The Glass-Steagall Act
The Glass-Steagall Act (1933) separated depository institutions aka retail banks from investment banks and limited securities, activities, and affiliations within commercial banks and securities firms.A retail bank's primary function is to accept deposits and make loans. On the other hand, investment banks plan IPOs, help with mergers and…
Read More...Peak Oil: Will We Ever Run Out?
Peak Oil is a theoretical point in time after which the production of oil is expected to decline permanently because the industry has reached the maximum rate of extraction. The theory of Peak Oil was developed by a geologist named M. King Hubbert in 1956. He predicted that US peak oil would occur in the 1970s.In the 1970s US oil production had…
Read More...Deadweight Loss
A deadweight loss is a cost to society as a whole that is generated by an economically inefficient allocation of resources within the market.A deadweight loss arises at times when supply and demand--the two most fundamental forces driving the economy--are not balanced.What is a Deadweight Loss?
When supply and demand not balanced by…
Read More...Allocative Efficiency
Allocative efficiency is the level of output where the price of a good or service is equal to the marginal cost of production. Allocative efficiency has been achieved when goods and/or services have been distributed in an optimal manner, and when their marginal cost and marginal utility are equal.What is Allocative Efficiency?
The term…
Read More...Laffer Curve
The Laffer Curve was conceptualized for modern economies by Arthur Laffer during a meeting in which he argued against President Gerald Ford's tax increase. The Laffer Curve shows the relationship between tax revenue collected by the government and tax rates paid by citizens. The tax rates depicted on a Laffer Curve range from 0% to 100%.The…
Read More...Natural Monopolies
Most of us are well-acquainted with the idea of a monopoly: when there is only one firm prevailing in a particular industry. However, from a regulatory view, monopoly power exists when a single firm controls 25% or more of a particular market. For example, De Beers is known to have a monopoly in the diamond industry. Natural monopolies are a…
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