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economics 101 terms

By November 27, 2020 No Comments

Terms in this set (125) economics . The experience of countries that have pursued this Utopian ideal by substituting domestic production for imports is an unhappy one. Fingers have been pointed at the currency peg adopted by some countries, and a reduction of capital controls in the years before the crisis. Want more from The Economist? Finding a way to end agricultural support had become by far the biggest remaining challenge for those trying to negotiate global free trade. Appellation . The common types of business competition. If you enjoyed this page, please consider bookmarking Simplicable. In 2003, rich countries together spent over $300 billion a year supporting their farmers, more than six times what they spent on foreign AID. Gravity. The other is the capital asset pricing model. This was the approach adopted by the EU when it set up its Common Agricultural Policy. All rights reserved. With loans that are not amortised, the borrower pays only interest during the period of the loan and then repays the sum borrowed in full. A number that is calculated to summarise a group of numbers. An English auction is the most familiar. If one person, firm or country can produce more of something with the same amount of effort and resources, they have an absolute advantage over other producers. But in recent years they have played a growing role in other parts of the economy, ranging from the allocation of government-controlled broadcasting bandwidth to the awarding of work to subcontractors by governments and big firms using competitive tendering, and even more recently the sale of goods over the Internet. In the 1990s American antitrust policy became somewhat more interventionist. A definition of organic growth with examples. Visit The Economist e-store and you’ll find a range of carefully selected products for business and pleasure, Economist books and diaries, and much more. Adverse Selection . Some kinds of arbitrage are completely risk-free-this is pure arbitrage. In practice, this means the average risk of that group. However, self-interest does not necessarily mean selfish. Flashcards. One way to reduce agency costs is for the principal to monitor what the agent does to make sure it is what he has been hired to do. The following are common terms related to economics. Ideally, insurance premiums should be set according to the risk of a randomly selected person in the insured slice of the population (55-year-old male smokers, say). Spell. Today, a lot of so called arbitrage, much of it done by hedge funds, involves assets that have some similarities but are not identical. Holding an auction can be an extremely efficient way for a seller to set the price of its products, especially if it does not have much information about how much people may be willing to pay for them. The owners would like managers to run the firm in ways that maximise the value of their shares, whereas the managers' priority may be, say, to build a business empire through rapid expansion and mergers and acquisitions, which may not increase their firm's share price. This kind of asymmetry can distort people's incentives and result in significant inefficiencies. This has reflected different ideas about what constitutes a monopoly and, where there is one, what sorts of behaviour are abusive. Economics an area of social studies which studies and measures how people make choices to satisfy unlimited wants and needs with the limited resources available to them. It includes a variety of models, principles and techniques that can be used to describe business and society. Some economic models in the field of behavioural economics assume that self-interested individuals behave altruistically because they get some benefit, or utility, from doing so. There are three levels of economics, namely: macroeconomics, microeconomics, and home economics. A government selling broadcasting licences does not know what buyers are prepared to pay for them; a lender does not know how likely a borrower is to repay; a used-car seller knows more about the quality of the car being sold than do potential buyers. Animal Spirits . Sometimes these will be identical assets in different markets, for instance, shares in a company listed on both the London Stock Exchange and New York Stock Exchange. The running down or payment of a loan by instalments. Economics A-Z is adapted from "Essential Economics", by Matthew Bishop - Bloomberg Press; Economist Books. A definition of financial market with examples. Many firms advertise their goods or services, but are they wasting economic resources? In the banking system alone, corporate loans equivalent to around half of one year's GDP went bad - a destruction of savings on a scale more usually associated with a full-scale war. An overview of Regression Toward The Mean. Transactions involving asymmetric (or private) information are everywhere. The most popular articles on Simplicable in the past day. The idea that a country should be self-sufficient and not take part in international trade. See, for example, Enron. The total value of international trade in agriculture has risen steadily. Indeed, those that have tried to do so have condemned themselves to inefficiency and comparative poverty, compared with countries that engage in international trade. Farming, forestry and fishing in 1913 accounted for 28% of employment in the United States, 41% in France and 60% in Japan, but only 12% in the UK. Often the assets being arbitraged will be identical in a more complicated way, for example, they will be different sorts of financial securities that are each exposed to identical risks. perfect competition A situation where numerous small firms producing identical products compete against each other in a given industry. An example is a repayment mortgage on a house, which is amortised by making monthly payments that over a pre-agreed period of time cover the value of the loan plus interest. Either way, there is much economic literature about charity, international aid, public spending and redistributive taxation. PLAY. Heavy spending on advertising may also create a barrier to entry, as a firm entering the market would have to spend a lot on advertising too. The definition of imperialism with examples. A brand of neo-classical economics established in Vienna during the late 19th century and the first half of the 20th century. Farmers may be required to set aside some of their land in return for this support. This is one of two influential economic theories of how assets are priced in the financial markets. This can create big problems for policymakers if they are trying to set a macroeconomic policy that works for both the area affected by the shock and the unaffected area.

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