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What consumers do. Within an economy, this can be broken down into private and public consumption (see public spending). The more resources a society consumes, the less it has to save or invest, although, paradoxically, higher consumption may encourage higher investment. The life-cycle hypothesis suggests that at certain stages of life individuals are more likely to be saving than consuming, and at other stages they are more likely to be heavy consumers. Some economists argue that consumption taxes are a more efficient form of taxation than taxes on wealth, capital, property or income.
Industry:Economy
The difference between what a consumer would be willing to pay for a good or service and what that consumer actually has to pay. Added to producer surplus, it provides a measure of the total economic benefit of a sale.
Industry:Economy
What people are usually thinking of when they worry about inflation. The prices paid by whoever finally consumes goods or services, as opposed to prices paid by firms at various stages of the production process (see, for example, factory prices).
Industry:Economy
How good consumers feel about their economic prospects. Measures of average consumer confidence can be a useful, though not infallible, indicators of how much consumers are likely to spend. Combined with measures such as business confidence, it can shed light on overall levels of economic activity.
Industry:Economy
When there are strings attached, for example, to international aid or loans from the IMF or World Bank. The delivery of the money may be made subject to the government of the country implementing economic or political reforms desired by the donor or lender.
Industry:Economy
The tendency of a market to be dominated by a few big firms. A high degree of concentration may be evidence of antitrust problems, if it reflects a lack of competition. Traditionally, economists examined whether there was too much concentration using the Herfindahl-Hirschman index, which is determined by adding the squares of the market shares of all firms involved. A low Herfindahl indicated many competitors and thus great difficulty in exercising market power; a high Herfindahl, however, suggested a concentrated market in which price rises are easier to sustain. More recently, antitrust authorities have placed less emphasis on concentration. One reason is that it is hard to define the market in which concentration should be measured. Instead, antitrust authorities have turned their attention to finding examples of firms earning excessive profits or holding back innovation, although this too raises tricky conceptual and practical questions.
Industry:Economy
If a deposit account of $100 earns an interest rate of 10% a year, then at the end of the year the account will contain $110. If all of that money is left in the account, then the 10% interest will be paid on the $110, so at the end of the second year $11 of interest will be added, making $121 in all. This is known as compound interest. By contrast, simple interest pays the 10% only on the original sum in the account.
Industry:Economy
When you buy a computer, you will also need to buy software. Computer hardware and software are therefore complementary goods: two products, for which an increase (or fall) in demand for one leads to an increase (fall) in demand for the other. Complements are the opposite of substitute goods. For instance, Microsoft Windows-based personal computers and Apple Macs are substitutes.
Industry:Economy
“Real economists don’t talk about competitiveness,” said Paul Krugman, a much-respected contemporary economist. Real businessmen and real politicians talk about it all the time, however. Many firms have undergone savage downsizing to remain competitive, and governments have set up numerous committees to examine how to sharpen their countries’ economic performance. Mr. Krugman’s objection was not to the use of the term competitiveness by companies, which often do have competitors that they must beat, but to applying it to countries. At best, it is a meaningless word when applied to national economies; at worst, it encourages protectionism. Countries, he claimed, do not compete in the same way as companies. When two companies compete, one’s gain is the other’s loss, whereas international trade, Mr. Krugman argued, is not a zero-sum game: when two countries compete through trade they both win. Yet measures of national competitiveness are not complete nonsense. A country’s future prosperity depends on its growth in productivity, which government policies can influence. Countries do compete in that they choose policies to promote higher living standards. Even so, conceptual and measurement difficulties mean that the growing number of indices purporting to compare the competitiveness of different countries should probably be taken with a large pinch of salt.
Industry:Economy
Something that gives a firm (or a person or a country) an edge over its rivals.
Industry:Economy
