Despite the predominance of capitalism as the mode of production in the current global economy, communism, independent production, slavery and feudalism have remained active in the production modes in the society. This analytical treatise attempts to explicitly explore the tenet of existence of other modes of production besides capitalism in the present society. Through the universal principles of intelligible strategies, governments across the globe are keen on production interventions that aim at protecting the infant companies. The governments operating on this assumption have to ensure their own survival by protecting their industries and trade policies. This action represents the communist production mode which is characterized by the need to serve self interest above the interest of the competitors. The prime principle of communism is featured by interconnected holistic phenomenon. The conscientious citizenship needs to perceive the global interrelationship since the world is marked with inclusive model of integration; the world explores several Continue reading
Economics Principles
Trickle-Down Economics or Reaganomics
In economics and politics, the term trickle-down economics or Reaganomics is the pejorative term for the theory that taxing the wealthiest individuals in society less will in allow those individuals to invest more of their money into the economics development and create new jobs for the middle and lower class. Proponents for the theory use the term supply-side economy, considering that the idea of the middle to lower classes tangentially receiving benefits through economics policy which directly benefit the rich is somewhat insulting. The basic idea is that the recipients of the tax cuts will then be able to invest more money into infrastructure, opening more stores and companies, which will then provide more jobs as well as drive down the prices of goods. However, in terms of economic theory, there have been no major economists who have ever supported this theory or have attempted to defend the “trickle-down” aspect Continue reading
Effect of Price Controls on an Economy
A lot has been said about open economies but the fact is that their existence is only in theory. It is common knowledge that all countries in the world have some entry restrictions in their markets. With this in mind, open economies are described as those countries whose policies allow production and pricing to be determined by the forces of supply and demand. The aforementioned restrictions are, therefore, in the form of policies that countries develop in a bid to accelerate economic growth. One of such policies is price control in which a government gives price floors and/or ceilings for products, rent, wages, etc. This article is an in-depth investigation of the effect of price controls like rent control and minimum wage on the efficiency of an economy. Importance of Price Controls Price controls are a very important part of any market. They play very important roles in protection of consumers Continue reading
Neoclassical Theory of Labor Supply Explained
The total number of hours that an individual is capable and willfully supplies at a standard wage rate is called the labor supply. Thus supply of labor involves individuals seeking to be employed for a given an agreed amount of wage. But the neoclassical theory of individual labor supply terms income and leisure as the major source of individual utility. Income that is generated by the individual from work is spent for the leisure activities, depending on the individual’s own preference. However, the changes in the market wage rate impacts the individual in two ways; an increase or decrease in the income and a shift from one activity to the other. In the longer term, the extreme increases and decreases in the wage rate may decline to unacceptable levels forcing individuals to exit the labor market, a situation known as voluntary unemployment. Therefore, the neoclassical theory of individual labor supply Continue reading
Market Economy – Overview, Features, Characteristics, Advantages and Disadvantages
A market economy can be defined as an economy in which the allocation of resources is determined only by their supply and the demand for them. Market economy can also be defined as an economic system in which economic decisions and the pricing of goods and services are guided solely by the aggregate interactions of a country’s citizens and businesses and there is little government intervention or central planning. To conclude, the market economic system is basically a system whereby private individuals take up the responsibility of allocating resources to the public and relies chiefly on market forces to determine prices. Countries practicing the market economic system tend to assume that the forces of demand and supply are the main determinants of what is right for a nation’s well-being. They {the countries} rarely experience government interventions such as price fixing, license quotas and industry subsidizations. In reality, the market economy Continue reading
Monopsony and Competition Law in Indian Context
Can a buyer be the biggest bully? The classical theory of monopsony answers this question. It envisions a market scenario with only one buyer, who can use his leverage to reduce the quantity of product purchased, thereby driving down the price that he has to pay. Seldom does a monopsonistic situation arise in the market, so much so that little has been thought till date about the potential adverse impact of such a scenario on market competition. Another reason for the antitrust analyst’s apparent neglect of the power on the buyer’s side of the market may be that such power tends to reduce the selling price of a commodity, thereby causing a prima facie increase in consumer welfare, which has always been one of the traditional goals of competition law. Classical Monopsony -What does It Entail? Pure monopsony can be looked upon as the demand-side analogue of the monopolist who Continue reading