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How Do Companies Add Value? Companies add value by improving the client or customer experience. This can be achieved by offering better quality ser...

What are Determinants of Economic Growth? The primary determinants of a country’s economic growth are the goods and services that comprise the Gr...

What are Determinants of Supply and Demand? Supply and demand determinants are factors that influence their amount and degree.. These supply factor...

What are Marginal Product and Diminishing Returns? Marginal product measures how much more can be made if one more person is hired; i.e. what is th...

What are Production Functions? In economics, production functions are calculations of maximum output from a variety of given inputs. These producti...

What are Rational Expectations? Rational Expectations is a theory that people’s past economic experiences influence their perception of the futur...

What are Real Interest Rates and Inflation Correction? Real interest rates are interest rates that have accounted for inflation, so they shouldn’...

What is a Production Possibilities Curve? The Production Possibilities Frontier Curve (PPF) is a statistical graphic curve that depicts the compari...

What are Income and Substitution Effects? Income effects reflects the increases or decreases in total consumption of goods and services in proporti...

What are Aggregate Consistency Conditions? Aggregate consistency conditions are parameters under which a macroeconomic and microeconomic aggregate...

What are Consumer Nondurables and Services? Consumer non durables are goods with a short lifespan of under 3 years. This can be anything from consu...

What are Consumer Surplus, Producer Surplus, and Allocative Efficiency? Consumer surplus is a measurement of the extra consumer benefits and satisf...

What are Distributional Effects? Distributional effects is a term describing the various kinds of impact a policy, project, or initiative may have...

What are Gains From Trade? Gains from Trade is the term used to describe the benefits derived from two parties engaging in trade. The gains include...

What are Government Purchases of Goods and Services? Government purchases of goods and services encompasses federal, state, and local government pu...

What are Intermediate Goods? Intermediate goods are products used to make final goods, such as raw and alloy materials, commodities, and components...

What are National Savings? National savings is a US Commerce Dept. estimate, based on voluminous data, as to the rate of savings among companies, g...

What are Planning Horizon and Infinite Horizon? Planning horizon refers to the projected timespan that a company’s future plan will take to be im...

What are Producers’ Durable Equipment and Structures? Durable equipment and structures include products used that last a long time. So, in the ca...

What are the Neutrality and Superneutrality of Money? Codified as a term by economist Friedrich Hayek (author of, The Road to Serfdom), the Neutral...

What are Total Utility and Marginal Utility? Marginal utility is the satisfaction that comes from consuming one more unit of something, where total utility is the total satisfaction that comes from consuming a good or service, overall. Total utility comes from adding up all marginal utility.

What are Wage Rates? Wage rates are pay scales that are predicated on labor value at an hourly rate. The free market sets the rate based upon supply and demand above floors for minimum wages that are established by government. High in demand rarer skills, such as those of top surgeons and litigators, command a much higher level of comparative wage rate than those of baristas and cashiers, which are much more plentiful.

What is Aggregate Demand v. Aggregate Supply? Aggregate Demand refers to the total amount of demand for goods and services in a particular economy at a particular price over a specified time frame. Aggregate Supply refers to total supply in the same economy at the same price and time frame. The statistical relationship between the two is usually viewed in graphic form, especially since aggregate supply usually lags behind aggregate demand. Shifting of the chart in the ability to correlate the two is contingent on how soon supply catches up with demand, which can take days, weeks or months.

What is an Open v. Closed Economy? An open economy is one that engages in trade with other economies. Conversely, a closed economy is one that is vertically integrated and self sufficient to the point where no trade with other economies is required or desired. Due to the needs of modern societies for energy, food commodities, and other resources that may not be available internally, there are no technically closed economies among nations in the 21st century.

What is General Price Level? The General Price Level is a daily compilation of consumer prices for goods and services. The Consumer Price Index (CPI) is an index reflection of general price level.

What is Implicit GNP Price Deflator? The Gross National Product (GNP) encompasses both the GDP, which is domestic, as well as international goods and services produced by a country. The GNP Price deflator is a measurement of GNP while factoring inflation into the equation in comparison to a designated baseline period of reference.

What is Marginal Analysis? Marginal analysis is the comparison and weighing of supplementary benefits to supplementary costs when evaluating a new product, service or process being proposed to be added to a business.

What is Market Equilibrium? Market equilibrium is an economic status where demand and supply are even, resulting in price stability. As demand drives up prices, the incentive for others to seek to expand supply increases, and prices ultimately fall as supply expands. Market equilibrium, when achieved, is often artificially obtained via monopolistic practices such as with DeBeers’ control over the diamond trade.

What is Outside the Labor Force? In general, outside the labor force refers to those people who comprise the segment of the population that are unemployed and not seeking employment. That can mean they are still students and too young for full time employment; retired people; infirm people who cannot work due to illness or injury; or those who have given up finding work.

What is Productivity? Productivity is a calculation ratio of the total amount of units made, delivered or accounted for based on the total number of work hours devoted to those units. On a macroeconomic basis, it is the ratio of Gross Domestic Product (GDP) to man hours of work.

What is a Budget Constraint? Consumers have a panoply of choices in goods and services. The total accumulation of goods and services that a consumer can purchase with their income at market prices over a specified timeframe is called one’s budget constraint. Budget constraint analysis traces purchasing choices and behaviors.

What is an Indifference Curve? An indifference curve is a graphic depiction of a consumer’s assumed baseline indifference between two disparate goods that deliver equivalent customer satisfaction and use. As income rises or other factors are introduced, the indifference curves attempt to chart consumer choice preferences.

What is elasticity? Elasticity refers to the degree of demand to quality or price changes in the market to a product or service. Products or services that are deemed extraneous or non essential will likely exhibit elasticity with demand inversely proportional to price. Inelasticity would be prone to more essential items like iPhones and Starbucks lattes, which can rise in price while still retain demand.

What is Human Capital? Human capital refers to the ascribing of a return on investment calculation of an employee’s skills sets, experience, and other abilities, which may or may not be tangible, but can be quantified as contributing to a company’s bottom line.

What is Legal Tender? Legal tender is the tangible mode of payment used to legally satisfy financial obligations, such as a national currency in paper or coin. It is the form by which it would be acknowledged in declared legal value objectively anywhere in that nation.

What is Money Supply? Money supply references the total amount of liquidity, inclusive of currency and other liquid instruments, such as money market accounts, savings accounts, etc. Management of money supply is crucial as oversupply can cause inflation while under supply can cause stagnated economic growth and productivity.

What is Perfect Foresight? In the study of probability theory, perfect foresight is a hypothetical and unrealistic stated assumption in which someone could ostensibly forecast prices with 100% accuracy. As there would be no uncertainty regarding future variables, perfect foresight poses that this individual’s expectations and forecasts would always be correct.

What is Permanent Income? Formulated as a hypothesis in the late 1950s by economist Milton Friedman, Permanent Income is a theory predicated on the habits of people to adjust their spending habits in accordance with long term projected income expectations, regardless external factors, and that increased savings only occurs when earnings are higher than anticipated.

What is Personal Consumption Expenditure? Personal Consumption Expenditure looks at the goods and services American consumers pay for and any changes to the prices of these things. It directly measures how much consumers spend on personal products and services.

What is Scarcity? Scarcity is the economic concept and study of limited supply of a product or resource vs. potentially unlimited demand. The study explores allocation and prioritization of products and resources to meet different demands depending on the designated category groups and individuals. Resources can also include intangibles such as leisure time, sleep, and education levels.