- Industry: Economy; Printing & publishing
- Number of terms: 15233
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The life and soul of the capitalist party. Somebody who has the idea and enterprise to mix together the other factors of production to produce something valuable. An entrepreneur must be willing to take a risk in pursuit of a profit.
Industry:Economy
One of the factors of production, along with land, labor and capital. The creative juices of capitalism; the animal spirits of the entrepreneur.
Industry:Economy
In a word, all that was wrong with American capitalism at the start of the 21st century. Until late 2001, Enron, an energy company turned financial powerhouse based in Houston, Texas, had been one of the most admired firms in the United States and the world. It was praised for everything from pioneering energy trading via the internet to its innovative corporate culture and its system of employment evaluation by peer review, which resulted in those that were not rated by their peers being fired. However, revelations of accounting fraud by the firm led to its bankruptcy, prompting what was widely described as a crisis of confidence in American capitalism. This, as well as further scandals involving accounting fraud (WorldCom) and other dubious practices (many by Wall Street firms), resulted in efforts to reform corporate governance, the legal liability of company bosses, accounting, Wall Street research and regulation.
Industry:Economy
People generally spend a smaller share of their budget on food as their income rises. Ernst Engel, a Russian statistician, first made this observation in 1857. The reason is that food is a necessity, which poor people have to buy. As people get richer they can afford better-quality food, so their food spending may increase, but they can also afford luxuries beyond the budgets of poor people. Hence the share of food in total spending falls as incomes grow.
Industry:Economy
A measure of the responsiveness of one variable to changes in another. Economists have identified four main types. * price elasticity measures how much the quantity of supply of a good, or demand for it, changes if its price changes. If the percentage change in quantity is more than the percentage change in price, the good is price elastic; if it is less, the good is inelastic. * income elasticity of demand measures how the quantity demanded changes when income increases. * Cross-elasticity shows how the demand for one good (say, coffee) changes when the price of another good (say, tea) changes. If they are substitute goods (tea and coffee) the cross-elasticity will be positive: an increase in the price of tea will increase demand for coffee. If they are complementary goods (tea and teapots) the cross-elasticity will be negative. If they are unrelated (tea and oil) the cross-elasticity will be zero. * Elasticity of substitution describes how easily one input in the production process, such as labor, can be substituted for another, such as machinery.
Industry:Economy
You can’t beat the market. The efficient market hypothesis says that the price of a financial asset reflects all the information available and responds only to unexpected news. Thus prices can be regarded as optimal estimates of true investment value at all times. It is impossible for investors to predict whether the price will move up or down (future price movements are likely to follow a random walk), so on average an investor is unlikely to beat the market. This belief underpins ¬arbitrage pricing theory, the capital asset pricing model and concepts such as beta. The hypothesis had few critics among financial economists during the 1960s and 1970s, but it has come under increasing attack since then. The fact that financial prices were far more volatile than appeared to be justified by new information, and that financial bubbles sometimes formed, led economists to question the theory. Behavioral economics has challenged one of the main sources of market efficiency, the idea that all investors are fully rational homo economicus. Some economists have noted the fact that information gathering is a costly process, so it is unlikely that all available information will be reflected in prices. Others have pointed to the fact that arbitrage can become more costly, and thus less likely, the further away from fundamentals prices move. The efficient market hypothesis is now one of the most controversial and well-studied propositions in economics, although no consensus has been reached on which markets, if any, are efficient. However, even if the ideal does not exist, the efficient market hypothesis is useful in judging the relative efficiency of one market compared with another.
Industry:Economy
Wages that are set at above the market clearing rate so as to encourage workers to increase their productivity.
Industry:Economy
Getting the most out of the resources used. For a particular sort of efficiency often favored by economists, see Pareto efficient.
Industry:Economy
Bigger is better. In many industries, as output increases, the average cost of each unit produced falls. One reason is that overheads and other fixed costs can be spread over more units of output. However, getting bigger can also increase average costs (diseconomies of scale) because it is more difficult to manage a big operation, for instance.
Industry:Economy
