Automation refers to the implementation of technology that reduces the need for manual labour and allows technology to make automatic decisions based on computer algorithms. Automation usually involves replacing workers with computer technology, leading to higher labour productivity. The advantage for firms is that it can reduce the cost of running a business. It may …
Definition of autonomous consumption: This is the level of consumption which does not depend on income. The argument is that even with zero income you still need to buy enough food to eat – either through borrowing or running down savings. Autonomous consumption in the Keynesian model In the Keynesian model of aggregate expenditure, autonomous …
Average cost (AC) is the total cost (TC) divided by quantity. AC= TC/Q Average variable cost (AVC) is the total variable cost (VC) divided by quantity AVC = VC/Q FC = Fixed costs – not changing with output VC = Variable costs – which do change with output TC Total costs = FC+VC Short-run average …
This is a policy of setting prices close to average cost. It is a way to maximise sales, whilst maintaining normal profits. It is sometimes known as sales maximisation. It will be used by firms who are seeking to increase market share and who don’t seek to maximise profits. Average cost pricing will occur in …
Definition of Avoidable Cost: A cost that can be avoided by not producing a particular good. For example, if you are building cars, avoidable costs would be the raw materials. If you stopped producing a car, you would no longer have to pay for the raw materials such as steel and aluminium. However, other costs …
A typical supply curve shows an increase in supply as wages rise. It slopes from left to right. However, in labour markets, we can often witness a backward bending supply curve. This means after a certain point, higher wages can lead to a decline in labour supply. This occurs when higher wages encourage workers to …
Definition The Balance of Payments shows a countries transactions with the rest of the world. It notes inflows and outflows of money and categorises them into different sections. The two sections of the Balance of Payments are: Current Account. – Trade in goods/services/investment incomes/transfers) Financial (Capital) account. – Foreign direct investment, capital flows, portfolio investment Balance …
Definition trade balance: The balance of trade measures the net exports of goods and services (NX). It is the value of exports – the value of imports. It forms the major component of the current account, although it ignores international investment flows and current transfers. The balance of trade refers to both trade in goods (visibles) …