Definition: Decreasing Returns to Scale This occurs when an increase in all inputs (labour/capital) leads to a less than proportional increase in output. For example, if a car firm increases its variable inputs (capital, raw materials and labour) by 50%, but the output of cars, increases by only 35%, then we say there are decreasing …
This is an aspect of consumer behaviour theory which states consumers will stick with regular spending patterns and we are much more likely to choose the easiest option we are given In the real world, we often purchase the goods/services that are presented as the automatic default choice. – We don’t take option to opt-out …
Definition: defined benefit scheme This is when the benefit payments are defined and fixed in advance. It means that if the pension fund experiences a poor performance the recipient is guaranteed a certain income. This means that the employee or government bears the brunt of any under-performance in the pension investment fund. However, it also …
There are two main classifications of poverty: Absolute poverty – is a condition where household income is below a necessary level to maintain basic living standards (food, shelter, housing). This condition makes it possible to compare between different countries and also over time. Relative poverty – A condition where household income is a certain percentage …
Comparative advantage occurs when one country can produce a good or service at a lower opportunity cost than another. This means a country can produce a good relatively cheaper than other countries The theory of comparative advantage states that if countries specialise in producing goods where they have a lower opportunity cost – then there …
Deregulation involves removing government legislation and laws in a particular market. Deregulation often refers to removing barriers to competition. For example, in the UK, many industries used to be a state monopoly – BT, British Gas, British Rail, local bus services, Royal Mail. However, deregulation allowed new firms to enter these markets and reduce the …
The Housing Market refers to the supply and demand for houses, usually in a particular country or region. A key element of the housing market is the average house prices and trend in house prices. Definitions related to housing market UK nominal house prices – actually monetary value – not adjusted for inflation Real house …
Deflation Definition Deflation is defined as a decrease in the general price level. It is a negative inflation rate. Deflation means the value of money will increase. Deflation is often associated with periods of negative or stagnant economic growth (Great Depression, Japanese economy in the 1990s, early 2000s). In fact, deflation is often used to …