Archives: Terms

Definition of Discount Rate The discount rate is the interest rate used to calculate the present value of future cash flows. That means it is the rate used to determine how much a future payment is worth today. This rate is used to compare investments with different time horizons and […]

Definition of Diseconomies of Scale Diseconomies of Scale are defined as the negative effects of increasing the size of a business. That means as a business grows, it may become more challenging to manage and coordinate its activities. This can lead to higher costs and a decrease in efficiency. Example […]

Definition of Diversification Diversification is an investment strategy that involves spreading out investments across different asset classes, industries, and geographies. That means it involves investing in a variety of different assets in order to reduce risk and increase returns. Example To illustrate this, let’s look at an example. Imagine you […]

Definition of Dominant Strategy In game theory, a dominant strategy is a strategy that is the best choice for a player, regardless of the other players’ strategies. That means it is the most profitable option for this player, no matter what the other players do. Example To illustrate this, let’s […]

Definition of Economy The economy is defined as the system of production, distribution, and consumption of goods and services in a given society. That means it includes all the activities related to the production, buying, and selling of goods and services in a particular country or region. Example To illustrate […]

Definition of Economic Activity Economic activity is defined as the production, distribution, and consumption of goods and services in an economy. That means it includes all the activities that are related to the production, distribution, and consumption of goods and services. Example To illustrate this, let’s look at a small […]

Definition of Economic Growth Economic Growth is defined as an increase in the production of goods and services in an economy over a period of time. That means it is a measure of the increase in the total output of an economy, usually measured as the percentage change in the […]

Definition of Economics Economics is the study of how people, businesses, and governments make decisions about the allocation of scarce resources. That means it looks at how people use their limited resources to satisfy their unlimited wants and needs. It also examines how the choices people make affect the production, […]

Definition of Economies of Scale Economies of scale is defined as the cost advantage that arises with increased output of a product. That means as production increases, the average total cost of each unit decreases because of the efficiencies that come with larger production volumes. Example To illustrate this, let’s […]

Definition of Efficiency Wages Efficiency wages are wages that are set higher than the market rate in order to increase the productivity of workers. That means employers pay their employees more than they would in a competitive market in order to incentivize them to work harder and be more productive. […]