Economy

Understanding the difference between Moral Hazard and Averse Selection

Moral hazard and adverse selection are both used for economics, in risk-management and insurance to explain circumstances where one person is at disadvantage because of the actions of another.   Moral risk is when there’s an imbalance of data in the relationship between two individuals, and changes in the behaviour of one of them occurs following an agreement between the […]

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What is Money?

Money is the reason that makes the world go around. The economies are based in the trade of cash for goods and services. Economics experts define the concept of money, where it came from and the value it has. These are the many facets of money. Medium of Exchange Before the advent of the currency–that is, money, people would

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Performativity

What is the definition of performance in economics? The theory of performativity suggests that models of finance or economics are not merely measuring an aspect of reality but instead, assist in shaping this aspect of reality into what the model portrays. In other words, it is the idea that economic theory doesn’t just define what the

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Efficiency Wages

What are the The Wages for Efficiency? In economics of labor the term “efficiency wages” refers to an amount of money that are paid to workers over what is considered to be the the minimum wage to ensure that they have the most skilled and productive workforce. The concept of efficiency wage suggests that an employer should pay

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The Bullwhip Effect

What is The Bullwhip Effect? The bullwhip effect is an instance wherein tiny variations of consumption on the end that is retail of the distribution chain are amplified as you move through into the supply chain, from end of the retail chain up to manufacturing. This occurs when a retailer alters the amount of the product it buys via wholesalers depending on a

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Is the United States an economy of markets or mixed?

The United States is home to a mix economy. It uses a mix of capitalism and socialism. A mixed economic system preserves some private property and allows for economic freedom in the capital use. But, it also allows governments to intervene in economic activities for social purposes and the public good. How the U.S.Government Impacts the Economy The U.S.

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Disguised Unemployment

What is Disguised Employment? Disguised unemployment refers to when a large portion of the labor force is not employed or is doing so in a redundant way that worker productivity falls below zero. Unemployment does not impact aggregate output. Hidden unemployment is when productivity falls and there are too many workers to fill the jobs.   KEY TAKEAWAYS Disguised

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Trade

What is Trade? Trade is the voluntary trading of goods or services among different economic actors. The parties are not obligated to trade. Therefore, transactions will only take effect if both parties see it as beneficial to their respective interests.   Trade can mean different things in different contexts. Trade can refer to the purchase and/or sale

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Are industrialization benefits good for the economy?

Industrialization a process that allows an economy to move from agrarian production towards mass-produced and more technologically advanced goods. This phase is marked with exponential leaps of productivity, shifts between rural and urban labor, and higher standards. Industrialization can be described as the most significant economic advancement in human history by using standard measures such as per capita, or

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