The traditional theory of the firm is based on classical economics and the work of early economists, such as David Ricardo and Leon Walras. The basic assumptions of the traditional theory of the firm are Firms seek to maximise profits. Information symmetry. Owners and workers of the firm have access to good information which enables …
Economics is a broad subject concerned with the optimal distribution of resources in society. Within the subject, there are several different branches which focus on different aspects. Also, there are different schools of thought which generally have different views on aspects of economics. The first way to split economics is microeconomics and macroeconomics. Microeconomics – …
Collusion involves firms coming to an agreement to artificially raise prices and increase profitability at the expense of consumers. Collusion can lead to significant welfare loss and governments have sought to prevent it through a variety of policies, including: Fines for firms found guilty of collusion Fines and jail sentences for company executives who are …
Summary – impact of devaluation in Yuan If the Yuan falls in value, Chinese exports will become cheaper compared to other countries (e.g. US, India, EU) A falling Yuan will increase demand for Chinese goods contributing to higher growth in China. However, a fall in the Yuan will make US and Indian goods relatively more …
Definition: Underemployment is defined as a situation where people are working fewer hours than they wish; e.g. you would like to work 40 hours a week, but the firm only gives you 30 hours. Underemployment may also refer to the fact workers accept jobs that don’t utilise their skills. e.g. graduate working in McDonald’s may …
In recent years, there has been a growing trend toward using electronic payments rather than physical cash. This trend to a cashless society is likely to be accelerated by the Coronavirus which gives an impetus to avoiding unnecessary physical transactions. There are several advantages of a cashless society, such as a lower risk of violent …
There are a few different reasons firms may put up prices, but in each case, a business will weigh up the pros and cons. Potential reasons for increasing prices An increase in costs of production. A general increase in the price level (inflation) Competitors are increasing the price. Firms believe demand has become more price …
Oil prices tend to be volatile for a few reasons. Demand varies with the economic cycle. Changes in the price of oil can be magnified by speculators who buy forward contracts Supply is quite inelastic in the short-term. Therefore, a small change in demand can have a significant impact on the price. Firms and consumers …