Economics

Market Economy
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Economics is the study of the market economy. The market economy refers to an abstract image of interaction among purposeful, "normal human beings," or actors, under a given set of conditions. The set of conditions are four:

  • a system of private property rights,
  • specialization,
  • the use of money
  • free enterprise.
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The assumptions of Marshall’s model create certain consequences for firms in perfectly competitive industries. One of the most important of these is that firms have no power over the price that they can charge. This is because there are so many firms selling an identical product that if any one firm attempts to sell at a price higher than its competitors, it will sell nothing.

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The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3 percent in September on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index rose 1.5 percent before seasonal adjustment.

Increases in the shelter and gasoline indexes were the main causes of the rise in the all items index. The gasoline index rose 5.8 percent in September and accounted for more than half of the all items increase. The shelter index increased 0.4 percent, its largest increase since May.

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Imagine that you are the president of Blue Skies Airlines, Inc. and you have decided that Blue Skies should buy a new Boeing 777. The plane will cost $125 million and change. There is one small problem though. Blue Skies only has a few million dollars in its bank account, and those funds are needed to pay fuel bills and the salaries of its employees.

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When you mention the word "investment" most people think of Wall Street and the stock market, not capital investment in new plant and equipment by firms. These are two distinct uses of the same word. When someone buys 100 shares of Nike Corporation they are making a financial investment. When Nike Corp. builds a new factory or warehouse, it is making a capital investment.