In other words, an externality occurs when production, consumption, or investment decisions affect a third party who did not agree to incur those costs or benefits. Externalities can be either positive or negative. Other names for externalities are "external costs," "externality economics," and "...
economics, social science that seeks to analyze and describe the production, distribution, and consumption of wealth. In the 19th century economics was the hobby of gentlemen of leisure and the vocation of a few academics; economists wrote about economic policy but were rarely consulted by legislato...
Economic factors are variables internal and external to the company that can have an effect on the profitability and efficiency of the company’s process. These factors could be tax rates, inflation, labor supply, exchange rates, recession, government policies, changes in law, etc. It also helps...
In this lesson, learn what transaction costs are in economics. Understand what the transaction cost theory proposes and see transaction costs types...
Example: “The introduction of new technology increased the economic surplus by reducing production costs and lowering prices for consumers.” Economic Equilibrium Economic equilibrium is a state where market supply equals demand, with no external forces causing disruption, leading to stable prices and ...
Financial statements are mainly prepared forexternal users. There users are people who are outside of the company or organization itself and need information about it to base their financial decisions on. These external users typically fall into four main categories: ...
Benefits.Among the most notable potential benefits of vertical integration are: greater economies of scale, as an organization’s fixed-cost base is spread across a larger range of operations; the migration of some fixed, external costs (e.g., logistics) to variable costs, over which the organ...
Mostexternalities are negative. Pollution is a well-known negative externality. A corporation may decide to cut costs and increase profits by implementing new operations that are more harmful to the environment. The corporation realizes costs in the form of expanding operations but also generates retur...
In economics,economies of scaledictate that the more units a business produces, the less it costs to produce each unit. External economies of scale describe the same phenomenon, except as applied to an entire industry rather than within a single company. For example, if a city creates a bette...
Productive firms seek to maximize their profits by bringing in the most revenue while minimizing costs. To do this, they choose a combination of inputs that minimizes their costs while producing as much output as possible. By doing so, they operate efficiently; when all firms in the economy ...