Consumer Sovereignty
…consumer sovereignty. The consumer is free to buy any commodity and in whatever quantities his likes. However, in a command economy, the state or central government decides what to produce….
…consumer sovereignty. The consumer is free to buy any commodity and in whatever quantities his likes. However, in a command economy, the state or central government decides what to produce….
Aggregate demand (AD) is the total demand for final goods and services in a given economy at a given time and price level. There are four components of Aggregate Demand…
…decrease in the price of compliments, then the demand for its compliments will increase. Complementary goods are goods you usually buy together, like bread and butter, tea and milk. If…
…to changes in their income when it comes to buying these widgets. The demand does not fall significantly with a fall in income. Engel Curve Engel Curves show how demand…
…(the agents) and voters (the principals) is an example of the Principal Agent Problem. Principal Agent Problem Examples A widespread real-life example of the principal agent problem is the way…
…number called the common ratio. For example, in the sequence 2, 10, 50, 250, 1250, the common ratio is 5. Additionally, he stated that food production increases in arithmetic progression….
…consumer has no preference for either combination of goods on the same line because they are understood to provide the same level of utility to the consumer. Indifference Curve Example…
…down all the cable themselves, which is pretty expensive. 2. Economies of Scale Competitors can’t compete with other firms that have much lower production costs. Ex: Not many firms will…
…are substitutes. For example: Coke and Pepsi If XED < o, then they are complements. For example: Bread and Butter If XED = 0, then they are unrelated. For example:…
…over-consumed. Negative Externalities of Consumption Example A common example of negative externalities of consumption is the phenomenon of noise pollution. When someone inconsiderately blasts music (“consumes” music) so loudly that…
…used to make decisions on price, output, product development, product promotion and other business scenarios. Game Theory Examples Buyers and sellers negotiating a price Firm and its competitors Auctions Prisoner’s…
…level. The term demand-pull inflation is mostly associated with Keynesian economics. For example, if aggregate demand is rising at 3%, but the productive capacity is only rising at 2%. Thus,…
…higher levels of consumption throughout the economy, increasing prices over time. To describe this process more specifically: consumers experience higher levels of demand for goods and services because there are…
…are representative of their domestic expenditures. Purchasing Power Parity Example For example: A loaf of bread in the US costs $2, and that amount in Indian Rupees is Indian Rupee…
…or certificates of deposits but pays out less than it charges for loans. Functions of Commercial Banks The basic role of a commercial bank is to provide financial services to…
…private company decides to sell stocks to the public for the first time. An important point to remember here is that in the primary market, the buyer directly purchases securities…
…the firm will buy 3 more machines. Example of the Accelerator Effect In 2021, there was a significant shortage of computer chips. This was largely due to COVID-19 where demand…
…sets the average index level (representing the average price level) for the 36 months covering the years 1982, 1983, and 1984 equal to 100; then measures changes in relation to…
…common characteristics of developing economies. Common Characteristics of Developing Economies 1. Low Per Capita Real Income Low per capita real income is one of the most defining characteristics of developing…
…legal tenders but only one is freely coined. For example, this system was prevalent in France, Germany, or the United States after 1873). Or trade money where both metals are…
…unions and company management come to a collective bargaining agreement. Collective Bargaining Agreements A collective bargaining agreement will typically include elements such as: Working conditions Conditions of employment Work hours…
…flow of income. Here are some examples of injections: Investment (I). Money invested by firms in purchasing capital stock. Exports (X). Money coming from abroad to buy domestically produced goods….
…market where people exchange currencies for other currencies. In this market, all buyers are also sellers since they are buying in one currency and selling another. Types of Exchange Rate…
…services. Stagflation is commonly triggered by sharp increases in commodity prices. What Causes Stagflation? Stagflation has a number of potential causes, including: Government expansion of the money supply: When, for…
…a decline in poverty levels. The Relationship between Inequality and Economic Growth Poverty has come down most when inequality has fallen, and there is high economic growth. Initial low levels…
…can’t fall below zero, the central bank can’t use expansionary fiscal policy. 5. Exports However, exports become more competitive abroad, so net exports increases. Example of Deflation in the United…
…a high income but spend it all so that they have a low level of wealth or a high level of wealth without any income at all. The Lorenz curve…
…decline as compared to the second stage. As an example, Mexico began to arrive at stage three at the beginning of the 21st century. Additionally, China used its One-Child Policy…
…disadvantages of direct finance. Financial Intermediaries Examples 1. Insurance Companies Insurance companies offer insurance to help spread the risk of default. You would go to an insurance company if you…
…at: prateek@intelligenteconomist.com This site is ideal for: Anyone seeking a free (and high-quality) education on important economics topics. Teachers who want to supplement their material for their class or curriculum….
…of Demand. For example, for staple foods like rice, when the price of rice rises, people with lower incomes will spend less on other superior foods and instead buy more…
…previous periods. Nobody buys at Price greater than Pc because consumers expect future price cuts. To sell some units today, it must decrease the price to induce consumers to buy….
…can be sold for. The most common example of a price floor is the minimum wage. This is the minimum price that employers can pay workers for their labor. The…
…burden of the tax can be divided between the buyer and the seller. For example, the statewide sales tax in the state of California is 7.25%. A marginal tax rate…
…cross-section of stocks within the portfolio. In complete markets, there is no compensation for idiosyncratic risk—that is it does not matter for its price. For instance, in a complete market…
…that his or her level of his or her utility (satisfaction) remains the same. We assume that any of the five combinations in the table have the same level of…