There are three main sectors of economy consists of household sectors, business sectors and government sectors. Household sector provides the factors of the production such as land, labor and capital and enterprise that the producers require to produce goods and services. They also receive payments as in rent, wages, interest and profits from the business sector. It is also stated that in general, household sector consists of the greatest number of consumers among all sectors and satisfying the wants will cause consume of their climate aim. Business sector act as a part as in receiving economy resources from household sector and in exchange for consumer expenditure, they also provide household sectors goods and services. Business sector is also given money to buy scarce economic resources from the resource market. While they’re in the product market, business sector sells their products and services, which is also the way they receives their income. To complete Continue reading
International Economics
Keynesian and Classical Economists Views about Disequilibrium
Economists usually define general disequilibrium as the state in which contrasting market forces of supply and demand fail to reach a balance and there exist an intrinsic inclination for change. The main indicator of market disequilibrium is the continuation of shortages either in the demand or supply side of the economy. There are two main models that hold divergent views concerning disequilibrium namely the Keynesian and Classical Economists models. Generally, the major causes for disequilibrium in the markets if the deficiencies created either in the aggregate demand or aggregate supply side of the economy. This means that in such circumstances the market does not clear. Main causes of disequilibrium are understood in the light of the economic model s followed by scholars. For instance, the Keynesian theory’s causes differ from that of classical economists. For instance, following Keynesian’s view, disequilibrium arises when there are disparities between leakages and injections where Continue reading
Supply-Side Economics – Definition and Influencing Factors
The early 1980s saw the emergence of a new school of thought that emphasized the impact of aggregate supply on the economic growth of nations. This new school of thought was called supply-side economics. Supply-side economists argued that creating an economic environment that provided incentives for people to work and save money, and also an environment that is conducive for firms to invest and create employment would cause an increase in aggregate supply. The supply-side economists assumed that the aggregate demand of the nation was always adequate and that it would absorb the aggregate supply, thus indicating their acceptance of Say’s law. Supply-side economics, thus, laid emphasis on reduction in tax-rates and social spending, promotion of free labor markets and liberalization of economy. The supply-side economists believed that incentives and tax-rates influence the economy’s aggregate supply to a great extent. According to them, the tax-rates induce people either to produce Continue reading
Welfare Economics
“The greatest meliorator of the world is selfish, huckstering trade.” (R.W. Emerson, Work and Days) Welfare Economics is a normative branch of economics that is concerned with the way economic activity ought to be arranged so as to maximize economic welfare. The hallmark of welfare economics is that policies are assessed exclusively in terms of their effects on the well-being of individuals. Accordingly, whatever is relevant to individuals well-being is relevant under welfare economics, and whatever is unrelated to individuals well-being is excluded from consideration under welfare economics. Economists often use the term utility to refer to the well-being of an individual, and, when there is uncertainty about outcomes, economists use an ex ante measurement of well-being, so-called expected utility. Welfare economics employs value judgement s about what ought to be produced, how production should be organized, the way income and wealth ought to be distributed, both now and Continue reading
Sustainable Development Goals (SDGs) – An Overview
The United Nations Sustainable Development Goals (SDGs) is a program that was created by the United Nations. Its aim is to achieve an all-round development globally through having the desire to achieve such factors as; hunger and poverty reduction, having many people access both clean and affordable energy, improvement and provision of proper health services, industrialization, innovation and both economic and infrastructural development and many more objectives totaling to seventeen. In other words, it offers a sincerely comprehensive apparition of the future. These sustainable development goals were created and adopted in 2015 September, after the period for which the achievements of Millennium Development Goals (MDGs) were terminated in 2015. However, some of the objectives were substantially met. Nevertheless, some remain unfinished business, to enable the overall global sustainability and prosperity for all by the year 2030. The achievement of these development goals will involve many stakeholders, including the public sector, Continue reading
Theory of Absolute Advantage and Comparative Advantage
Theory of Absolute Advantage If one region can produce a commodity with less expense than another, and they exchange, then both should benefit. In a nutshell, this is the law of comparative advantage. It is used as the justification for WTO trade regulations. Some land grows corn better than other land. This economical insight into farming in early 18th Century was the cornerstone of the law of absolute advantage. Some farmland will yield more corn per acre than another, therefore the good land confers an absolute advantage over other regions. The conclusion drawn from this argument is that the farmer of the poor land should change products that it can produce to its absolute advantage, such as grazing sheep. The law of absolute advantage is based on the assumption that competition is the best paradigm within which to build an economy, it assumes that competition will improve production. The Continue reading