...AN INTRODUCTION TO ECONOMICS IN 5,000 WORDS Authors Note. Many years ago when I was doing research as a Visiting Associate Member at St. Antony’s College, Oxford, I shared a house with several grad students from various different disciplines who were studying for their D.Phil. I was struck by the number who asked me what economics was about and would I please write an elementary book some day, so that an intelligent and welleducated person could learn about it. I never forgot. This article is a simple introduction to the discipline, or at least as simple as I can make it. Economics courses tend to contain a lot of mathematics or a lot of diagrams, or both. This article uses neither. It might be useful to you if you are similarly intellectually curious; or if you are just starting a course in economics and looking for an easy overview; or perhaps are contemplating studying the subject and wondering what the heck you might be getting into. If the article interests you and you would like to learn more, please check out the link at the end. This takes you to a free book of economics notes that sticks to using diagrams (lots!), with only the tiniest bit of algebra in one small section. The notes explain this article in more detail. Not counting these notes, I have written 5 books, the latest of which is Going to University: the Secrets of Success, Exposure Publishing, UK, 2007. This is designed to help sixth formers (grades 11-12) and assist you to adjust quickly and easily to...
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...#793634.34 Principals of Economics Unit 3 Student’s Name Institution #793634.34 Principals of Economics Unit 3 The Perfectly competitive market is a market structure in which the competition level is very high (Mankiw, 2007). In this market structure, the knowledge is freely available to all buyers and sellers. The availability knowledge enables the consumers and producers to make rational decisions to maximize their profits. Market price is the particular price that buyers and sellers agree to use in the market at a given time. I formal markets, there are two types of prices. These are the selling price and the buying price. The price of the goods in the market determines the market structures (Economics Online, 2015). The increase market products depend on demand and supply. In a perfectly competitive market firm, the price of goods determines the profit. The average revenue is the revenue a firm generates by selling one unit of output. The market structure determines the relationship between the quantity of output and average revenue. In a perfectly competitive market, the average revenue equals both marginal revenue and the price. Both marginal revenue and the prices are constant. A business experiences marginal revenue when it sells one or more extra units of its output. Marginal revenue plays a crucial role in profit maximization decision making (Mankiw, 2007). Therefore, a perfectly competitive market increases its profit...
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...How People Make Economic Decisions ECO/212 February 3, 2011 How People Make Economic Decisions Consumers are a major key in economics and every decision they make is rational; this is what economist assume. Consumers make decisions on four basic principals; trade-offs, opportunity cost, marginal changes, alternative marginal benefits and scarcity resources. Four Basic Principals of Decision Making First principal are trade-offs. A person needs to weigh the want over the means; so this means getting a good or service that the person wants and then needs to give up on or the other. The second principal is opportunity cost. Making a decision based on cost and benefits and possible looking for an alternative conclusion. The third principal is marginal changes. Consumer decision would be based on marginal benefits and comparing with marginal costs of the conclusion. Alternative benefits changes the marginal costs or benefits to motivate people to respond. The fourth principal is called scarcity. Consumers have to make choices because in the economy the goods and services are scarce. People exceed their wants when there are limited services and goods to meet the means of consumers. In my personal experience, I used the four basic principals in the decision making of returning to school. I have been out the school for many years and was afraid of making the final decision of returning to school. I finally looked at many variables that I took into consideration in making...
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...achievement, principal leadership, and student economic status influence closing the achievement gap in Upper Midwest urban schools. | | Lit Review | Professional Development * Professional development standards established in 2011 to develop new policies and practices (Borko, 2012). * The intensity and duration of the professional development indicates the amount of change in classroom practices (Garet et al., 2007).Teacher Knowledge for Improvement * Professional development improves teacher quality by changing teacher practices (Wenglinski, 2002) * Professional development is most effective when designed using actual school data (Borko, 2008; Ingvarson et.al, 2005). * Implementing professional knowledge, based on how schools succeed and effective teaching, is inevitable (Edmonds, 1979). * Through Professional Development programs, school districts maintain highly qualified employees that have skills to improve student achievement (Evan, 2009).Economic Status and Student Achievement * Student achievement begins before children enter school. A child’s home environment, economic status, emotional and social development, health, and cultural identity are related to achievement (Cunningham, 2012).Educational Leadership * Research by Smith and Andrews (1989) strengthened the importance of the principal’s role in creating conditions for effective schools and keys to success. Similar research findings were supported by Lipham (1984). * Because principals lack prerequisite...
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...American Economic Review: Papers & Proceedings 2009, 99:2, 448–453 http://www.aeaweb.org/articles.php?doi=10.1257/aer.99.2.448 Beliefs and disagreement in OrganizatiOns † Authority versus Persuasion By Eric Van den Steen* Managers often face a choice between authority and persuasion. In particular, since a firm’s formal and relational contracts and its culture and norms are quite rigid in the short term, a manager who needs to prevent an employee from undertaking the wrong action has the choice between either trying to persuade this employee or relying on interpersonal authority.1 Herbert Simon (1947) noted, for example, that “when … disagreement is not resolved by discussion, persuasion, or other means of conviction, then it must be decided by the authority of one or the other participant” and that “in actual practice … authority is liberally admixed with suggestion and persuasion.” Obviously, in choosing between persuasion and authority, the manager makes a cost-benefit trade-off. This paper studies that trade-off, focusing in particular on agency conflicts that originate in open disagreement, in the sense of differing priors. To that purpose, I will study a setting in which a principal and an agent are involved in a project. The project’s outcome depends both on decisions and on implementation effort by the agent, i.e., on effort to execute the decisions. A key issue is that the principal and agent may openly disagree on which decisions are most likely to † Discussants:...
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...maslen@icaew.co.uk. Further information on the Audit Quality Forum, the current work programme and how to get involved is available at www.icaew.co.uk/auditquality or contact 020 7920 8493. © December 2005 Institute of Chartered Accountants in England & Wales Dissemination of the contents of this paper is encouraged. Please give full acknowledgement of source when reproducing extracts in other published works. No responsibility for any person acting or refraining to act as a result of any material in this document can be accepted by the ICAEW, the Audit and Assurance Faculty or authors. ISBN 1 84152 404 2 AuditQuality a Q Agency theory and the role of audit CONTENTS 3 Contents Page Executive summary Introduction Principal-agent relationships What is an agency relationship? Agency theory Motives of agents and...
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...theory is controversial and essential theory in accounting, economic and finance sphere. The theory raises a problem of agency relationship, in which, cooperating parties- principal and agent, have different goals and division of work. Agency theory arises two problems: the difficulty of verifying what the agent is actually doing, and the conflict between goals and desires of the principal and agent (Eisenhardt, 1989). Agency theory is based on two different approaches: positivist agency theory and the principal-agent research. The first one describes the governance mechanism that limits the selfish behavior of the agent. Positivist agency theory identifies two propositions including governance system. If the contract between the principal and the agent is based on outcomes, there is a high probability that the agent will act in the interest of the principal. In addition if the principal has information to verify behavior of the agent, then the agent will act in the interest of the principal. The second one, principal-agent stream, contains more testable implications than the positivist theory. There are several things like goal conflict, easily measurable outcome, and the assumption that the agent is more risk averse than the principal, that are assumed in principal-agent research. The main difference between these two theories is that the positivist agency theory identifies certain contract alternatives and principal-agent theory indicates which contracts are the most efficient...
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...8th International Conference on Islamic Economics and Finance Measurement of Financial Development: A Fresh Approach Noureen Adnan 1 Financial development can be defined as the policies, factors, and the institutions that lead to the efficient intermediation and effective financial markets. A strong financial system offers risk diversification and effective capital allocation. The greater the financial development, the higher would be the mobilization of savings and its allocation to high return projects. Financial development can be measured by a number of factors including the depth, size, access, and soundness of financial system. It can be measured by examining the performance and activities of the financial markets, banks, bond markets and financial institutions. It is observed that higher the degree of financial development in a country, the wider will be the availability of financial services. A developed financial system offers higher returns with less risk. In this paper it is attempted to collect main components of financial development including Banks, Stock markets, insurance companies and bond markets for 41 economies during the period of 1988 to 2009. The method of principal component is utilized to extract a single financial development index out of them. Principal component analysis is a modern tool of data analysis. The main aim to apply principal component to achieve a meaningful index out of complex and multidimensional elements of financial development...
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...incentives. While premium incentives, just like xed-prize tournaments, are based on relative performance, the prize to be awarded is not set in advance but is a function of the rm's success: the prize is high if the rm is successful and low if it is not successful. Relying on a simple model of cost minimization, we are able to show that premium incentives outperform xed-prize tournaments as well as piece rates. Our theoretical result is qualitatively con rmed by a controlled laboratory experiment and has important practical implications for the design of organizational incentive systems. JEL Classi cation: C72, C91, J33 Keywords: Tournaments, Incentives, Economic experiments Max Planck Institute for Economics, Kahlaische Strasse 10, 07745 Jena, Germany. yEberhard Karls Universitat Tubingen, Faculty of Economics and Business Administration, Nauklerstrasse 47, 72074 Tubingen, Germany. zThe Hebrew University, Center for the Study of Rationality, Giv'at Ram, Jerusalem 91904, Israel. 1 1 Introduction and Motivation As documented by Orrison et al. (2004) or Bothner et al. (2007), tournament incentives have developed into an increasingly important component of compensation systems; they are `pervasive in organizations' (Casas-Arce and Martnez-Jerez, 2009). Unlike piece rates, which are awarded according to absolute performance, tournament incentives are awarded...
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...Agency Theory: A brief Review by N. Waweru The agency theory assumes that there exists a contractual relationship between members of a firm. It recognises the existence of two groups of people; principals or superiors and agents or subordinates. The principals will delegate decision making authority to the agents and expect them to perform certain functions in return for a reward. Both the principals and the agents are assumed to be rational economic persons motivated solely by self-interest but may differ with respect to preferences, beliefs and information (Jensen and Meckling, 1976). The principal/agent relationship can exist throughout any organisation and usually starts from the shareholder-director and ends with the supervisor-shop floor worker (Figure 1.1). In an organisation context, which involves uncertainty and asymmetric information, the agent’s actions may not always be directed to the best interests of the principal. Agents’ pursuit of their self-interest instead of those of the principal is what is called the agency problem (Jensen and Meckling, 1976). To counter this behaviour, the principal may monitor the agents’ performance through an accounting information system. The owner can also limit such aberrant behaviour by incurring auditing, accounting and monitoring costs and by establishing, also at a cost, an appropriate incentive scheme (Jensen and Meckling, 1976). According to Jensen (1998), agency theory seeks to understand: (1) how to assign decision making...
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...articles of the 60s and his first book, Theory of Justice written in 1971, was about collective coercive power and its’ use in demanding justice and fairness in a societies as addressed in his dissertation in 1951, “Outline of a Decision Procedure for Ethics”. (Richardson, 2005) Rawls also studied at Oxford University. His first appointments were at Cornell University and MIT and joined the Harvard University faculty in 1962 where he remained for his career of thirty years. (Wenar, 2008)John Rawls had a philosophy of social justice that said individual rights went hand in hand with justice and equality through basic personal and political liberties. This first principal said that everyone had a right to participate in politics, have freedom of associations, and the right of due process by law. Rawls’ principal said that everyone had a right to be active and play a role in politics regardless of wealth....
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...How People Make Economic Decisions In today’s economy, decision-making skills vary for each household; however, the bottom-line goal for every individual is to get the most for their money. In order to do this, there are 4 principles of individual decision-making: facing trade-offs, evaluating what one is giving up to obtain their goal, thinking at the margin, and responding to incentives. The first principal in individual decision-making is facing a trade-off. In order for individuals to accomplish their goals or to obtain something they desire, there is usually something that must be given up or traded to accomplish that. In Chapter 1 of our material, efficiency vs. equity is discussed which helps further explain this principal. Society is always desiring to obtain the most for their money; getting the best they can. This is called efficiency. While trying to get the most out of our everyday decisions, we must also consider equity and making sure that the economic prosperity of our decisions is fairly distributed. The second principal goes hand-in-hand with the first. “Because people face trade-offs, making decisions requires comparing the costs and benefits of alternative courses of action” (Mankiw, 2007, p.5). To make the decision of what goals we are going to strive for, it is imperative to consider if the goal is worth the item(s) being given up. Is it worth not being able to do something else? How much money is it going to cost to obtain this goal or item? How...
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...principals. The principals, on the other hand, may wish that a particular vendor be selected, so they reject the selection offered by the cooperative. Not only the actions or inactions of both the agent and principal influence the outcome, but also there are random factors, beyond the control of either the principal or the agent (which influence the outcome). Moreover, there are costs borne by the agent in performing the action, and by the principal in providing compensation in addition to the costs of monitoring the behavior of the agent. As such, these tools of agency theory are an appropriate lens by which to model Cooperative Public Purchasing (CPP) for at least three reasons. First, the nomenclature developed here can apply to both public...
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...EMH additionally claims that prices instantly reflect even hidden or "insider" information. Critics have blamed the belief in rational markets for much of the late-2000s financial crisis.[1][2][3] In response, proponents of the hypothesis have stated that market efficiency does not mean having no uncertainty about the future, that market efficiency is a simplification of the world which may not always hold true, and that the market is practically efficient for investment purposes for most individuals.[4] In political science and economics, the principal–agent problem or agency dilemma concerns the difficulties in motivating one party (the "agent"), to act in the best interests of another (the "principal") rather than in his own interests. Common examples of this relationship include corporate management (agent) and shareholders (principal), or politicians (agent) and voters (principal).[1] For another example, consider a dental patient (the principal) wondering whether his dentist (the agent) is recommending expensive treatment because it is truly necessary for the patient's dental health, or because it...
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...standards, as well as overall student success. Many current leadership theories, as well as those which have evolved over a long period of time, offer a glimpse into the cause of the decline in both student achievement and lowered morale among long time staff members. This is further complicated by the fact that the principal is markedly old school in management style while the assistant principal, the fourth to work with this principal, is well versed in, and embraces more current leadership styles. The dichotomy that currently exists can best be expressed as leadership versus management. While the existence of these two different ideologies could be complimentary, the autocratic, transactional style of the principal does not allow for equal participation by the assistant principal. The principal is a top notch manager who handles day to day operational aspects of the school with ease and fluidity, but has for the majority of her tenure employed a highly directive style of leadership and has been resistant to the growing trend towards the more collaborative, shared decision making model the school district has begun to advocate. In contrast, the assistant principal is a visionary leader who clearly prefers a mix of situational and transformational styles...
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