What's it? New Classical economics is an evolution of the classical schools of economics. It uses a neoclassical microeconomic approach to explain macroeconomic phenomena. It emphasizes the maximization of utility and the rational expectations of
Economic Context
Physical Capital: Meaning, Importance, Effects on the Economy
What's it: Physical capital refers to man-made means to aid production. Economists classify it as a factor of production. Examples of physical capital are buildings, vehicles, machinery, and equipment. You can find the components in the fixed
Ease of Entry: Meaning, Impacts, Determinants
What's it: Easy of entry refers to the level of difficulty a company has to enter into an industry or market. It is important because it affects the intensity of competition and profitability in the market. When new entrants enter, they bring in
Abnormal Profit: Meaning, Formula
What's it: Abnormal profit occurs when the firm earns a higher than normal profit. It occurs when total revenue exceeds total economic costs (implicit costs plus explicit costs). Also known as supernormal profit or economic profit.When a
Capital Account: Beyond Current & Financial in the Balance of Payments (Components)
The capital account acts as a companion to the current account and financial account within a country's balance of payments (BoP). It meticulously tracks the flow of capital—not money used to buy goods and services but rather transactions involving
Free Rider: Meaning, Examples, Impacts and Possible Solutions
What's it: Free rider is someone who gets benefit from a product at no cost. It appears in the public good because people are free to benefit from the goods without paying. When you consume it, it does not reduce the benefits received by others.
Perfect Capital Mobility: Ideal & Reality (Exchange Rates, Effects)
What's it: Perfect capital mobility describes a hypothetical scenario where capital, such as money and investments, can move freely across borders without restrictions. In this ideal world, there are no barriers to entry or exit for capital flows.
Economic Inequality: Understanding the Gap (Causes, Measures & Solutions)
What's it: Economic inequality is the unequal distribution of income and economic opportunities between various groups in society. Inequality is a universal problem. You can see, it happens in all countries.The acute unemployment rate and
Short-Run Aggregate Supply: Curve, Determinants and Shifts
Short-run aggregate supply (SRAS) is a crucial concept in economics. It reveals how much an economy produces (real GDP) at different price levels. Unlike the long run, where all factors are adjustable, the short run has some "sticky" elements, like
Excess Capacity: Meaning, Measure, Impacts, Affecting Factors
What's it: Excess capacity is where production capacity is not fully utilized to achieve the minimum efficient scale. In other words, the firm produces at a lower output scale than it was designed for. Not only companies but this term can also
Individual Supply: Meaning, Curve, Determinants
What's it: Individual supply refers to the number of goods a firm is willing and able to produce at a given price, ceteris paribus. It only represents supply from one producer. When you combine all the firms' production in the market, we call it
Disposable Income: Key to Understanding Consumer Spending [Impacts, Formula, Determinants]
What's it: Disposable income is the money you have left after paying taxes. You can use it for savings or to buy goods and services.Disposable income is essential to describe household purchasing power. When it increases, we expect