Introduction to Economics GEN1704.2/ECN1101.2 L, Mussurov Altay

According to neoclassical economics, the wage rate is determined by a process of labor-market clearing (in which workers and employers compete with each other, ensuring that labor supply equals labor demand). Why, then, do we almost always observe unemployment? Neoclassical theorists argue that observed unemployment reflects frictional, structural, or disguised effects that are consistent with labor market clearing. In other words, this “natural” level of unemployment is, in fact, full employment. It is fruitless, in this view, to try to reduce unemployment below this natural level. misguided attempts to do so only create inflation. Unions, minimum wages, and other “market-inhibiting” measures will tend to increase the natural rate of unemployment.

Nominal gross domestic product measures the total value of all the goods and services produced and traded for money in the formal economy, evaluated at their current money prices. Nominal GDP can grow from one period to the next because of an increase in actual (real) output, and/or because of an increase in average prices (that is, as a result of inflation).

Some products cannot be transported over long distances, or otherwise sold to consumers from far-off locations. These products (including some goods and most services) are hence considered non-tradeable. they must be consumed near to where they are produced. Non- tradeable products include most construction, some manufacturing (such as highly perishable or extremely bulky products), most private services, and nearly all public services.

An abstract assumption, central to neoclassical economics, in which companies are so small that none can influence total output or price levels in an industry, none can distinguish its products from those of competing firms, and none can anticipate or interact with the actions of its competitors. Perfect competition has never existed in real life; it is a theoretical assumption developed solely in order to defend the internal logical integrity of neoclassical economic theories.

A tangible tool, building, machine, or other productive asset which is used to produce other goods or services.

A state of having inadequate income or other resources to support a household or group of households at a basic standard of living. Poverty can be measured in absolute or relative terms.

According to neoclassical economic theory, individuals’ preferences regarding the sorts of consumer goods they most enjoy will exercise an ultimate influence on both the composition of output in the economy, and the prices paid for final products and factors of production.

The overall average level of nominal prices in the economy can be calculated, most often as a weighted average of the prices of individual goods and services (with weightings reflecting the importance of each product in overall spending or output). Price levels can be calculated for consumer spending, for wholesale trade, for producer inputs, or for any other category of production. The most common measures of the overall price level are the consumer price index and the gross domestic product deflator.

Products which are harvested directly from the natural environment, with minimal subsequent processing, are considered primary products. These typically include agricultural, fishing, forestry, mineral, and energy products.

A form of business in which the company’s entire equity base is owned by one or a small group of individual investors. Under the private equity model, the company does not issue shares onto the stock market, and hence is not usually required to release public financial statements or comply with other securities regulations. Private equity firms are generally considered to be more ruthlessly focused on generating shorter-term cash profits from their operations than joint stock companies.