Theories and Basics

Articles explaining and demystifying every key term and theory in economics.

Laffer Curve Explained

Quick Definition: The Laffer curve is a graphical representation of the relationship between the government tax rate and the amount of tax revenue it receives. What is the Laffer curve? The Laffer curve is a graph showing the relationship between a government’s…

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Privatisation Explained

Quick Definition: Privatisation is when private businesses take control of organisations that were previously owned by the government. Also known as: Demonopolisation; outsourcing What is privatisation? Privatisation is the process of transferring state-owned businesses, which are controlled and run by the government,…

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Merit Goods Explained

Quick Definition: Merit goods are goods that bring wider benefits to society if they are consumed. They are generally under supplied by the private sector so the government provides them as well. What are merit goods? Merit goods are goods or services…

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Shoe-Leather Cost Explained

Quick Definition: A shoe-leather cost describes the cost to individuals who have to take frequent visits to the bank to take out more money for goods and services in periods of high inflation. The name ‘shoe-leather cost’ comes from the fact that…

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Poverty Trap Explained

Quick Definition: The poverty trap is when the unemployed are financially better off claiming benefits than entering employment. What is the poverty trap? The poverty trap is a term used to describe situations in an economy where people are financially better off…

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Engel’s Law Explained

Quick Definition: Engel’s Law states that the proportion of spending on food decreases as incomes rise. What is Engel’s Law? Engel’s Law is named after the statistician Ernst Engel, who was the first to investigate the relationship between income and spending on…

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Economic Growth Explained

tree growing on coins

Quick Definition: Economic growth is when a country’s production of goods and services increases over time. What is economic growth? Economic growth is often defined as an increase in a country’s output i.e. the production of goods and services. However, economic growth…

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Gross Domestic Product (GDP) Explained

Quick Definition: Gross domestic product is the total value of all goods and services produced in an economy during a set period of time. What is gross domestic product? Gross domestic product (GDP) is the value of the total amount of goods…

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