- Industry: Economy; Printing & publishing
- Number of terms: 15233
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The market value of a company’s shares: the quoted share price multiplied by the total number of shares that the company has issued.
Industry:Economy
The difference made by one extra unit of something. Marginal revenue is the extra revenue earned by selling one more unit of something. The marginal price is how much extra a consumer must pay to buy one extra unit. Marginal utility is how much extra utility a person gets from consuming (or doing) an extra unit of something. The marginal product of labor is how much extra output a firm would get by employing an extra worker, or by getting an existing worker to put in an extra hour on the job. The marginal propensity to consume (or to save) measures by how much a household’s consumption (savings) would increase if its income rose by, say, $1. The marginal tax rate measures how much extra tax you would have to pay if you earned an extra dollar. The marginal cost (or whatever) can be very different from the average cost (or whatever), which simply divides total costs (or whatever) by the total number of units produced (or whatever). A common finding in microeconomics is that small incremental changes can matter enormously. In general, thinking “at the margin” often leads to better economic decision making than thinking about the averages. Alfred Marshall, the father of Neo-classical economics, based many of his theories of economic behavior on marginal rather than average behavior. For instance, given certain plausible assumptions, a profit-maximizing firm will increase production up to the point where marginal revenue equals marginal cost. This is because if marginal revenue exceeded marginal cost, the firm could increase its profit by producing an extra unit of output. Alternatively, if marginal cost exceeded marginal revenue, the firm could increase its profit by producing fewer units of output. In all walks of life, a basic rule of rational economic decision making is: do something only if the marginal utility you get from it exceeds the marginal cost of doing it.
Industry:Economy
Making things like cars or frozen food has shrunk in importance in most developed countries during the past half century as services have grown. In the United States and the UK, the proportion of workers in manufacturing has shrunk since 1900 from around 40% to barely 20%. More than two-thirds of output in OECD countries, and up to four-fifths of employment, is now in the services sector. At the same time, manufacturing has grown in importance in developing countries. Many people think that manufacturing somehow matters more than any other economic activity and is in some way superior to surfing the Internet or cutting somebody’s hair. This is prob¬ably nothing more than nostalgia for times past when making things in factories was what real men did, just as 150 years ago growing things in fields was what real men did. Mostly, the shift from manufacturing to services (as with the earlier shift from agriculture to manufacturing) reflects progress into jobs that create more utility, this time for real women as well as real men, which may explain why it is happening first in richer countries.
Industry:Economy
The big picture: analyzing economy-wide phenomena such as growth, inflation and unemployment. Contrast with microeconomics, the study of the behavior of individual markets, workers, households and firms. Although economists generally separate themselves into distinct macro and micro camps, macroeconomic phenomena are the product of all the microeconomic activity in an economy. The precise relationship between macro and micro is not particularly well understood, which has often made it difficult for a government to deliver well-run macroeconomic policy.
Industry:Economy
Top-down policy by government and central banks, usually intended to maximize growth while keeping down inflation and unemployment. The main instruments of macroeconomic policy are changes in the rate of interest and money supply, known as monetary policy, and changes in taxation and public spending, known as fiscal policy. The fact that unemployment and inflation often rise sharply, and that growth often slows or GDP falls, may be evidence of poorly executed macro¬economic policy. However, business cycles may simply be an unavoidable fact of economic life that macroeconomic policy, however well conducted, can never be sure of conquering.
Industry:Economy
Goods and services that have a high elasticity of demand. When the price of, say, a Caribbean holiday rises, the number of vacations demanded falls sharply. Likewise, demand for Caribbean holidays rises significantly as average income increases, certainly by more than demand for many normal goods. Contrast this with necessities, such as milk or bread, which people usually demand in quite similar quantities whatever their income and whatever the price.
Industry:Economy
A tax that is the same amount for everybody, regardless of income or wealth. Some economists argue that this is the most efficient form of taxation, as it does not distort incentives and thus it has no deadweight cost. This is because each person knows that whatever they do they will have to pay the same amount. It is also cheap to administer, as there is no complex process of measuring each person’s income and assets in order to calculate their tax bill. However, because rich and poor people pay the same, the tax may be perceived as unfair – as Margaret Thatcher found out when she introduced a lump-sum “poll tax”, a decision that was later to play a large part in her ousting as British prime minister.
Industry:Economy
One of the best-known fallacies in economics is the notion that there is a fixed amount of work to be done – a lump of labor – which can be shared out in different ways to create fewer or more jobs. For instance, suppose that everybody worked 10% fewer hours. Firms would need to hire more workers. Hey presto, unemployment would shrink. In 1891, an economist, D. F. Schloss, described such thinking as the lump of labor fallacy because, in reality, the amount of work to be done is not fixed. Government-imposed restrictions on the amount of work people may do can actually reduce the efficiency of the labor market, thereby increasing unemployment. Shorter hours will create more jobs only if weekly pay is also cut (which workers are likely to resist) otherwise costs per unit of output will rise. Not all labor costs vary with the number of hours worked. Fixed costs, such as recruitment and training, can be substantial, so it will cost a firm more to hire two part-time workers than one full-timer. Thus a cut in the working week may raise average costs per unit of output and cause firms to buy fewer total hours of labor. A better way to reduce unemployment may be to stimulate demand and so increase output; another is to make the labor market more flexible, not less.
Industry:Economy
When we are all dead, according to Keynes. Unimpressed by the thrust of classical economics, which said that economies have a long-run tendency to settle in equilibrium at full employment, he wanted economists to try to explain why in the short run economies are so often in disequilibrium, or in equilibrium at high levels of unemployment.
Industry:Economy
The rate of interest that top-quality banks charge each other for loans. As a result, it is often used by banks as a base for calculating the interest rate they charge on other loans. LIBOR is a floating rate, changing all the time.
Industry:Economy
