What is the formula for measuring price elasticity of demand? Percentage change in quantity demanded / Percentage change in price When the price elasticity coefficient is less than 1‚ the percentage change in quantity demanded is smaller than the change in price. When the price elasticity coefficient is equal to 1‚ the percentage change in quantity demanded is equal to the change in price. When the price elasticity coefficient is greater than 1‚ the percentage change in quantity demanded
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European transition economies. Tourism does not only bring in massive hard currencies‚ which transition economies desperately need‚ but also receives tremendous foreign direct investment (FDI)‚ which transition states could possibly benefit from the spillover effects. This paper examines the tourism industry in Hungary after the collapse of Communism in 1989. Firstly‚ it outlines the important role tourism plays in Hungary during transition period. Secondly‚ it analyzes the economic impact brought
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Market Failure "As long as producers and consumers act as perfect competitors‚ that is‚ take prices as given‚ then under certain conditions‚ a Pareto efficient allocation of resources emerges" - Fundamental Theorem of Welfare Economics Pareto Efficient Allocation is a point of efficiency‚ wherein the only way to make one agent better off is to make others worse off Governments have two reasons for their activity - Tax Collection and Public Expenditure - Regulate Market Failures Market Failure -
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Objectives Subsidies‚ by means of creating a wedge between consumer prices and producer costs‚ lead to changes in demand/ supply decisions. Subsidies are often aimed at : 1. inducing higher consumption/ production 2. offsetting market imperfections including internalisation of externalities; 3. Achievement of social policy objectives including redistribution of income‚ population control‚ etc. Effects of subsidies Economic effects of subsidies can be broadly grouped into 1.Allocative effects:
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Economics Unit 1 Review Economics – the study of how to distribute scarce resources among competing ends Microeconomics – focuses on individual consumers and businesses Macroeconomics – takes a broad view of the economy 3 Basic questions any society must answer * What to produce * How to produce * For whom to produce Economists assume that economic decision makers maximize their own utility. Utility is the satisfaction or pleasure from any action. Economists assume the
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favor of government intervention 3. Cluster theory suggests that companies obtain resources as a result of geographic proximity to other related and supportive industries primarily as a result of: a. Information spillovers b. Lower shipping costs c. Region specific subsidies d. Access to a common labor pools 4. A theory of internationalization‚ observed in the wine industry in the assigned readings‚ that focuses on the development of relationships between producers‚ suppliers‚ competitors
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making output and resource allocation decisions. However‚ there are solutions to externalities. Firstly‚ the solution to misallocation of resources is clear. An external cost‚ for example‚ should be reduced up to the point where marginal spillover costs saved by any further reduction just equal the marginal lost profits from the externality generating activity. Similarly an action that
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reviews the empirical evidence on the very different conclusions that can be drawn about productivity spillovers of foreign direct investment. It explains the concept of host country spillover benefits‚ describes the various forms these benefits can take‚ both within and between industries‚ and summarizes the evidence regarding the relative magnitudes of the various forms of spillovers. Moreover‚ the paper discusses host country policy measures which can accelerate both the BC affiliates
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by addressing and focusing on the economic problem of externalities‚ demerit goods‚ and the lack of provision of public goods. Governments can utilise various methods to address externalities and demerit goods. Externalities are third party spillover effects‚ and can be both positive and negative‚ and can come from consumption or production sides. Demerit goods are goods that either cause negative externalities‚ or are goods that governments deem unacceptable for their citizens‚ for instance
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Role of Government The government provides the legal framework and the services needed for a market economy to operate effectively. The legal framework sets the legal status of business enterprises‚ ensures the rights of private ownership‚ and allows the making and enforcement of contracts. Government also establishes the legal "rules of the game" that control relationships among business‚ resource suppliers‚ and consumers. Discrete units of government referee economic relationships‚ seek out foul
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