Archive about 'Principles Of Economics'

In economics, briefly explain what is nominal and real income

Tweet Nominal income or money income  is income expressed as a number of monetary units like money wagesWhereasReal income is what the money income can actually buy on the market. Real income is the actual purchasing power reflecting the goods and services that it can command. Illustration: Say the monthly household’s monthly income is $4,000 […]

Briefly explain the steps to the construction of a consumer price index (CPI)

Tweet Earlier article on practical challenges on constructing the consumer price index (CPI).Below are the brief steps to construct a consumer price index (CPI): Select the base year Select a basket of goods and services Assign weights Gather information on goods and services

Briefly explain the problems during the construction of a consumer price index (CPI)

Tweet In theory, constructing a CPI is simple but there are the following practical problems: The choice of a base year The selection of a representative basket of goods The weighting to the selected items No consideration given to the quality of the item Problem with the accuracy and reliability of data supplied Problem with […]

Explain briefly the Principles Governing Consumer Behavior.

Tweet In economic analysis, the principle governing consumer behavior relates to the general behavior of a consumer in distributing a limited personal income amongst an infinite variety of goods and services available. It assumed the following: The consumer will so arrange expenditure that the relative marginal utility of all the goods consumed will be in […]

In Economic, What Is Gross Capital Formation,Depreciation And Net Capital Formation

Tweet Gross Capital formation in a given period is the expenditure on fixed capital assets(buildings, plant and machinery, vehicles,etc) either for replacing or adding to the stock of fixed assets. Note that the expenditure on repairs and maintenance is excluded. Depreciation is the fixed capital resources being used up or consumed due to wear and […]

In Economic, What Is Capital and Real Capital

Tweet Capital One of the factors of production Defined as “ wealth which is use for the production of further wealth; or simply a commodity which is used in the production or other goods and services like plant or equipment Represents current consumption forgone in order to obtain future production and future consumption It enhances […]

Explain briefly what is Ricardo’s Theory Of Rent

Tweet Ricardo’s theory of rent: States that the rent of a piece of land has been the excess of the yield of that piece of and over that of the worst land in cultivation. He regarded that land at the margin of cultivation yielded no rent, indeed if rent was charged the land would not […]

Explain briefly what is the Classical Theory Of Employment.

Tweet Classical theory of employment: Economic thought of the Classical School of economist and based on two fundamental postulates: The wage will be equal to the marginal product of labor; (represent the demand schedule for labor) and the utility of the wage when a given volume of labor is employed is equal the marginal disutility […]

Explain briefly what is Malthusian Theory of Population.

Tweet Thomas Malthus(1766-1834) developed the theory of population and published it in An Essay on the Principle of Population in 1978. Malthusian Theory Of Population advocates the following: That population would soon out-strip the means of feeding it, if it were not kept down by vice, misery or self-restraint; That in a state of society […]

Karl Marx(1818-1883) and The Marxist Economics And His Economic Interpretation of Theory

Tweet Karl Marx advocated the Marxist socialism which had its origin in the conditions created by the Industrial Revolution. He showed that the capitalist system could not by its very nature survive and in due course get replaced by socialism and that the class which would effect the revolution would be the new industrial working-class […]