrast to a free good (like air, sea, water) where there is no opportunity cost – but abundance. Free goods cannot be traded …
“Nothing is so permanent as a temporary government program.” Milton Friedman, “Tyranny of the Status Quo,” (1984) p. 115 Friedman was a free-market economist critical of government intervention. With this quote, he was making the point that government intervention can invariably lead to government failure and inefficient use of resources. One example, Friedman used was …
Definition of Productive efficiency Productive efficiency is concerned with producing goods and services with the optimal combination of inputs to produce maximum output for the minimum cost. To be productively efficient means the economy must be producing on its production possibility frontier. (i.e. it is impossible to produce more of one good without producing less …
The tax burden refers to the share of GDP that is collected in different forms of tax within an economy. For example, in an economy with a size of £1,000bn – if the government collects tax of £300bn, then the tax burden will be 30%. The tax burden gives a strong guide to the extent …
The fundamental economic problem is the issue of scarcity and how best to produce and distribute these scare resources. Scarcity means there is a finite supply of goods and raw materials. Finite resources mean they are limited and can run out. Unlimited wants mean that there is no end to the quantity of goods and …
Summary Education has positive benefits for the rest of society. If university education is left to market forces, there may be under-provision, and the economy may suffer from a lack of skilled graduates. Furthermore, in a free market, higher education would become the preserve of wealthy families who can afford to send their children to …
A look at factors that determine an individuals supply of labour and the market supply of labour. Higher wages usually will encourage a worker to supply more labour because work is more attractive compared to leisure. Therefore the supply curve for labour tends to be upwardly sloping. However, a worker isn’t just interested in earning …