Goods and services
Physiocratic economists categorized production into productive labour and unproductive labour. This emphasis on production was adapted by David Ricardo, Thomas Robert Malthus and John Stuart Mill. Other, mainly Italian, 18th century economists maintained that all desired goods, the division of consumables into services is a simplification, these are not discrete categories. Most business theorists see a continuum with pure service at one endpoint, most products fall between these two extremes. For example, a restaurant provides a good, but provides services in the form of ambience. Although some utilities, such as electricity and communications service providers, exclusively provide services, other utilities deliver physical goods, for public sector contracting purposes in the European Union, electricity supply is actually defined as goods rather than services. Goods are normally structural and can be transferred in an instant while services are delivered over a period of time, goods can be returned while a service once delivered cannot.
Goods are not always tangible and may be virtual e. g. a book may be paper or electronic, marketing theory makes use of the service-goods continuum as an important concept which enables marketers to see the relative goods/services composition of total products. In a narrower sense, service refers to quality of customer service and this particular usage occurs frequently in retailing. Distinctions are made between goods and services in the context of international trade liberalization, for example, the World Trade Organizations General Agreement on Tariffs and Trade covers international trade in goods and the General Aglreement on Trade in Services covers the services sector
World War II
World War II, known as the Second World War, was a global war that lasted from 1939 to 1945, although related conflicts began earlier. It involved the vast majority of the worlds countries—including all of the great powers—eventually forming two opposing alliances, the Allies and the Axis. It was the most widespread war in history, and directly involved more than 100 million people from over 30 countries. Marked by mass deaths of civilians, including the Holocaust and the bombing of industrial and population centres. These made World War II the deadliest conflict in human history, from late 1939 to early 1941, in a series of campaigns and treaties, Germany conquered or controlled much of continental Europe, and formed the Axis alliance with Italy and Japan. Under the Molotov–Ribbentrop Pact of August 1939, Germany and the Soviet Union partitioned and annexed territories of their European neighbours, Finland and the Baltic states. In December 1941, Japan attacked the United States and European colonies in the Pacific Ocean, and quickly conquered much of the Western Pacific.
The Axis advance halted in 1942 when Japan lost the critical Battle of Midway, near Hawaii, in 1944, the Western Allies invaded German-occupied France, while the Soviet Union regained all of its territorial losses and invaded Germany and its allies. During 1944 and 1945 the Japanese suffered major reverses in mainland Asia in South Central China and Burma, while the Allies crippled the Japanese Navy, thus ended the war in Asia, cementing the total victory of the Allies. World War II altered the political alignment and social structure of the world, the United Nations was established to foster international co-operation and prevent future conflicts. The victorious great powers—the United States, the Soviet Union, the United Kingdom, the Soviet Union and the United States emerged as rival superpowers, setting the stage for the Cold War, which lasted for the next 46 years. Meanwhile, the influence of European great powers waned, while the decolonisation of Asia, most countries whose industries had been damaged moved towards economic recovery.
Political integration, especially in Europe, emerged as an effort to end pre-war enmities, the start of the war in Europe is generally held to be 1 September 1939, beginning with the German invasion of Poland and France declared war on Germany two days later. The dates for the beginning of war in the Pacific include the start of the Second Sino-Japanese War on 7 July 1937, or even the Japanese invasion of Manchuria on 19 September 1931. Others follow the British historian A. J. P. Taylor, who held that the Sino-Japanese War and war in Europe and its colonies occurred simultaneously and this article uses the conventional dating. Other starting dates sometimes used for World War II include the Italian invasion of Abyssinia on 3 October 1935. The British historian Antony Beevor views the beginning of World War II as the Battles of Khalkhin Gol fought between Japan and the forces of Mongolia and the Soviet Union from May to September 1939, the exact date of the wars end is not universally agreed upon.
It was generally accepted at the time that the war ended with the armistice of 14 August 1945, rather than the formal surrender of Japan
A government is the system by which a state or community is controlled. In the Commonwealth of Nations, the government is used more narrowly to refer to the collective group of people that exercises executive authority in a state. This usage is analogous to what is called an administration in American English, government is sometimes used in English as a synonym for governance. In the case of its broad definition, government normally consists of legislators, administrators. Government is the means by which state policy is enforced, as well as the mechanism for determining the policy of the state. A form of government, or form of governance, refers to the set of political systems. Government of any kind currently affects every human activity in many important ways, in political science, it has long been a goal to create a typology or taxonomy of polities. as typologies of political systems are not obvious. It is especially important in the science fields of comparative politics. On the surface, identifying a form of government appears to be simple, the United States is a constitutional republic, while the former Soviet Union was a socialist republic.
However self-identification is not objective, and as Kopstein and Lichbach argue, for example, elections are a defining characteristic of an electoral democracy, but in practice elections in the former Soviet Union were not free and fair and took place in a one-party state. Voltaire argued that the Holy Roman Empire is neither Holy, nor Roman, many governments that officially call themselves a democratic republic are not democratic, nor a republic, they are usually a dictatorship de facto. Communist dictatorships have been prone to use this term. For example, the name of North Vietnam was The Democratic Republic of Vietnam. China uses a variant, The Peoples Republic of China, thus in many practical classifications it would not be considered democratic. Experience with those movements in power, and the ties they may have to particular forms of government. For example, The meaning of conservatism in the United States has little in common with the way the words definition is used elsewhere, as Ribuffo notes, what Americans now call conservatism much of the world calls liberalism or neoliberalism.
Since the 1950s conservatism in the United States has been associated with the Republican Party. However, during the era of segregation many Southern Democrats were conservatives, values are sorted from 1–100 based on level of democracy and political accountability
A tax is a financial charge or other levy imposed upon a taxpayer by a state or the functional equivalent of a state to fund various public expenditures. A failure to pay, or evasion of or resistance to taxation, is punishable by law. Taxes consist of direct or indirect taxes and may be paid in money or as its labour equivalent, the legal definition and the economic definition of taxes differ in that economists do not regard many transfers to governments as taxes. For example, some transfers to the sector are comparable to prices. Examples include tuition at public universities and fees for utilities provided by local governments, governments obtain resources by creating money and coins, through voluntary gifts, by imposing penalties, by borrowing, and by confiscating wealth. In modern taxation systems, governments levy taxes in money, but in-kind and corvée taxation are characteristic of traditional or pre-capitalist states, the method of taxation and the government expenditure of taxes raised is often highly debated in politics and economics.
Tax collection is performed by a government agency such as the Canada Revenue Agency, when taxes are not fully paid, the state may impose civil penalties or criminal penalties on the non-paying entity or individual. The levying of taxes aims to raise revenue to fund governing and/or to alter prices in order to affect demand and their functional equivalents throughout history have used money provided by taxation to carry out many functions. A governments ability to raise taxes is called its fiscal capacity, when expenditures exceed tax revenue, a government accumulates debt. A portion of taxes may be used to service past debts, governments use taxes to fund welfare and public services. These services can include education systems, pensions for the elderly, unemployment benefits, energy and waste management systems are common public utilities. A tax effectively changes relative prices of products and they have therefore sought to identify the kind of tax system that would minimize this distortion.
Governments use different kinds of taxes and vary the tax rates, taxes on the poor supported the nobility, modern social-security systems aim to support the poor, the disabled, or the retired by taxes on those who are still working. A states tax system often reflects its communal values and the values of those in current political power. To create a system of taxation, a state must make choices regarding the distribution of the tax burden—who will pay taxes and how much they will pay—and how the taxes collected will be spent. In democratic nations where the public elects those in charge of establishing or administering the tax system, in countries where the public does not have a significant amount of influence over the system of taxation, that system may reflect more closely the values of those in power. All large businesses incur administrative costs in the process of delivering revenue collected from customers to the suppliers of the goods or services being purchased. Taxation is no different, the resource collected from the public through taxation is always greater than the amount which can be used by the government, the difference is called the compliance cost and includes the labour cost and other expenses incurred in complying with tax laws and rules
It is concerned with the social and economic impacts that purchasing and consumption behaviour has on both the consumer and wider society. Consumer behaviour blends elements from psychology, social anthropology and economics and it examines how emotions and preferences affect buying behaviour. The study of behaviour investigates the influences, on the consumer, from groups such as family, sports, reference groups. The study of behaviour is concerned with all aspects of purchasing behaviour - from pre-purchase activities through to post-purchase consumption and evaluation activities. It is concerned with all involved, either directly or indirectly, in purchasing decisions and consumption activities including brand-influencers. Research has shown that consumer behaviour is difficult to predict, even for experts in the field, new research methods such as ethnography and consumer neuroscience are shedding new light on how consumers make decisions. Customer relationship management databases have become an asset for the analysis of customer behaviour, understanding purchasing and consumption behaviour is a key challenge for marketers.
Consumer behaviour, in its broadest sense, is concerned with understanding both how purchase decisions are made and how products or services are consumed or experienced, some purchase decisions involve long, detailed processes that include extensive information search to select between competing alternatives. Other purchase decisions, such as impulse buys, are made almost instanteously with little or no investment of time or effort in information search, some purchase decisions are made by groups while others are made by individuals. When a purchase decision is made by a group, such as a household, different members of the group may become involved at different stages of the decision process. For example, one person may search for information while another may physically go to the store, buy the product, for most purchase decisions, each of the decision roles must be performed, but not always by the same individual. The importance of children as influencers in a range of purchase contexts should never be underestimated.
The decision model situates the black box in an environment which shows the interaction of external and internal stimuli as well as consumer responses. The decision model assumes that purchase decisions do not occur in a vacuum, rather they occur in real time and are affected by other stimuli, including external environmental stimuli and the consumers momentary situation. The elements of the include, interpersonal stimuli or intrapersonal stimuli, environmental stimuli. In addition, the black box includes buyer characteristics and the decision process. In practice some purchase decisions, such as those made routinely or habitually, are not driven by a sense of problem-solving. Such decisions are termed low-involvement and are characterized by low levels of information search/ evaluation activities
The theory of consumer choice is the branch of microeconomics that relates preferences to consumption expenditures and to consumer demand curves. Consumption is separated from production, because two different economic agents are involved, in the first case consumption is by the primary individual, in the second case, a producer might make something that he would not consume himself. Therefore, different motivations and abilities are involved, the models that make up consumer theory are used to represent prospectively observable demand patterns for an individual buyer on the hypothesis of constrained optimization. Prominent variables used to explain the rate at which the good is purchased are the price per unit of good, prices of related goods. As the price of a good rises, consumers will substitute away from that good, in addition, as the wealth of the individual rises, demand for most products increases, shifting the demand curve higher at all possible prices. The basic problem of consumer theory takes the following inputs, The consumption set C – the set of all bundles that the consumer could conceivably consume, a preference relation over the bundles of C.
This preference relation can be described as a utility function. A price system, which is a function assigning a price to each bundle, an initial endowment, which is a bundle from C that the consumer initially holds. The consumer can sell all or some of his initial bundle in the given prices and he has to decide which bundle to buy, under the given prices and budget, in order to maximize his utility. Consider an economy with two types of homogeneous divisible goods, traditionally called X and Y, the consumption set is R +2, i. e. the set of all pairs where x ≥0 and y ≥0. Each bundle contains a quantity of good X and a non-negative quantity of good Y. A typical preference relation in this universe can be represented by a set of indifference curves, each curve represents a set of bundles that give the consumer the same utility. A typical utility function is the Cobb-Douglas function, u = x α ⋅ y β, a typical price system assigns a price to each type of good, such that the cost of bundle is x p X + y p Y.
A typical initial endowment is just a fixed income, which along with the prices implies a budget constraint, the consumer can choose any point on or below the budget constraint line BC In the diagram. This line is downward sloped and linear since it represents the boundary of the inequality x p X + y p Y ≤ i n c o m e. In other words, the amount spent on both goods together is less than or equal to the income of the consumer, the consumer will choose the indifference curve with the highest utility that is attainable within his budget constraint. Every point on indifference curve I3 is outside his budget constraint so the best that he can do is the point on I2 where the latter is tangent to his budget constraint. He will purchase X* of good X and Y* of good Y, indifference curve analysis begins with the utility function
Price elasticity of demand
Price elasticity of demand is a measure used in economics to show the responsiveness, or elasticity, of the quantity demanded of a good or service to a change in its price, ceteris paribus. More precisely, it gives the change in quantity demanded in response to a one percent change in price. Price elasticities are almost always negative, although tend to ignore the sign even though this can lead to ambiguity. Only goods which do not conform to the law of demand, in general, the demand for a good is said to be inelastic when the PED is less than one, that is, changes in price have a relatively small effect on the quantity of the good demanded. The demand for a good is said to be elastic when its PED is greater than one, revenue is maximized when price is set so that the PED is exactly one. The PED of a good can be used to predict the incidence of a tax on that good, various research methods are used to determine price elasticity, including test markets, analysis of historical sales data and conjoint analysis.
It is a measure of responsiveness of the quantity of a raw good or service demanded to changes in its price, for example, if the price increases by 5% and quantity demanded decreases by 5%, the elasticity at the initial price and quantity = −5%/5% = −1. The only classes of goods which have a PED of greater than 0 are Veblen and Giffen goods, although the PED is negative for the vast majority of goods and services, economists often refer to price elasticity of demand as a positive value. The latter type of elasticity measure is called a cross-price elasticity of demand, as the difference between the two prices or quantities increases, the accuracy of the PED given by the formula above decreases for a combination of two reasons. First, the PED for a good is not necessarily constant, as explained below, PED can vary at different points along the demand curve, due to its percentage nature. Elasticity is not the thing as the slope of the demand curve. Second, percentage changes are not symmetric, the change between any two values depends on which one is chosen as the starting value and which as the ending value.
For example, if quantity demanded increases from 10 units to 15 units, but if quantity demanded decreases from 15 units to 10 units, the percentage change is −33. 3%, i. e. ÷15. Two alternative elasticity measures avoid or minimise these shortcomings of the elasticity formula, point-price elasticity. Point elasticity of demand method is used to change in demand within same demand curve. One way to avoid the accuracy problem described above is to minimise the difference between the starting and ending prices and quantities. However, the point-price elasticity can be computed if the formula for the demand function, Q d = f, is known so its derivative with respect to price, d Q d / d P. Loosely speaking, this gives an average elasticity for the section of the actual demand curve—i. e, the arc of the curve—between the two points
An economy is an area of the production, distribution, or trade, and consumption of goods and services by different agents in a given geographical location. Economic agents can be individuals, organizations, or governments, Economic transactions occur when two parties agree to the value or price of the transacted good or service, commonly expressed in a certain currency. Monetary transactions only account for a part of the economic domain. Economic activity is spurred by production which uses resources, labor. It has changed over time due to technology, innovation such as that which produces intellectual property and these factors give context and set the conditions and parameters in which an economy functions. In other words, the domain is a social domain of human practices. A command-based economy is where political agents directly control what is produced and how it is sold, a green economy is low-carbon, resource efficient, and socially inclusive. Today the range of fields of the examining the economy revolve around the social science of economics, but may include sociology, anthropology.
All professions, economic agents or economic activities, contribute to the economy, consumption and investment are variable components in the economy that determine macroeconomic equilibrium. There are three sectors of economic activity, primary and tertiary. Alternate and long-standing terminology distinguishes measures of an economy expressed in real values, such as real GDP, the English words economy and economics can be traced back to the Greek word οἰκονόμος, a composite word derived from οἶκος and νέμω by way of οἰκονομία. The first recorded sense of the economy is in the phrase the management of œconomic affairs. Economy is recorded in more senses, including thrift. The most frequently used current sense, denoting the system of a country or an area. As long as someone has been making and distributing goods or services, there has some sort of economy, economies grew larger as societies grew. The Babylonians and their city state neighbors developed forms of economics comparable to currently used civil society concepts and they developed the first known codified legal and administrative systems, complete with courts and government records.
The ancient economy was based on subsistence farming. The Shekel referred to an ancient unit of weight and currency, the first usage of the term came from Mesopotamia circa 3000 BC. and referred to a specific mass of barley which related other values in a metric such as silver, copper etc
Macroeconomics is a branch of economics dealing with the performance, structure and decision-making of an economy as a whole. This includes national and global economies and microeconomics, a pair of terms coined by Ragnar Frisch, are the two most general fields in economics. Macroeconomic models and their forecasts are used by governments to assist in the development, Macroeconomics encompasses a variety of concepts and variables, but there are three central topics for macroeconomic research. Macroeconomic theories usually relate the phenomena of output, outside of macroeconomic theory, these topics are important to all economic agents including workers and producers. National output is the amount of everything a country produces in a given period of time. Everything that is produced and sold generates an equal amount of income, therefore and income are usually considered equivalent and the two terms are often used interchangeably. Output can be measured as total income, or it can be viewed from the side and measured as the total value of final goods.
Macroeconomic output is measured by gross domestic product or one of the other national accounts. Economists interest in long-run increases in output study economic growth, advances in technology, accumulation of machinery and other capital, and better education and human capital all lead to increased economic output over time. However, output does not always increase consistently, business cycles can cause short-term drops in output called recessions. Economists look for macroeconomic policies that prevent economies from slipping into recessions, the amount of unemployment in an economy is measured by the unemployment rate, i. e. the percentage of workers without jobs in the labor force. The unemployment rate in the force only includes workers actively looking for jobs. People who are retired, pursuing education, or discouraged from seeking work by a lack of job prospects are excluded, unemployment can be generally broken down into several types that are related to different causes. Classical unemployment theory suggests that unemployment occurs when wages are too high for employers to be willing to hire more workers, other more modern economic theories suggest that increased wages actually decrease unemployment by creating more consumer demand.
Structural unemployment covers a variety of causes of unemployment including a mismatch between workers skills and the skills required for open jobs. Large amounts of unemployment can occur when an economy is transitioning industries. While some types of unemployment may occur regardless of the condition of the economy, Okuns law represents the empirical relationship between unemployment and economic growth. The original version of Okuns law states that a 3% increase in output would lead to a 1% decrease in unemployment, a general price increase across the entire economy is called inflation
Consumer cooperatives are enterprises owned by consumers and managed democratically which aim at fulfilling the needs and aspirations of their members. They operate within the system, independently of the state, as a form of mutual aid. Consumers cooperatives often take the form of retail outlets owned and operated by their consumers, there are many types of consumers cooperatives, operating in areas such as health care, housing and personal finance. Consumers cooperatives may, in turn, form cooperative federations and these may come in the form of cooperative wholesale societies, through which consumers cooperatives collectively purchase goods at wholesale prices and, in some cases, own factories. Alternatively, they may be members of cooperative unions, Consumer cooperation has been a focus of study in the field of cooperative economics. The Co-operative Group is by far the largest of these businesses, itself having over 4500 outlets, Consumer cooperatives rose to prominence during the industrial revolution as part of the labour movement.
As employment moved to areas and job sectors declined, workers began organizing and controlling businesses for themselves. Workers cooperative were originally sparked by critical reaction to industrial capitalism, the formation of some workers cooperatives were designed to cope with the evils of unbridled capitalism and the insecurities of wage labor. In the decades that followed, several cooperatives or cooperative societies formed including Lennoxtown Friendly Victualling Society, the philosophy that underpinned the cooperative movement stemmed from the socialist writings of thinkers including Robert Owen and Charles Fourier. These ideas were put into effect successfully in the mills of New Lanark. It was here that the first co-operative store was opened and he tried to form such communities in Orbiston in Scotland and in New Harmony, Indiana in the United States of America, but both communities failed. Similar early experiments were made in the early 19th century and by 1830 there were several hundred co-operatives, dr William King made Owens ideas more workable and practical.
He believed in starting small, and realized that the classes would need to set up co-operatives for themselves. He founded a periodical called The Co-operator, the first edition of which appeared on 1 May 1828. This gave a mixture of co-operative philosophy and practical advice about running a shop using cooperative principles, the first successful organization was the Rochdale Society of Equitable Pioneers, established in England in 1844. The Rochdale Pioneers established the ‘Rochdale Principles’ on which ran their cooperative. This became the basis for the development and growth of the cooperative movement. On December 21,1844, they opened their store with a very meagre selection of butter, flour, within three months, they expanded their selection to include tea and tobacco, and they were soon known for providing high quality, unadulterated goods
In macroeconomics, aggregate demand or domestic final demand is the total demand for final goods and services in an economy at a given time. It specifies the amounts of goods and services that will be purchased at all possible price levels and this is the demand for the gross domestic product of a country. It is often called effective demand, though at times this term is distinguished. The aggregate demand curve is plotted with real output on the horizontal axis and it is downward sloping as a result of three distinct effects, Pigous wealth effect, Keynes interest rate effect and the Mundell–Fleming exchange-rate effect. The Pigou effect states that a price level implies lower real wealth. The Mundell–Fleming exchange-rate effect is an extension of the IS–LM model, whereas the traditional IS-LM Model deals with a closed economy, Mundell–Fleming describes a small open economy. Aggregate demand is expressed contingent upon a level of the nominal money supply. There are many factors that can shift the AD curve, rightward shifts result from increases in the money supply, in government expenditure, or in autonomous components of investment or consumption spending, or from decreases in taxes.
According to the aggregate demand-aggregate supply model, when demand increases, there is movement up along the aggregate supply curve. Business lost access to capital, so it had dismissed workers and this meant workers had less to spend as consumers, consumers bought less from business, which because of additionally reduced demand, had found the need to dismiss workers. The downward spiral could only be halted, and rectified by external action, people with higher incomes have a lower marginal propensity to consume their incomes. People with lower incomes are inclined to spend their earnings immediately to buy housing, transport and so forth and they save instead, which means that the velocity of money, meaning the circulation of income through different hands in the economy, is decreased. This lowered the rate of growth, spending should therefore target public works programmes on a large enough scale to speed up growth to its previous levels. An aggregate demand curve is the sum of individual demand curves for different sectors of the economy, a basic conception is that it is the total consumption expenditures of the domestic economy.
The consumption function is C = a + M P C ×, where a is autonomous consumption, M P C the marginal propensity to consume, gross private domestic investment, such as spending by business firms on factory construction. This is conceived as all private sector spending aimed at the production of some future consumable, in Keynesian economics, not all of gross private domestic investment counts as part of aggregate demand. Much or most of the investment in inventories can be due to a short-fall in demand, the Keynesian model forecasts a decrease in national output and income when there is unplanned investment. Thus, only the planned or intended or desired part of investment is counted as part of aggregate demand, investment is affected by the output and the interest rate