The Washington Consensus refers to a set of broadly free market economic ideas, supported by prominent economists and international organisations, such as the IMF, the World Bank, the EU and the US. Essentially, the Washington consensus advocates, free trade, floating exchange rates, free markets and macroeconomic stability. The ten principles originally stated by John Williamson …
What are the advantages and disadvantages for a developing economy, such as Ghana if it is dependent on primary products? Definition of Primary products: Raw materials and resources used in the productive process. Examples include metals, agricultural products and minerals. Advantages of Producing Primary Products For many developing economies, their main comparative advantage will be …
Discrimination in the labour market occurs when employers make decisions on wages and employment based on prejudices, such as race, gender, religion. It can lead to variations in wages for the same job and different employment rates. Kenneth Arrow defined discrimination as: “the valuation in the market-place of personal characteristics of the worker that are …
Profit maximisation is an assumption of classical economics. One can easily understand the logic of pursuing profit maximisation. Profits enable greater wages and dividends for the entrepreneurs who set up the company. Profit can be used to finance investment in expanding the company Profit provides a fall back for difficult times However, despite the benefits …
Readers Question: how can the government avoid public sector failure? Firstly, it makes a change to consider a question like this. Usually, the question is – Why is the government inefficient? Why do we get government failure? Should we privatise public services? But, here we can examine whether the tendency to government failure can be …
Laissez-faire economics is defined as a situation with minimal government intervention. Under laissez-faire, governments and regulators ‘leave alone’ private firms to allow them to make decisions about production and output. In particular, laissez-faire involves zero / minimal government intervention on issues such as regulation, taxes and tariffs. Comparison between Laissez-Faire economics and social democracy Origin …
Monopsony occurs when there is one buyer and many sellers. In the labour market, a monopsony occurs with one employer and many workers wanting to gain employment. Arguably, monopsony power enables firms to ‘exploit’ workers by setting lower wages and employing fewer workers than in a competitive market. To visualise monopsony power, we could think …
Diseconomies of scale occur when long-run average costs start to rise with increased output. Economies of scale occur up to Q1. After output Q1, long-run average costs start to rise. Reasons for dis-economies of scale Poor communication in a large firm. It can be hard to communicate ideas and new working practices. Alienation: Working in …