Arrow’s impossibility theorem is a result in social choice theory, showing that there is no way to construct a social welfare function that satisfies all of the reasonable criteria for such a function. The theorem is named after Kenneth Arrow, who proved it in his 1951 book, Social Choice and Individual Values. Where is arrow … Read more
The Gini index is a measure of inequality. It is often used to measure income inequality, but can also be used to measure other measures of inequality such as wealth, health, or education. The Gini index is calculated by taking the difference between the cumulative percentages of the population at different levels of income or … Read more
A medium of exchange is an intermediary instrument that is used in the trade of goods and services. The most common medium of exchange is money. Money is used in exchange for goods and services because it is a widely accepted form of payment. Other forms of medium of exchange include barter, credit, and trade. … Read more
Dumping occurs when a company exports a product at a price lower than the price it charges for the same product in its home market. In order for dumping to be found to be taking place, there must be an injury to the domestic industry in the importing country as a result of the lower-priced … Read more
Derived demand is defined as the demand for a good or service that is derived from the demand for another good or service. In other words, the demand for the good or service in question is not directly related to the consumer’s own needs or wants, but is instead indirectly related to the demand for … Read more
A “crack-up boom” is a situation where people lose confidence in the currency and begin to hoard other assets, such as gold or land, instead. This can lead to a rapid increase in the price of those assets and a decrease in the value of the currency. A crack-up boom can be caused by a … Read more
Hedonic regression is a type of regression analysis that is used to predict the prices of goods and services based on a set of observed characteristics. The observed characteristics can be anything that is thought to affect the price of the good or service, such as the quality of the product, the size of the … Read more
In basic terms, market power is the ability of a firm to influence the market price of a good or service. Market power arises when a firm is able to influence the market price of a good or service by virtue of its size or market share. In other words, market power is the ability … Read more
The GDP gap is the difference between a country’s potential GDP and its actual GDP. Potential GDP is the level of GDP that would be achieved if the economy were operating at full capacity. The GDP gap is used to measure the amount of slack in the economy. A positive GDP gap indicates that the … Read more
In order to understand purchasing power, it is first necessary to understand the consumer price index (CPI). The CPI is a measure of the average change in prices paid by consumers for a basket of goods and services. It is used to measure inflation and is often used as a guide for setting interest rates. … Read more
