- Industry: Economy; Printing & publishing
- Number of terms: 15233
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The relationship between inputs and output, which can be applied to individual factors of production or collectively. Labor productivity is the most widely used measure and is usually calculated by dividing total output by the number of workers or the number of hours worked. Total factor productivity attempts to measure the overall productivity of the inputs used by a firm or a country. Alas, the usefulness of productivity statistics is questionable. The quality of different inputs can change significantly over time. There can also be significant differences in the mix of inputs. Furthermore, firms and countries may use different definitions of their inputs, especially capital. That said, much of the difference in countries’ living standards reflects differences in their productivity. Usually, the higher productivity is the better, but this is not always so. In the UK during the 1980s, labor productivity rose sharply, leading some economists to talk of a “productivity miracle”. Others disagreed, saying that productivity had risen because unemployment had risen – in other words, the least productive workers had been removed from the figures on which the average was calculated. There was a similar debate in the United States starting in the late 1990s. Initially, economists doubted that a productivity miracle was taking place. But by 2003, they conceded that during the previous five years the United States enjoyed the fastest productivity growth in any such period since the Second World War. Over the whole period from 1995, labor productivity growth averaged almost 3% a year, twice the average rate over the previous two decades. That did not stop economists debating why the miracle had occurred.
Industry:Economy
Part of the “ile” family that signposts positions on a scale of numbers (see also percentile). The top quartile on, say, the distribution of income, is the richest 25% of the population.
Industry:Economy
How likely something is to happen, usually expressed as the ratio of the number of ways the outcome may occur to the number of total possible outcomes for the event. For instance, each time you throw a dice there are six possible outcomes, but in only one of these can a six come up. Thus the probability of throwing a six on any given throw is one in six. The fact that you threw a six last time does not alter the one-in-six probability of throwing a six next time (see risk).
Industry:Economy
Selling state-owned businesses to private investors. This policy was associated initially with Margaret Thatcher’s government in the 1980s, which privatized numerous companies, including public utility businesses such as British Telecom, British Gas, and electricity and water companies. During the 1990s, privatization became a favorite policy of governments all over the world. There were several reasons for the popularity of privatization. In some instances, the aim was to improve the performance of publicly owned companies. Often nationalization had failed to achieve its goals and had become increasingly associated with poor service to customers. Sometimes privatization was part of transforming a state-owned monopoly into a competitive market, by combining ownership transfer with deregulation and liberalization. Sometimes privatization offered a way to raise new capital for the firm to invest in improving its service, money that was not available in the public sector because of constraints on public spending. Indeed, perhaps the main attraction of privatization to many politicians was that the proceeds from it could ease the pressure on the public purse. As a result, they could avoid (in the short-term) doing the more painful things necessary to improve the fiscal position, such as raising taxes or cutting public spending.
Industry:Economy
When prices of, say, a public utility are regulated, giving producers an incentive to maximize their profits by reducing their costs as much as possible. Contrast with rate of return regulation.
Industry:Economy
Price mechanism is an economic term that refers to the buyers and sellers who negotiate prices of goods or services depending on demand and supply. A price mechanism or market-based mechanism refers to a wide variety of ways to match up buyers and sellers through price rationing.
Industry:Economy
In equilibrium, what balances supply and demand. The price charged for something depends on the tastes, income and elasticity of demand of customers. It depends on the amount of competition in the market. Under perfect competition, all firms are price takers. Where there is a monopoly, or firms have some market power, the seller has some control over the price, which will probably be higher than in a perfectly competitive market. By how much more will depend on how much market power there is, and on whether the firm(s) with the market power are committed to profit maximization. In some cases, firms may charge less than the profit-maximizing price for strategic or other reasons (see predatory pricing).
Industry:Economy
A measure of the responsiveness of demand to a change in price. If demand changes by more than the price has changed, the good is price-elastic. If demand changes by less than the price, it is price-inelastic. Economists also measure the elasticity of demand to changes in the income of consumers.
Industry:Economy
When a firm charges different customers different prices for the same product. For producers, the perfect world would be one in which they could charge each customer a different price: the price that each customer would be willing to pay. This would maximize producer surplus. This cannot happen, not least because sellers do not know how much any individual would pay. Yet some price discrimination is possible if an overall market can be segmented into somewhat separate markets and the equilibrium price in each of these markets is different, perhaps because of differences in consumer tastes, perhaps because in some segments the firm enjoys some market power. But this will work only if the market segments can be kept apart. If it is possible and profitable to buy the product in a low-price segment and resell it in a high-price segment, then price discrimination will not last for long.
Industry:Economy
The state of being poor, which depends on how you define it. One approach is to use some absolute measure. For instance, the poverty rate refers to the number of households whose income is less than three times what is needed to provide an adequate diet. (Though what constitutes adequate may change over time. ) Another is to measure relative poverty. For instance, the number of people in poverty can be defined as all households with an income of less than, say, half the average household income. Or the (relative) poverty line may be defined as the level of income below which are, say, the poorest 10% of households. In each case, the dividing line between poverty and not-quite poverty is somewhat arbitrary. As countries get richer, the number of people in absolute poverty usually gets smaller. This is not necessarily true of the numbers in relative poverty. The way that relative poverty is defined means that it is always likely to identify a large number of impoverished households. However rich a country becomes, there will always be 10% of households poorer than the rest, even though they may live in mansions and eat caviar (albeit smaller mansions and less caviar than the other 90% of households).
Industry:Economy
