What is Cost of Capital? Cost of capital refers to the entire cost or expenses required to finance a major capital project, this include cost of debt and cost of equity. In this case, the meaning of cost of capital is dependent on the type of financing used, whether equity or debts. It is the required rate of return that makes a capital project coun...

What is Labor Economics? Labor economics is the study of behavior and decision making by employers and employees (including the supply of and demand for labor) as a result of environmental factors, such as fluctuating prices, profits, salaries, and conditions of work.  When is Labor Economics Used? Labor economics is a model for understanding demand...

What is Deflation? Deflation is an economic condition where the price of goods, services, and labor declines because of the increase in the purchasing power of the nation's currency. The increase in the purchasing power of the currency is generally related to limitations in the money supply due to economic stagnation or limited available credit. For...

What is the Fisher Effect? The Fisher effect, also known as the Fisher Hypothesis, is an economic theory which was proposed by an economist named Irving Fisher. The theory states that the real interest rate is independent of monetary measures, specifically the nominal interest rate and the expected inflation rate. It describes the underlying relatio...

What are Internal Controls? Internal controls refer to accounting policies and auditing procedures that ensure that the accounting information of a company are accurate and reliable. Companies set up internal controls to achieve a number of objectives. The forms of internal controls in a company determine how complaint, it will be to credible accoun...

How do Monopolistic Competitors Affect Market Entry? If one monopolistic competitor earns positive economic profits, other firms will be tempted to enter the market.  The entry of other firms into the same general market  shifts the demand curve that a monopolistically competitive firm faces. As more firms enter the market, the quantity demanded at ...

What is the Double Coincidence of Wants? In an economy without money, an exchange between two people would involve a double coincidence of wants, a situation in which two people each want some good or service that the other person can provide. For example, if an accountant wants a pair of shoes, this accountant must find someone who has a pair of sh...

What is a Public Limited Company? A public limited company is the legal status of any firm which has offered shares for purchase to members of the general public through an initial public offering or direct public offering.  Shareholders of a Public Limited Company have limited personal liability for debts and obligations of the company? Whre is the...

What are the Limitations of Fiscal Policy? Fiscal policy can help an economy that is producing below its potential GDP to expand aggregate demand so that it produces closer to potential GDP, thus lowering unemployment. However, fiscal policy cannot help an economy produce at an output level above potential GDP without causing inflation At this point...

What is Bid Rigging? Bid rigging is an unethical practise that occurs in the process of bidding, this is an act whereby businesses (competing parties) conspire with one another to execute non-competitive bids. In this situation, the competing parties conspire and choose a party to secure the contract using an uncompetitive bid.  In most countries, b...