What is an Externality? An externality is a cost or benefit of an economic activity experienced by an unrelated third party. The external cost or benefit is not reflected in the final cost or benefit of a good or service. Therefore, economists generally view externalities as a serious problem that makes markets inefficient, leading to…
What is the Human Development Index (HDI)? The Human Development Index (HDI) is a statistical measure (composite index) developed by the United Nations to assess the social and economic development of countries around the world. The HDI considers three indicators of human development, namely, life expectancy, education, and per capita income. Pakistani economist Mahbub ul…
What is the Labor Market? The labor market is the place where the supply and the demand for jobs meet, with the workers or labor providing the services that employers demand. The worker may be anyone who wishes to offer his services for compensation, while the employer may be a single entity or an organization…
What is Unemployment? Unemployment is a term referring to individuals who are employable and actively seeking a job but are unable to find a job. Included in this group are those people in the workforce who are working but do not have an appropriate job. Usually measured by the unemployment rate, which is dividing the…
What is EDLP? EDLP, which stands for Every Day Low Prices, is a pricing strategy in which firms promise consumers consistently low prices on products without having to wait for sales events. In such a pricing strategy, a firm sets a low price and maintains it over a long time-horizon (given that product costs remain…
What is Financial Economics? Financial economics is a branch of economics that deals with various financial markets, taking into consideration how resources are being used. Its particular attention to monetary activities sets it apart from the other branches. In financial economics, important aspects that occur in forex and stock markets are analyzed, as well as…
What is Pareto Distribution? The Pareto Distribution was named after Italian economist and sociologist Vilfredo Pareto. It is sometimes referred to as the Pareto Principle or the 80-20 Rule. The Pareto Distribution is used in describing social, scientific, and geophysical phenomena in society. Pareto created a mathematical formula in the early 20th century that described…
What is the Financial Account? The financial account measures the changes in the number of foreign assets held by residents of a country. Residents include individuals/families, businesses, and the government. A country’s financial account is one of the three components of its balance of payments. The balance of payments, as the name suggests, is simply the way…
What is Market Failure? Market failure refers to the inefficient distribution of goods and services in the free market. In a typical free market, the prices of goods and services are determined by the forces of supply and demand, and any change in one of the forces results in a price change and a corresponding…
What is the Capital Account? The capital account is used to account for and measure any financial transaction within a country that isn’t exerting an active effect on that country’s savings, production, or income. The capital account – along with the current and financial accounts – make up the country’s balance of payments, which comprehensively…
