Archives: Terms

Definition of Compensating Differential A compensating differential is defined as the difference in wages paid to workers for performing the same job in different locations or under different conditions. That means it is the extra amount of money paid to workers to make up for the differences in working conditions, […]

Definition of Collusion Collusion is defined as an agreement between two or more parties to limit open competition by deceiving, misleading, or defrauding others of their legal rights. That means it is a form of anti-competitive behavior in which companies cooperate with each other to gain an unfair advantage over […]

Definition of Common Resource A common resource is defined as a good that is rival, but not excludable. That means it is shared by a group of people or a community (i.e., access cannot be restricted or limited), but not available to all of them at the same time (i.e., […]

Definition of Compounding Compounding is the process of generating earnings on an asset’s reinvested earnings. That means it is the accumulation of earnings from an initial investment over time. Or in other words, it describes the interest you earn on your interest that you earned on your interest (and so […]

Definition of Constant Returns to Scale Constant Returns to Scale (CRS) is an economic concept that describes a situation in which the output of a production process increases proportionally with the inputs. That means if the inputs are doubled, the output will also double. This is in contrast to increasing […]

Definition of Consumption Consumption is defined as the use of goods and services by households. That means it is the process of buying and using goods and services to satisfy one’s needs and wants. Consumption is an essential part of the economy, as it is the main driver of economic […]

Definition of Cost Cost is defined as the amount of money or resources that must be expended in order to produce or acquire something. That means it includes both the direct and indirect expenses associated with a product or service. Direct costs are those that are directly related to the […]

Definition of Cost-Benefit Analysis Cost-benefit analysis is a method of evaluating the costs and benefits of a project or decision. That means it is used to determine whether a project or decision is worth pursuing by comparing the costs and benefits associated with it. It is a systematic approach to […]

Definition of Cyclical Unemployment Cyclical unemployment is defined as unemployment that results from a lack of aggregate demand in the economy during economic downturns. That means it occurs when there is not enough demand for goods and services, which leads to a decrease in production and an increase in unemployment. […]

Definition of Demand Deposits Demand deposits are bank accounts that allow customers to withdraw their money at any time without prior notice. That means customers can access their funds whenever they need them, without having to wait for the bank to process the transaction. Example To illustrate this, let’s look […]