Adverse Selection

Adverse selection describes circumstances in which either buyers or sellers have information that the other group does not have. In these cases, when these two groups are informed to different degrees, this is known as asymmetric information.Naturally, the result is that one party has a consistent advantage over the other, which leads to…
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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…
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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…
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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…
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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. It can be 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 refers to the degree of…
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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…
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