Definition of Normative Statements Normative statements are statements that express a value judgment about what is right or wrong, good or bad. That means they are subjective opinions about how things should be rather than factual statements about how things are. They are often used to express opinions, beliefs, or […]
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Permanent Income
Definition of Permanent Income Permanent income is an economic concept that describes the amount of money an individual or household expects to receive in the long run. That means it is the amount of money that is expected to remain constant, even if there are fluctuations in income over shorter […]
Read morePhillips Curve
Definition of Phillips Curve The Phillips curve is an economic concept that describes the relationship between inflation and unemployment. It states that there is an inverse relationship between the two, meaning that when one goes up, the other goes down. That means when unemployment is low, inflation tends to be […]
Read morePigovian Tax
Definition of Pigovian Tax A Pigovian tax is a tax that is imposed on a market activity that generates negative externalities. That means it is a tax on activities that have a negative impact on society, such as pollution or over-consumption. The purpose of the tax is to internalize the […]
Read morePlanned Spending
Definition of Planned Spending Planned spending is the amount of money that an individual or organization plans to spend on goods and services in a given period of time. That means it is the amount of money that is budgeted for a certain purpose. It is usually calculated by taking […]
Read moreOligopoly
Definition of Oligopoly An oligopoly is defined as a type of market structure in which a few firms dominate the entire industry. That means there are only a small number of firms that control the majority of the market share. As a result, these firms have significant market power (i.e., […]
Read morePerfect Complements
Definition of Perfect Complements Perfect complements are two goods or services that are consumed together and are considered inseparable. That means they are consumed in fixed proportions, and the demand for one good is directly linked to the demand for the other. In that regard, they are the exact opposite […]
Read morePerfect Substitutes
Definition of Perfect Substitutes Perfect substitutes are goods or services that are exactly the same in terms of function but different when it comes to price, quality, or other characteristics. That means they are interchangeable and can be used to satisfy the same need. As a result, the demand for […]
Read moreNormal Good
Definition of Normal Good A normal good is a good for which, all other things equal, an increase in income leads to an increase in demand and vice versa. That means when people earn more money, they buy more of that good and when they earn less, they buy less […]
Read morePhysical Capital
Definition of Physical Capital Physical capital is defined as all the tangible assets that are used to produce goods and services. That means it includes all the tools, machines, buildings, and other equipment that are used during the production process. Or in other words, physical capital is the tangible counterpart […]
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