What is Basis Trading? Basis trading is a financial arbitrage trading strategy that involves the trading of a financial instrument, such as a financial derivative or a commodity, with the motive of profiting from the apparent mispricing of the securities. It is also referred to as cash-and-carry trade. Basis trading is carried out when a…
What is Economic Inequality? Economic inequality most often refers to disparities in wealth and income that may exist in certain societies. Economic inequality is a metric that many jurisdictions and governments monitor in order to assess the impact of policy changes. How can we measure income inequality? There are many ways to measure income inequality,…
What is Socialism vs. Capitalism? In the study of economics, socialism vs. capitalism represent opposing schools of thought, and their central arguments touch on the role of government in the economy and economic equality among the citizens. Capitalists believe that the government should allow the free market to determine supply and demand. On the other…
What is the Gini Coefficient? The Gini coefficient (Gini index or Gini ratio) is a statistical measure of economic inequality in a population. The coefficient measures the dispersion of income or distribution of wealth among the members of a population. The Gini coefficient is one of the most frequently used measures of economic inequality. The…
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…
