- Industry: Economy; Printing & publishing
- Number of terms: 15233
- Number of blossaries: 1
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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
Over their lives, people try to spread their spending more evenly than their income. The permanent income hypothesis, developed by Milton Friedman, says that a person’s spending decisions are guided by what they think over their lifetime will be their average (also known as permanent) income. A sharp increase in short-term income will not result in an equally sharp increase in short-term consumption. What if somebody unexpectedly comes into money, say by winning the lottery? The permanent income hypothesis suggests that people will save most of any such windfall gains. Reality may be somewhat different. (See life-cycle hypothesis. )
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
How to win at Twister? No, but maybe at monopoly. Game theory is a technique for analyzing how people, firms and governments should behave in strategic situations (in which they must interact with each other), and in deciding what to do must take into account what others are likely to do and how others might respond to what they do. For instance, competition between two firms can be analyzed as a game in which firms play to achieve a long-term competitive advantage (perhaps even a monopoly). The theory helps each firm to develop its optimal strategy for, say, pricing its products and deciding how much to produce; it can help the firm to anticipate in advance what its competitor will do and shows how best to respond if the competitor does something unexpected. It is particularly useful for understanding behavior in monopolistic competition. In game theory, which can be used to describe anything from wage negotiations to arms races, a dominant strategy is one that will deliver the best results for the player, regardless of what anybody else does. One finding of game theory is that there may be a large first-mover advantage for companies that beat their rivals into a new market or come up with an innovation. One special case identified by the theory is the zero-sum game, where players see that the total winnings are fixed; for some to do well, others must lose. Far better is the positive-sum game, in which competitive interaction has the potential to make all the players richer. Another problem analyzed by game theorists is the prisoners' dilemma. (See also Nash equilibrium. )
Industry:Economy
A form of protectionism. A country imposes limits on the number of goods that can be imported from another country. For instance, France may limit the number of cars imported from Japan to, say, 20,000 a year. As a result of limiting supply, the price of the imported good is higher than it would be under free trade, thus making life easier for domestic producers.
Industry:Economy
Market failure? Not necessarily. Usually a queue reflects a price that is set too low, so that demand exceeds supply, so some customers have to wait to buy the product. But a queue may also be the result of deliberate rationing by a producer, perhaps to attract attention – by a restaurant that wants to appear popular, say. Customers may regard a queue, such as a waiting list for health treatment, as a fairer way to distribute the product than using the price mechanism.
Industry:Economy
Using private firms to carry out aspects of government. This has become increasingly popular since the early 1980s as governments have tried to obtain some of the benefits of the private sector without going as far as full privatization. The gains have been greatest when services have been allocated to private firms through competitive bidding. They have been smallest, and arguably even negative, in cases when the main contribution of the private firm has been to raise finance. That is because governments can usually borrow more cheaply than private firms, so when they ask them to raise money the question that springs to mind is: are they doing this to make their public borrowing look smaller?
Industry:Economy
A firm providing essential services to the public, such as water, electricity and postal services, usually involving elements of natural monopoly. Food is essential, but because it is provided in a competitive market, food supply is not usually regarded as a public utility. Because public utilities have some monopoly power, they are typically subject to some regulation by government, such as price controls and perhaps an obligation to provide their services to everybody, even to those who cannot afford to pay a market price (the universal service obligation). Public utilities are often owned by the state, although this has become less common as a result of privatization.
Industry:Economy
Spending by national and local government and some government-backed institutions. See fiscal policy, golden rule and budget.
Industry:Economy
Things that can be consumed by everybody in a society, or nobody at all. They have three characteristics. They are:
* non-rival – one person consuming them does not stop another person consuming them;
* non-excludable – if one person can consume them, it is impossible to stop another person consuming them;
* non-rejectable – people cannot choose not to consume them even if they want to. Examples include clean air, a national defense system and the judiciary. The combination of non-rivalry and non-excludability means that it can be hard to get people to pay to consume them, so they might not be provided at all if left to market forces. Thus public goods are regarded as an example of market failure, and in most countries they are provided at least in part by government and paid for through compulsory taxation. (See also global public goods. )
Industry:Economy
