Intertemporal equilibrium is a concept which states economic agents make decisions taking into account the present and future time periods. At a particular point in time an economy may not be in equilibrium because individuals do not just decide based on the current situation, but also take into account for what may happen in the …
Involuntary unemployment is a situation where workers are willing to work at the market wage or just below but are prevented by factors beyond their control. These factors could include deficiency of aggregate demand, labour market inflexibilities, implicit wage bargaining and efficiency wage theory. In Keynesian theory, involuntary unemployment is associated with insufficient aggregate demand …
An isoquant shows all combination of factors that produce a certain output An isocost show all combinations of factors that cost the same amount. Isocosts and isoquants can show the optimal combination of factors of production to produce the maximum output at minimum cost. Definition isoquant An isoquant shows all the combination of two factors …
Joint supply occurs when two goods are produced together from the same origin / raw material. Examples of joint supply If you grow wheat, you get both wheat and straw. Producing refined flour creates bran as a byproduct. Bran can be used as fibre ingredient or using in compost If you increase the supply of …
Definition of Kaldor–Hicks efficiency Pareto efficiency occurs where at least one party benefits and nobody is made worse off. Kaldor Hicks states that a decision can be more efficient – as long as there is a net gain to society – enabling any potential losers to be compensated from the net gain. Example of Kaldor …
A kinked demand curve occurs when the demand curve is not a straight line but has a different elasticity for higher and lower prices. One example of a kinked demand curve is the model for an oligopoly. This model of oligopoly suggests that prices are rigid and that firms will face different effects for both …
Labour intensive refers to a production process where labour costs are the largest component. Labour intensive implies that capital (machines/factories) are a small percentage of the final cost. Labour intensity is the percentage of labour which is used in the production process. Labour intensive industries Certain industries and types of jobs tend to be more …
Definition of leverage ratio The leverage ratio is the proportion of debts that a bank has compared to its equity/capital. There are different leverage ratios such as Debt to Equity = Total debt / Shareholders Equity Debt to Capital = Total debt / Capital (debt+equity) Debt to Assets = Total debt / Assets Leverage ratios …