- Industry: Economy; Printing & publishing
- Number of terms: 15233
- Number of blossaries: 1
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Economics that describes the world as it is, rather than trying to change it. The opposite of normative economics, which suggests policies for increasing economic welfare.
Industry:Economy
Charging low prices now so you can charge much higher prices later. The predator charges so little that it may sustain losses over a period of time, in the hope that its rivals will be driven out of business. Clearly, this strategy makes sense only if the predatory firm is able eventually to establish a monopoly. Some advocates of anti-dumping policies say that cheap imports are examples of predatory pricing. In practice, the evidence gives little support for this view. Indeed, in general, predatory pricing is quite rare. It is certainly much less common in practice than it might appear from the propaganda of firms that are under pricing pressure from more efficient competitors.
Industry:Economy
A poverty trap is "any self-reinforcing mechanism which causes poverty to persist." If it persists from generation to generation, the trap begins to reinforce itself if steps are not taken to break the cycle.
Industry:Economy
At the beginning of the 20th century the population of the world was 1. 7 billion. At the end of that century, it had soared to 6 billion. Recent estimates suggest that it will be nearly 8 billion by 2025 and 9. 3 billion by 2050. Almost all of this increase is forecast to occur in the developing regions of Africa, Asia and Latin America. For what economists have had to say about this, see demographics.
Industry:Economy
A crude method of judging whether shares are cheap or expensive; the ratio of the market price of a share to the company’s earnings (profit) per share. The higher the price/earnings (P/E) ratio, the more investors are buying a company’s shares in the expectation that it will make larger profits in future than now. In other words, the higher the P/E ratio, the more optimistic investors are being.
Industry:Economy
The most competitive market imaginable. Perfect competition is rare and may not even exist. It is so competitive that any individual buyer or seller has a negligible impact on the market price. Products are homogeneous. Information is perfect. Everybody is a price taker. Firms earn only normal profit, the bare minimum profit necessary to keep them in business. If firms earn more than that (excess profits) the absence of barriers to entry means that other firms will enter the market and drive the price level down until there are only normal profits to be made. Output will be maximized and price minimized. Contrast with monopolistic competition, oligopoly and, above all, monopoly.
Industry:Economy
On September 22nd 1985, finance ministers from the world's five biggest economies - the United States, Japan, West Germany, France and the UK - announced the Plaza Accord at the eponymous New York hotel. Each country made specific promises on economic policy: the United States pledged to cut the federal deficit, Japan promised a looser monetary policy and a range of financial-sector reforms, and Germany proposed tax cuts. All countries agreed to intervene in currency markets as necessary to get the dollar down. Perhaps not surprisingly, not all the promises were kept (least of all the American one on deficit cutting), but even so the plan turned out to be spectacularly successful. By the end of 1987, the dollar had fallen by 54% against both the D-mark and the yen from its peak in February 1985. This sharp drop led to a new fear: of an uncontrolled dollar plunge. So in 1987 another big international plan, the Louvre Accord, was hatched to stabilize the dollar. Again specific policy pledges were made (the United States to tighten fiscal policy, Japan to loosen monetary policy). Again the participants promised currency intervention if major currencies moved outside an agreed, but unpublished, set of ranges. The dollar promptly rose.
Industry:Economy
Part of the “ile” family that signposts positions on a scale of numbers (see also quartile). The top percentile on, say, the distribution of income, is the richest 1% of the population.
Industry:Economy
Named after Arthur Pigou (1877–1959), a sort of wealth effect resulting from deflation. A fall in the price level increases the real value of people’s savings, making them feel wealthier and thus causing them to spend more. This increase in demand can lead to higher employment.
Industry:Economy
In 1899 the commissioner of the American Office of Patents recommended that his office be abolished because “everything that can be invented has been invented”. The fact that there has been so much innovation during the subsequent 100 years may owe something to the existence of patents. Economists reckon that if people are going to spend the time and money needed to think up and develop new products, they need to be fairly confident that if the idea works they will earn a decent profit. Patents help achieve this by granting the inventor a temporary monopoly over the idea, to stop it being stolen by imitators who have not borne any of the development risk and costs. Like any monopoly, patents create inefficiency because of the lack of competition to produce and sell the product. So economists debate how long patent protection should last. There is also debate about which sorts of innovation require the encouragement of a potential monopoly to make them happen. Furthermore, the pace of innovation in some industries has sharply reduced the number of years during which a patent is valuable. Some economists say that this shows that patents do not play a large part in the process of innovation.
Industry:Economy
