- Industry: Economy; Printing & publishing
- Number of terms: 15233
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As good as it gets, given the constraints you are operating within. For the concept of optimum to mean anything, there must be both a goal, say, to maximize economic welfare, and a set of constraints, such as an available stock of scarce economic resources. Optimizing is the process of doing the best you can in the circumstances.
Industry:Economy
The true cost of something is what you give up to get it. This includes not only the money spent in buying (or doing) the something, but also the economic benefits (utility) that you did without because you bought (or did) that particular something and thus can no longer buy (or do) something else. For example, the opportunity cost of choosing to train as a lawyer is not merely the tuition fees, price of books, and so on, but also the fact that you are no longer able to spend your time holding down a salaried job or developing your skills as a footballer. These lost opportunities may represent a significant loss of utility. Going for a walk may appear to cost nothing, until you consider the opportunity forgone to use that time earning money. Everything you do has an opportunity cost (see shadow price). Economics is primarily about the efficient use of scarce resources, and the notion of opportunity cost plays a crucial part in ensuring that resources are indeed being used efficiently.
Industry:Economy
Central banks buying and selling securities in the open market, as a way of controlling interest rates or the growth of the money supply. By selling more securities, they can mop up surplus money; buying securities adds to the money supply. The securities traded by central banks are mostly government bonds and treasury bills, although they sometimes buy or sell commercial securities.
Industry:Economy
An economy that allows the unrestricted flow of people, capital, goods and services across its borders; the opposite of a closed economy.
Industry:Economy
Where the usual rules of a person or firm’s home country do not apply. It can be literally offshore, as in the case of investors moving their money to a Caribbean island tax haven. Or it can be merely legally offshore, as in the case of certain financial transactions that take place within, say, the City of London, which are deemed for regulatory purposes to have taken place offshore.
Industry:Economy
When a few firms dominate a market. Often they can together behave as if they were a single monopoly, perhaps by forming a cartel. Or they may collude informally, by preferring gentle non-price competition to a bloody price war. Because what one firm can do depends on what the other firms do, the behavior of oligopolists is hard to predict. When they do compete on price, they may produce as much and charge as little as if they were in a market with perfect competition.
Industry:Economy
At the beginning of the 20th century the population of the world was 1. 7 billion. At the end of that century, it had soared to 6 billion. Recent estimates suggest that it will be nearly 8 billion by 2025 and 9. 3 billion by 2050. Almost all of this increase is forecast to occur in the developing regions of Africa, Asia and Latin America. For what economists have had to say about this, see demographics.
Industry:Economy
The value of anything expressed simply in the money of the day. Since inflation means that money can lose its value over time, nominal figures can be misleading when used to compare values in different periods. It is better to compare their real value, by adjusting the nominal figures to remove the inflationary distortions.
Industry:Economy
A measure used to help decide whether or not to proceed with an investment. Net means that both the costs and benefits of the investment are included. To calculate net present value (NPV), first add together all the expected benefits from the investment, now and in the future. Then add together all the expected costs. Then work out what these future benefits and costs are worth now by adjusting future cashflow using an appropriate discount rate. Then subtract the costs from the benefits. If the NPV is negative, then the investment cannot be justified by the expected returns. If the NPV is positive, it can, although it pays to make comparisons with the NPVs of alternative investment opportunities before going ahead.
Industry:Economy
The school of economics that developed the free-market ideas of classical economics into a full-scale model of how an economy works. The best-known neo-classical economist was Alfred Marshall, the father of marginal analysis. Neo-classical thinking, which mostly assumes that markets tend towards equilibrium, was attacked by Keynes and became unfashionable during the Keynesian-dominated decades after the Second World War. But, thanks to economists such as Milton Friedman, many neo-classical ideas have since become widely accepted and uncontroversial.
Industry:Economy
