What is asset appreciation?
It refers to the increase...
What is brain drain?
It refers to the flight...
What is outsourcing?
It refers to a business...
What is mobility of resources?
It refers to the ease...
What are the limitations of outsourcing?
-Structural UN+ - certain sectors...
How does outsourcing curb the negative effects of globalization?
-Expand the resource capacity for...
What are the possible solutions to overcome the problems of globalization?
-Exchange rate management
-Supply-side management
-Manpower development/taxation...
What are the impacts of globalization on Singapore?
-Structural unemployment
-Inflation
-Detrimental influence of international...
What are the negative impacts of labor flows?
-Brain drain from source country
-Drain...
What are the benefits of labor flows?
-Equalization of wage – low...
What are the negative impacts of capital flows for a source country?
-Reduction of GDP and decrease...
What are the benefits of capital flows for a source country?
-Increase returns of investment –...
What are the costs of capital flows for receiving country?
Cause appreciation of host countries...
What are the positive of capital flows for receiving country?
-Higher rates of private investment...
What are the determinants of Capital Flows? What are the determinants of Foreign Direct Investment (FDI)?
-Business Facilitation
-Political and economic framework
-Availability...
What are negative impacts of globalization?
-Higher degree of competitiveness for...
What are the benefits of globalization?
-Increased consumption and production possibilities
-Promotes...
What is a standard trading procedure?
With standardized procedures set by...
What is international factor flows?
Flow of capital and labour...
What is economic integration?
-Standard trading procedure
-Smoothen the mobility...
What is Foreign Direct Investment (FDI)?
Movement of capital that is...
What is the flow of fund?
-Flow of short term capital...
What is labor flow?
Movement of labour from countries...
What is capital and labor flow?
Movement of FDI and foreign...
What is globalization?
It involves the rapid increase...
What is Production Possibility Curve (PPC)?
It refers to the a...
What are exchange rate fluctuations?
It refers to the change...
What is international trade?
It refers to the exchange...
What is ‘retaliation’?
Also known as a form...
What is a trade union?
It refers to an organization...
What is transaction?
It refers to the movement...
What is deregulation?
It refers to the reduction...
What is mobility of resources?
It refers to the ease...
What is taxation?
It refers to the compulsory...
What is the Marshall-Lerner condition?
It refers to an economic...
What is factor endowment?
It refers to the amount...
What is emerging economy? What is a developing economy?
It refers to a growing...
What is advanced economy? What is a developed economy
It refers to a highly-developed...
What is production capacity?
It refers to the volume...
What is an infant industry?
An industry that is just...
What is balance of trade?
-It refers to the difference...
What is export revenue?
Amount earned from exporting goods...
What is common market?
An agreement where no tariff...
What is preferential trade agreement (PTA)?
A trade agreement whereby trade...
What is trade creation?
Arises when there is a...
What is a custom union?
An agreement where no tariff...
What is government procurement?
-Increase transparency of procurement process
-Increase...
What are intellectual property rights?
Encourage the growth research and...
What is import expenditure?
Amount spent on importing goods...
What are embargos?
Complete ban on certain imports...
What are quotas?
Quantity restriction imposed on imported...
What are tariffs?
Custom duties or tax on...
What are exchange controls?
The control of amount of...
How are subsidies used as an act of protectionism?
-Increase subsidies to local producers...
What are the benefits and limitations of free trade?
-Minimize conflicts between nations
-Common market...
What is ‘dumping’?
Foreign producers selling at a...
What are Terms of Trade (TOT)?
Refers to the rate at...
What are the factors that limit free trade?
-High transport cost
-Lack of mobile...
What are the impacts of international businesses? What are the impacts of foreign direct investment (FDI)?
-Facilitate transfer of knowledge and...
What are the detrimental impacts Free Trade Agreements (FTAs) have on emerging economies? What are the detrimental impacts Free Trade Agreements (FTAs) have on developing nations?
-Increase the complexity of trade...
What are the detrimental impacts Free Trade Agreements (FTAs) have on advanced economies? What are the detrimental impacts Free Trade Agreements (FTAs) have on developed nations?
-Increase the complexity of trade...
How does Free Trade Agreements (FTAs) benefit emerging economies? How does Free Trade Agreements (FTAs) benefit developing economies?
-Raise the standard of living...
How does Free Trade Agreements (FTAs) benefit advanced economies? How does Free Trade Agreements (FTAs) benefit developed nations?
-Raise the standard of living...
What are the benefits and limitations of Free Trade Agreements (FTAs)?
-Minimize conflicts between nations
-Common market...
What is trade diversion?
Where a customs union results...
Why should countries use protectionism?
-Protect growing industries
-May help to...
What methods of protectionism are there?
-Tariffs or Custom Duties
-Quotas
-Import Licenses
-Embargos...
What is protectionism?
The act of imposition of...
What is import substitution strategy?
Strategy to replace imported goods...
How do favorable terms of trade (TOT) affect an economy?
-If the favourable TOT is...
How do Terms of Trade (TOT) affect the Production Possibility Curve (PPC)?
International trading price will make...
What are the factors affecting terms of trade (TOT)?
-Lower prices of imports
-Higher prices...
What is Free Trade Agreement (FTA)?
A free trade agreement involves...
What are the advantages of diversification?
-Widen the scope of economic...
Why should countries diversify their economic development?
-To avoid the disadvantages of...
Why should countries trade?
-To overcome the lack of...
What is dynamic comparative advantage?
Dynamic CA refers to the...
What are the limitations of comparative advantage? Why the theory of comparative advantage cannot be used to explain the trade pattern?
-Countries will trade with another...
What are the benefits of international trade?
-Countries can now reap the...
What are the detriments of international trade?
-Increasing competition between countries leads...
What is trading price? How is trading price derived?
It is derived from the...
What is absolute advantage?
Absolute advantage is seen when...
What are the conditions for specialization?
-2 countries
-2 commodities
-No transportation costs
-No...
What is the Theory of Comparative Advantage? What is comparative advantage?
Comparative advantage is seen when...
What is per capita income?
It refers to the total...
What is future value of saving?
It refers to the value...
What is a basket of currency?
It refers to a selected...
What is a trade-weighted exchange rate?
It refers to an index...
What is mortgage loan?
It refers to a particular...
What are official reserves?
It refers to the sum...
What is a gradual and modest appreciation?
It refers to a steady...
What is currency manipulation?
It refers to currency intervention...
What is capital control?
It refers to a form...
What is capital investment?
It refers to the allocation...
What is capital accumulation?
It refers to the acquisition...
How is exchange rate determined in a fixed exchange rate system?
In the fixed exchange rate...
How is exchange rate determined in a managed-float exchange rate system?
In this exchange rate system,...
What is the market equilibrium for foreign exchange?
It refers to the price...
What is a flexible exchange rate system?
It refers to a fixed...
What is the external value of a currency?
It refers to the value...
How to prevent speculation of hot money?
The government can introduce capital...
What is the real effective exchange rate (REER)?
NEER after taking into consideration...
What is the nominal effective exchange rate (NEER)?
-Exchange rate that is determined...
How is the Purchasing Power Parity (PPP) used?
Foreign exchange rate of the...
What is Purchasing Power Parity (PPP)?
Exchange rate is determined by...
What are the impacts of the depreciation of a currency?
-Rise in import price and...
What are the impacts of the appreciation of a currency?
-Impact of exchange rate
-Effect of...
What are the reasons for exchange rate regulation?
-To reduce the uncertainty in...
What is under-valuation?
Under-valuation refers to the condition...
What is over-valuation?
Over-valuation refers to the condition...
What are the determinants of exchange rate?
-Change in demand for local...
What are the disadvantages of a fixed exchange rate system?
-Opportunity cost of having a...
What are the advantages of a fixed exchange rate system?
-Removes uncertainty and discourages speculation...
What is a fixed exchange rate system?
In the fixed exchange rate...
What is a managed-float exchange rate system?
In this exchange rate system,...
How is exchange rate determined in a flexible exchange rate system?
-The flexible exchange rate system...
What are the disadvantages of a flexible exchange rate system?
-Uncertainty –Discourages trade and investment...
What are the assumptions for a flexible exchange rate system?
Pedx + Pedm > 1
-Capital...
What are the advantages of a flexible exchange rate system?
-Automatic stabilization: The BOP and...
What is depreciation of a currency?
A decrease in value of...
What is appreciation of a currency?
An increase in value of...
How to calculate exchange rate?
S$1 – US$0.82/ US$1 –S$1.22;...
What is exchange rate?
The foreign exchange rate is...
What is remittance?
It refers to the transfer...
How to assess economic performance using balance of payment?
-From the current account, the...
How to calculate balance of payment?
The sum of the current...
What are the external impacts of a balance of payment disequilibrium?
-Fall in exchange rate of...
What are the internal impacts of a balance of payment disequilibrium?
-Inflationary impact on the economy
-Fall...
What is the scope of impact when there is balance of payment surplus?
-Xd/Md/FDI/flow of fund – affect...
What are the impacts of balance of payment surplus on an external economy?
-Rise in exchange rate of...
What are the impacts of a balance of payment surplus on domestic economy?
-Increase in national income and...
What are the impacts of balance of payment deficit on an external economy?
-Fall in exchange rate of...
What are the impacts of balance of payment deficit on a domestic economy?
-Inflationary impact on the economy
-Fall...
What are the factors affecting capital account?
-return on business
-taxation policy
-market demand-...
What are the factors affecting financial account?
-Interest rate- determined the return...
What are the factors affecting balance of trade?
-Inflation rate – affect cost...
What is visible balance? What is trade balance?
Balance of trade
...
What is income balance?
Remittance of profit and dividends
...
What is invisible balance?
Services...
What is the Marshall-Lerner condition?
Pedx + Pedm >1
...
What is overvaluation of currency?
Overvaluation refers to the condition...
What is undervaluation of currency?
Undervaluation refers to the condition...
Why should the government not be concerned of a balance of payment deficit?
-A short and temporary BOP...
Why should the government be concerned of balance of payment disequilibrium?
-A long term and persistent...
What are the impacts of balance of payment disequilibrium?
-In the short-term, temporary and...
What are the factors affecting balance of payment disequilibrium?
-Relatively High Domestic Inflation
-Relatively High...
What is balance of payment surplus?
Inflow of money will be...
What is balance of payment deficit?
Inflow of money will be...
What is the J-curve effect?
The effect of depreciation of...
How changes in balance of payment equilibrium affect exchange rate?
-Surplus in BOP – inflow...
What is the official financing account?
-An accommodating account that shows...
What is the overall balance?
The sum of the current...
What is the balancing item?
The balancing item is a...
What is financial account?
-Records investment overseas by local...
What is capital account?
All inflows and outflows of...
What is current account?
-Monetary transfer for exports and...
What are the components of balance of payment?
-Current Account
-Capital Account (LT term...
What is balance of payment?
A statement of a country’s...
What are direct controls?
Income Policy (Reduce inflation)/Flexible Wage...
What is a flexible wage structure?
It refers to a system...
What is Marshall-Lerner condition?
It refers to an economic...
What are assets?
It refers to an output...
Why Singapore cannot conduct depreciation of exchange rate to solve the lack of external demand and Foreign Direct Investment (FDI)?
-Depreciation – rise in import...
Why does Singapore adopt an exchange rate management policy?
Ped export is price-inelastic –...
Why is monetary policy ineffective in Singapore?
-Singapore is an interest-rate taker...
What is trade facilities development?
The development of international air...
What is rising cost condition? What is inflationary condition?
This refers to a situation...
What are the benefits and limitations of price policies?
-Suppressing the symptoms of the...
What are price policies?
-Price ceiling set below equilibrium
-May...
What are the benefits and limitations of direct controls?
-May face problems with militant...
What are the benefits and limitations of Free Trade Agreements (FTAs)
Benefits
-Trade creation as removal of...
What is Free Trade Agreements (FTAs)?
-Deals struck, usually between 2...
What are embargos?
Total ban on particular good
...
What are exchange controls?
Control the amount of FOREX...
What are benefits and limitations of quotas?
-Quotas do not bring revenue...
What are quotas?
Quotas take the form of...
What are the benefits and limitations of subsidies?
It may lead to a...
What are subsidies?
-Fall in COP
-fall in price...
What are the benefits and limitations of tariffs?
-Tariffs bring revenue to the...
What are tariffs?
A tariff is a tax...
What is supply-side fiscal policy?
-A set of government economic...
Why does Singapore introduce supply-side fiscal policy instead of demand-side fiscal policy?
– FP-affect AD-Demand-side implication
–depending factors...
What are the benefits and limitations of technological development?
-Requires the facilities and pools...
What is technological development?
-Raise the technological level of...
What are the benefits and limitations of manpower development?
-Educational level of the workers...
What is manpower development?
Raise the productivity of the...
What are the benefits and limitations of capital accumulation?
-Requires financial knowledge and expertise
-Political...
What is capital accumulation?
Creation of a financial centre...
What is trade facilities development?
The development of international air...
What are the benefits and limitations of infrastructural development?
-Source of funding - budget...
What is infrastructural development?
Build up facilities to attract...
What are the benefits and limitations of a weak exchange rate policy?
-Import prices would be higher...
What are the benefits and limitations of a strong exchange rate policy?
-Limit on how much exchange...
How does weak exchange rate policy work?
-Fall in exchange rate -...
How does strong exchange rate policy work?
-Increase in exchange rate -...
What is exchange rate management policy?
-The foreign exchange system attempts...
What are the benefits and limitations of a contractionary fiscal policy?
-Low multiplier- reduces effectiveness of...
What are the benefits and limitations of an expansionary fiscal policy?
-Low multiplier - reduces effectiveness...
How does contractionary fiscal policy work?
-It is used to curb...
How does expansionary fiscal policy work?
-It is used to solve...
What is fiscal policy?
The policy involves the variation...
What are the benefits and limitations of a contractionary monetary policy?
-Ineffective if the interest elasticity...
What are the benefits and limitations of expansionary monetary policy?
Benefits
-Can create a more market-oriented...
How does contractionary monetary policy work?
When contractionary monetary policy is...
How does expansionary monetary policy work?
When expansionary monetary policy is...
What is monetary policy?
The policy involves the variation...
What is supply-side management policy?
-Through the implementation of the...
What is demand-side management policy?
It is a policy that...
What is jobless growth?
Situation where there is economic...
What is equal distribution of income? What is equity?
-Income distribution is measured by...
What is balance of payment equilibrium?
At BOP equilibrium, there is...
What is price stability?
-Price stability is measured by...
What is full employment?
Full employment would refer to...
What is sustainable economic growth? What is long-term growth?
An increase in real GDP...
What is economic growth?
Economic growth refers to the...
What are the aims of government?
Economic growth, full employment, balance...
What is speculation?
It refers to the buying...
What is core inflation?
It refers to the measurement...
What are the possible solutions to curb inflation?
-Contractionary monetary policy
-Contractionary fiscal policy
-Strong...
What is direct regulation?
It refers to the direct...
What is rising cost condition? What is inflationary condition?
This refers to a situation...
What is inflation rate?
The rate of inflation is...
Why should inflation rate be kept low? Why is low inflation rate more important than other aims?
-Low inflation helps to prevent...
How effective is direct regulation in curbing inflation? What are the limitations of direct regulation in curbing inflation?
Due to extensive government regulation...
How can direct regulation curb inflation?
-Price control – Price ceiling...
How effective is exchange rate management policy curb inflation? What are the limitations of exchange rate management policy curb inflation?
-Strong exchange rate makes import...
How can exchange rate management policy curb inflation?
-The Central Bank will intervene...
How effective is fiscal policy in curbing inflation? What are the limitations of fiscal policy in curbing inflation?
-Raising tax is a bad...
How can fiscal policy curb inflation?
Fiscal policy in the contractionary...
How effective is monetary policy in curbing inflation? What are the limitations of monetary policy in curbing inflation?
-Central Bank cannot control the...
How can monetary policy curb inflation?
With contractionary MP, central bank...
What are the negative impacts of inflation?
-Loss of international competitiveness
-Balance of...
What are the external factors of inflation?
-Loss of international competitiveness
-Balance of...
What are the internal factors of inflation?
-Impact on Investment, Production and...
What is wage-price spiral?
It happens when powerful union...
What is price-wage spiral?
It happens when big business...
What is Consumer Price Index (CPI)
CPI measures relative changes in...
What is cost of living index?
It measures the percentage change...
What is cost of living?
A theoretical price index that...
What is the external value of money?
The purchasing power of local...
How to determine the internal value of money?
-Decrease in price level will...
What is the internal value of money?
The purchasing power of a...
What is tax-based inflation?
Increase in indirect tax like...
What is imported inflation?
The rise in global price...
What is asset-based inflation?
It occurs when there is...
What are the various types of cost-push inflation?
Imported inflation
Tax-based inflation
Structural rigidities
Asset-based inflation
...
What is cost-push inflation?
It occurs when there is...
What are structural rigidities?
It refers to the condition...
What is demand-pull inflation?
It occurs when there is...
How to calculate inflation rate?
Using consumer price index (CPI)...
What is deflation?
A sustained, inordinate fall in...
What is stagflation?
Stagflation is an economic situation...
What is hyper inflation?
Extremely high inflation rate. (more...
What is mild inflation?
Inflation rate is single digit...
What is galloping inflation?
Price increasing beyond 2 digit...
Why is there inflation? What are the causes of inflation?
-Galloping inflation
-Mild inflation
-Hyper-inflation
-Demand-pull inflation
-Cost-push inflation
-Structural...
What is inflation?
A sustained, inordinate and general...
What is hot money?
It refers to money held...
What is child mortality rate?
It refers to death of...
What is literacy rate?
It refers to the rate...
Why is there overheating of an economy?
The inability of production capacity...
How do countries attract Foreign Direct Investment (FDI)
Establishing improved infrastructure, maintaining political...
What is Foreign Direct Investment (FDI)?
It refers to direct investment...
What are capital goods?
They are already-produced durable goods...
What is physical capital?
It refers to factors of...
What are raw materials?
It refers to basic material...
What is capital flow?
It refers to the movement...
What is sub-prime mortgage?
It refers to a type...
What is inflationary condition? What is overheating of an economy? What is rising cost condition?
This refers to a situation...
What is jobless growth?
-Situation where there is economic...
What is a technical recession? What is economic recession?
It refers to an economic...
Why is economic growth the most important aim?
-Economic growth provides government higher...
What are the obstacles to economic growth?
-Lack of financing
-Lack of capable...
What is life expectancy?
Average age people are expected...
What is Genuine Progress Indicator?
Genuine Progress Indicator (GPI) is...
What is Gross Happiness Index?
Gross National Happiness (GNH) is...
What is Gini co-efficient?
The Gini coefficient is a...
What are the negative impacts of economic growth? Why should the government not focus excessively on economic growth? Why other aims are more important that economic growth?
-Current Opportunity Costs of Growth
-May...
What are the positive impacts of economic growth?
-Higher Standard of Living
-Redistribution of...
How to achieve desirable economic growth?
-Sustainable Growth
-Dimensional and Diversified Development
-Benefits...
What are the determinants of economic growth?
-Physical Capital
-Labour Resources
-Land and Raw...
What is the Production Possibility Curve (PPC)?
The PPC reflects the resource...
What is sustainable economic growth? What is long-term growth?
Sustainable growth refers to the...
What is actual growth?
-Actual economic growth refers to...
What is potential growth? What is short-term growth?
Potential growth refers to the...
How to measure economic growth?
Economic growth is usually measured...
What is economic growth?
Economic growth refers to the...
What is budget deficit?
It refers to an economic...
What are economic indicators?
They are statistics that can...
What is labor productivity?
It refers to the amount...
What is productivity?
It refers to the measure...
What economic indicators are used?
Wage-to-GDP ratio, consumer price index,...
How to measure degree of openness of economy?
Openness can be seen in...
What is privatization?
The conversion of state-owned enterprises...
How does balance of trade imply improved standard of living?
The level of balance of...
How does economic growth indicate improvement in standard of living?
-The rise in GDP will...
What is the difference between nominal GDP and real GDP? What is the difference between nominal GNP and real GNP?
The difference is due to...
How to calculate wage-to-GDP ratio?
-Proportion of total wage earned...
How to calculate Gini Co-efficient ratio?
Measure of inequality of wealth/income...
What is export competitiveness?
Competition for export demand, seen...
What is the relationship between productivity, GDP rate and inflation rate?
-When government increases productivity, it...
What is the relationship between government expenditure and budget deficit?
-Rise in government expenditure/low government...
What is the relationship between FDI, export demand, import demand and real GDP?
FTA promotes export demand and...
What are the components of current account balance?
-Balance of Trade
-Service Balance
-Income Balance
-Transfer...
What is the relationship between money supply, exchange rate and inflation rate?
Reduction in money supply will...
What is the relationship between exchange rate, foreign direct investment (FDI) flows and trade flows?
Appreciation of exchange rate will...
How to calculate nominal GNP? What is the equation for nominal GNP? (Formula)
GNP = GDP + Net...
How to calculate nominal GDP? What is the equation for nominal GDP? (Formula)
The formula for computing nominal...
Why is there a need to raise productivity?
Raising productivity will lower cost...
What is net factor income from abroad?
Net factor income from abroad...
What is the GDP deflator?
It is the ratio of...
How to measure standard of living of a country?
-Real per capita income
-Composition production...
How to measure the competitive edge of a country?
-Wage rate
-Cost of resources
-Productivity
-Exchange rate
-Cost...
How to measure the economic performance of a country?
-The GDP growth rate or...
Why are there problems of the inaccuracy of national income figures?
Weak administrative system, double accounting...
Why does increase in GDP growth rate not imply improved standard of living?
-If the percentage increase in...
Why does higher GDP growth rate represent improved standard of living?
-Higher level of real per...
What is purchasing power parity (PPP)?
Exchange rate is determined by...
What are the difficulties in using national income to compare standard of living between two countries? What are the problems of space comparison?
-Different price structures
-Different rates of...
What are the difficulties in determining national income? What are the problems of time comparison?
-Changes in price level
-Growth of...
What are the limitations of GDP figures?
-The underground economy especially if...
What is potential production capacity? What is potential growth?
It refers to the expansion...
What is actual production capacity? What is actual growth?
It refers to the actualization...
What are the uses of national income figures?
-Measure economic growth
-To derive the...
Why is there a need for diversification of economy?
-Widen scope of economic growth
-Reduce...
What is space comparison?
Comparison of standard of living...
What is time comparison?
Comparison of standard of living...
What is wage-to-GDP ratio?
-Proportion of total wage earned...
What is Gini Co-efficient ratio?
-Measure of inequality of wealth/income...
What is real effective exchange rate?
Value of an individual country's...
What is nominal effective exchange rate?
Value of an individual country's...
What is exchange rate?
The measure of one country’s...
What is financial account?
Records flow of funds due...
What is capital account?
Records all inflows and outflows...
What is current account?
Records monetary transfer for exports...
What is balance of payment?
-Records the flow of currency...
What is balance of trade?
Revenue from exports less expenses...
How to calculate real GDP growth rate?
Economic Growth Rate – Inflation...
What real GDP growth rate?
The rate at which real...
What is GDP growth rate?
The amount at which GDP...
What is working population?
Refers to the proportion of...
What is labor force?
-Working population (both active and...
What is cost of living index?
A theoretical price index that...
What is cost of living?
The amount that is spent...
How is Consumer Price Index (CPI) used?
-It is used as a...
What is Consumer Price Index (CPI)?
Measures the change in price...
What is Measurement of Economic Welfare (MEW)?
-Measured the standard of living...
What is Human Development Index (HDI)?
-Measured the standard of living...
What is real per capita income?
Real income of an individual...
What is quantitative standard of living?
-Standard of living measured in...
What is qualitative standard of living?
Standard of living measured in...
What is standard of living?
Measures the average quality of...
What is personal disposable income?
-The flow of income available...
What is personal income?
The flow of income that...
What is Net Property Income from Abroad?
-Income earned by local firms...
What is meant by ‘GDP at 2000 base year price level’?
-Real GDP
-The real value of...
What is real Gross National Product (GNP)?
The real value of all...
What is nominal Gross National Product (GNP)?
-The monetary value of all...
What is real Gross Domestic Product (GDP)?
The real value of all...
What is nominal Gross Domestic Product (GDP)?
-The monetary value of all...
What is bureaucratic inefficiency?
Bureaucratic inefficiency arises from the...
Why parks and overhead bridges public goods are while hospitals and primary school education merit goods?
- Parks and overhead bridges...
Why is government intervention ineffective in solving market failure?
Distortions that Arise because of...
Why does the government conduct direct provision of public museums but not university education?
- Public museums have a...
How does carbon permit works in curbing air pollution?
The carbon permit involves the...
What are the benefits and limitations of moral suasion?
Benefits
- Provide discretionary power to...
What is moral suasion?
Moral suasion is a persuasion...
What is market failure?
Market failure refers to the...
What are the disadvantages of a free market economy?
-Prone to market failure
-Public goods...
What are the advantages of a free market economy?
-Reduced welfare loss
-Firms are more...
What are the features of a free market economy?
•Private ownership of property
•Freedom of...
What is a free market economy?
A free market is a...
What is market mechanism?
It focuses on the use...
What is cost-benefit analysis?
Cost-benefit analysis (CBA) is a...
What are the impacts of intellectual property right on the society?
Intellectual property rights create market...
What are the impacts of licensing on the society?
Licensing raises the cost condition...
What is cost condition?
Cost condition refers to the...
How does a monopolistic competitive firm attain production equilibrium? Q. How does the firms in monopolistic competition set price and output level?
Under this market structure, the...
How does an oligopolistic firm attain production equilibrium? How does the firms in oligopoly set price and output level?
Under this market structure, the...
How does a monopoly attain production equilibrium? How does the monopoly set price and output level?
Under this market structure, the...
How does a perfect competitive firm attain production equilibrium? How does the firms in perfect competition set price and output level?
Allocative and production efficiency can...
What is perfect mobility of factors of production?
Perfect mobility refers to the...
How is welfare loss incurred under imperfect market structures?
Under imperfect market structures, the...
What is price rigidity?
Price rigidity is a situation...
What is mutual inter-dependency?
It is a situation (usually...
What is liberalization of market?
Liberalisation of market refers to...
What are the impacts of intellectual property right on the firm?
Intellectual property rights are a...
What is intellectual property right?
A work or invention that...
What are the impacts of patent right on the firm?
Patent rights are a form...
What are the impacts of patent right on consumers?
-Patent rights increases firms’ ability...
How does patent right affect production equilibrium?
Patent rights are a form...
How does patent right affect market power?
Patent rights are a form...
What is patent right?
When firms have a new...
What is low-cost price leader?
Low-cost price leader is a...
What is barometric price leader?
Barometric price leader is a...
What is a collusive oligopoly?
-Firms in the industry make...
What is Free Competition Act?
Free Competition Act is a...
What is anti-trust law?
Competition law, known in the...
What is price regulation?
Price regulation refers to government...
What is legalization?
It is the process of...
What is nationalization?
It refers to the public...
What is consumer exploitation?
Firms with market power can...
Under what circumstances should the government regulate monopolies?
Where there is market dominance,...
How should the government regulate monopolies?
-MC pricing
-Two tier charge
...
Why does natural monopoly exist?
Capital intensive industries, like the...
What is a natural monopoly?
A natural monopoly is a...
What is marginal cost (MC) pricing?
MC pricing is a price...
What is two-tier charge?
Two tier charge refers to...
What is cost minimization?
All firms will try to...
What is profit maximization?
Profit maximization is the process...
Why are firms profit-motivated?
Firms are profit-motivated as it...
Why are imperfect market structures unable to attain production efficiency in the short run?
The firms are unlikely to...
Why are imperfect market structures unable to attain allocative efficiency in the short run?
The firms will not be...
Explain how the firms in the non-collusive oligopolistic market determine price and output decision.
This model explains why once...
What is product differentiation?
It involves making artificial changes...
What are the types of non-price competition?
-product differentiation
-advertising
-research and...
What is non-price price competition?
It occurs when firms compete...
What is predatory pricing?
Predatory pricing is a deliberate...
What are the limitations of price competition?
It might take a long...
What are the benefits of price competition?
It can successfully rule out...
What is price competition?
It occurs when firms in...
Is price discrimination feasible in the pharmacuetical industry.
-Two or more prices being...
What are the positive impacts of price discrimination?
-Price discrimination makes it possible...
What are the negative impacts of price discrimination?
-It may be a form...
What is 3rd degree price discrimination?
The firm sells the same...
What is 2nd degree price discrimination?
The firm charges different prices...
What is 1st degree price discrimination?
This happens when a firm...
What is contrived barrier?
Contrived barrier is achieved when...
What is price discrimination?
-Price discrimination: the practice of...
Explain how market power affects the production equilibrium.
The greater the market power...
Explain how market power affects the price and output level.
The greater market power a...
What is market power?
Market power refers to the...
What profits can be reaped in a monopolistic competition long run?
Normal profits...
What profits can be reaped in an oligopoly long run?
Supernormal or normal profits...
What profits can be reaped by a monopoly in the long run?
Supernormal profits...
What profits can be reaped in a perfect competition in the long run?
Normal profits...
Why will firms in monopolistic competition reap only normal profit in the long run?
Firms in monopolistic competition reap...
What is x-inefficiency?
X-inefficiency is the difference between...
Forms of Efficiency
Allocative efficiency is a type...
What is supernormal profit?
Profit is greater than cost...
What is normal profit?
Cost is equal to profit...
What is subnormal profit?
Cost is greater than profit...
What are the characteristics of a monopolistic competitive firm?
-large numbers of buyers and...
What are the characteristics of an oligopolistic firm?
-small numbers of large firms...
What are the characteristics of a monopoly?
-single producer
-no close substitutes...
What are the characteristics of a perfect competitive firm?
-large number of buyers and...
What is market concentration ratio?
Market concentration ratio is the...
What is perfect market information?
Every seller knows the prices...
What is a Monopolistic Competitive Market?
In the monopolistic competitive market...
What is an Oligopoly?
In the oligopolistic form of...
What is a Monopoly?
In the monopoly form of...
What is Perfect Competition Market Structure?
With perfect competition, there is...
What is an imperfect market structure?
In the imperfect market structure,...
What is a perfect market structure?
In the perfect market structure,...
What is marginal product?
MP is the additional change...
What is production condition?
Short Run:
- Production Condition...
What are variable factors of production?
These are factors of production...
What are fixed factors of production?
These are factors of production...
What are factors of production?
The resources used for production...
What is the Law of Variable proportion?
The law of variable proportion...
What is the Law of diminishing marginal returns?
The law of diminishing marginal...
What is the production law?
The production law measures the...
What is specialisation of production?
Specialization of production is a...
How does source of efficiency influence the law of production in long run?
In the long run, the...
How does source of efficiency influence the law of production in the short run?
In the short run, the...
What are the positive impacts of merger on consumers?
-Cost savings which are passed...
What are the negative impacts of merger on consumers?
-Higher prices for consumers as...
What are the negative impacts of merger on firms?
-Complexity in management
-Time lag in...
What are the positive impacts of merger on firms?
-Able to reap internal economies...
What are negative impacts of small firms on consumers and society?
-Higher price of obtaining goods...
What are positive impacts of small firms on consumers and society?
-Convenience for consumers as small...
How does rise in productivity affect cost condition?
Rise in productivity decreases the...
How does the implementation of research and development affect cost condition?
R&D increases the cost of...
What is vertical integration?
It occurs when a merger...
What is horizontal integration?
It occurs when firm takes...
What is a niche market?
It is a subset of...
How can small firms survive?
Through strategies like:
-banding
-targeting niche markets
-providing...
What is merger?
When two firms merge, a...
What is acquisition?
Acquisition refers to a company...
How do external economies of scale affect the average cost of production?
External economies of scale are...
How do the internal economies of scale affect average cost of production?
Internal economies of scale are...
What is law of diminishing returns/ law of variable proportion?
It states that as more...
What are the disadvantages of large firms?
-Complexity of management
-Less innovation...
What are the advantages of large firms?
-Able to reap internal economies...
What is division of labour?
Division of Labour is the...
What is low-labor morale?
Low labour morale refers to...
What is bureaucratic red-tape?
Red tape is excessive regulation...
What is decreasing returns to scale?
Output increases less than proportionately...
What is constant return to scale?
Output increases proportionately to the...
What is increasing returns to scale?
Output increases more than proportionately...
Why the firms cannot increase the scale of production excessively?
The long run average cost...
Why firms need to reap economies of scale? What are the benefits of economies of scale?
Economies of scale are closely...
What are the types of external diseconomies of scale?
-Concentration of resources and facilities
-Concentration...
What are the types of internal diseconomies of scale?
-Administrative DEOS
-Managerial DEOS
-Hierarchy Alienation...
What are the types of external economies of scale?
-Economies of concentration
-Economies of disintegration
-Economies...
What are the types of internal economies of scale?
-Technical EOS
-Managerial EOS
-Financial EOS
-Commercial EOS
-Risk-bearing...
What are economies of scale?
Cost savings accrued to a...
What is average product?
AP is derived from the...
What is marginal product?
MP is the additional change...
What is average fixed cost?
It is the amount of...
What is average variable cost?
It is the total variable...
What is fixed cost?
Cost of production that is...
What is variable cost?
Cost that incurred due to...
What are the fixed factors of production?
These are factors of production...
What are the variable factors of production?
These are factors of production...
What is long run?
All the factors of production...
What is short run?
The firm is constrained by...
What is deadweight loss?
Deadweight loss is the sum...
What is producer surplus?
Producer surplus is the difference...
What is consumer surplus?
Consumer surplus is the difference...
What is lump sum subsidy?
A fixed amount of subsidy...
What is Ad Valorem or percentage subsidy?
Ad Valorem subsidies a percentage...
What is specific subsidy or per unit subsidy?
Specific subsidy is a constant...
What is subsidy?
Subsidy is a payment to...
What is ad valorem tax?
A tax based on the...
What are the problems with price ceiling?
Occurrence of black market...
What are the factors that will affect the effectiveness of price ceiling?
Elasticity of demand and supply...
Why do government impose price ceiling?
A price ceiling is usually...
How does the government set maximum price?
A maximum price is set...
What are the problems with floor price?
-With the surpluses, government will...
What are the factors that will affect the effectiveness of floor price?
elasticity of demand and supply...
Why do government impose floor price?
-protect the income of producers...
How does the government set minimum price?
The minimum price is set...
What is producer tax burden?
Tax incidence that falls on...
What is consumer tax burden?
Tax incidence that falls on...
What is tax incidence?
Tax incidence refers to the...
What is indirect tax?
Indirect tax is tax levied...
What is direct tax?
Direct tax is directly levied...
What is floor price?
-Minimum price set artificially so...
What is price ceiling?
-A maximum price set artificially...
What is price regulation?
Price regulation is a policy...
What is the formula of Cross Elasticity of Demand? How to calculate the cross elasticity.
CED = Percentage change in...
What is the formula of Income elasticity of demand? How to calculate the income elasticity of demand?
YED = Percentage change...
What are the uses of cross elasticity of demand?
-To Determine the Relationship of...
What are the uses of income elasticity of demand?
-Provide information on how the...
What are the determinants of cross elasticity of demand?
-Relationship of the Goods
-Market Classification...
What are the determinants of income elasticity of demand?
-The Proportion of Income Spent...
What is Cross-Elasticity of Demand?
Cross elasticity of demand measures...
What is Income Elasticity of Demand?
Income elasticity of demand measures...
What is the formula of Price elasticity of Supply? How to calculate the cross elasticity of supply.
PES = ...
What is the formula of Price elasticity of Demand? How to calculate the price elasticity of demand.
PED = ...
How do the concept of price elasticity of demand and supply affect producer surplus (benefit)?
When supply is price-inelastic, there...
What are the disadvantages for keeping price high?
When the demand is price-elastic,...
What are the advantages for keeping price high?
When demand is price-inelastic, keeping...
What are the disadvantages for keeping price low?
When demand is price-inelastic, keeping...
What are the advantages for keeping price low?
When the demand is price-elastic,...
How do elasticity concepts affect market equilibrium?
It explains why the price...
How do the concept of price elasticity of demand and supply affect consumer surplus (benefit)?
When demand is price-inelastic, there...
How the concept of price elasticity of demand and supply affect the trade balance? What is Marshal-Lerner condition?
Marshal-Lerner Condition refers to the...
Why price will rise sharply due to the magnitude of price elasticity of demand and supply?
Under a price-inelastic supply, a...
How do the concept of price elasticity of demand and supply affect the producer tax burden?
If goods have high PED...
How do the concept of price elasticity of demand and supply affect the consumer tax burden?
If good to be taxed...
What are the limitations of elasticity of demand and supply?
-Magnitude of the value of...
What are the uses of price elasticity of supply?
It depicts the extent of...
What are the uses of price elasticity of demand?
-To Determine the Relationship of...
How are elasticity concepts useful for government policymaking?
Elasticity concepts can help the...
Why are firms unable to keep prices low in the long run?
In the long run, prices...
How to use the concept of price elasticity of demand to maximize total revenue?
-When demand for good is...
What are the determinants of Price elasticity of demand?
-Degree of Necessity
-Availability of Substitutes
-Proportion...
What are the determinants of Price elasticity of supply?
-Determinants of Price Elasticity of...
What do the various magnitudes of elasticity of supply represent?
1 : Supply is price...
What do the various magnitudes of price elasticity of demand represent?
1 : Demand is price...
What is Price Elasticity of Supply?
Price elasticity of supply measures...
What is Price Elasticity of Demand?
Price elasticity of demand measures...
What is producer benefit?
Producer benefit refers to the...
What is consumer benefit?
Consumer benefit refers to the...
Explain the concept of law of diminishing marginal utility.
The law of diminishing marginal...
Why do prices fall when there is a glut? (Excess Supply Condition)
A shortage means that demand...
What is fixed supply?
Fixed supply refers to the...
What is composite demand?
Composite demand is the demand...
What is the income effect?
The effect of a change...
What is the substitution effect?
The effect of a change...
Why is the demand curve downward sloping?
The demand curve in downward...
What are the non-price determinants of supply?
-Costs of production
-Price of related...
What are the non-price determinants of demand?
-Taste and preferences
-Real disposable income
-Population
-Government...
What is market equilibrium?
A situation in which buyers...
What is the meaning of excess supply condition?
It occurs when there is...
Why do prices rise when there is a shortage? (Excess Demand condition)
A shortage means that demand...
What is consumer surplus?
Consumers’ surplus is the difference...
What is competitive supply?
Competitive supply occurs when increase...
What is joint supply?
Goods produced together from the...
What is derived demand?
Some goods are demanded not...
What is joint demand?
Goods that are jointly demanded,...
What is competitive demand?
Goods are in competitive demand...
What is a luxury good?
Luxury goods are products and...
What is a normal good?
Normal goods are any goods...
What is an inferior good?
An inferior good is a...
What is subsidy?
Subsidy is a payment to...
What is specific tax?
Specific tax, is a tax...
What is a black market?
A black market or underground...
What is shortage?
Shortage is a term describing...
What is glut?
Glut is a term describing...
What is producer surplus?
Producer surplus is the difference...
What is the meaning of excess demand condition?
Consumer surplus is the difference...
What is a “change in supply”?
A change in supply means...
What is a “change in demand”?
A change in demand is...
What is a “change in quantity supplied”?
A change in quantity supply...
What is a “change in quantity demanded”?
A change in quantity demanded...
Why is the supply curve upward sloping?
The supply curve shows the...
What is market equilibrium?
This condition of market equilibrium...
What is supply?
Supply refers to the amount...
What is demand?
Demand refers to the consumer’s...
What causes the production possibility curves to shift inward?
decrease in quantity/quality of resources...
What causes the production possibility curves to shift outward?
- increase in quantity/quality of...
What is the Production Possibility Curve (PPC)?
A PPC is a graph...
What are the factors of production?
Factors of production are the...
What is a capital good?
A capital good (sometimes simply...
What is decreasing opportunity cost?
This means that as more...
What is constant opportunity cost?
This happens when factors of...
What is increasing opportunity cost?
Increasing opportunity cost is reflected...
Why is there opportunity cost?
Because of scarcity, every time...
What is opportunity cost?
In microeconomic theory, the opportunity...
What does marginal utility mean?
The marginal utility of a...
What is utility?
Utility is a representation of...
How to address the problem of scarcity?
To address the problem of...
Why scarcity cannot be eradicated?
There is a limited amount...
What causes the problem of scarcity?
The fact that there are...
What is scarcity?
Scarcity is the fundamental economic...
