Product has no close substitutes economics essay

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Product has no close substitutes economics essay

The most useful definition of the term as a noun seems to be an extremely liquid asset, measured in a standard unit of account and capable with certainty of discharging debts expressed in that unit.

As applied to the United States at the present time, this definition includes in money the circulating stock of metallic small change, Federal Reserve Notes and other paper currency, and also the stock of commercial bank deposits with checking privileges. In rare cases where there are unusually sharp cleavages in attitudes and expectations within a given society, it may even imply different moneys for different groups within that society.

Unit of account means a unit such as the U. Such units have been used to facilitate thinking about economic matters through much of human history. As may be seen from the fact that the more venerable units of account shekels, pounds, and the like correspond to units of weight, most societies until recently have thought of their units of account as expressing the value of a stated weight of gold or silver; but since paper money came into general use in the nineteenth century, units of account have become more and more abstract.

It should be noted that a society at a given time may be using one or more units of account. A debt is an obligation on the part of one economic unit person, firm, or government body to another, expressed in a standard unit of account.

For the debtor, a debt is negative wealth—but expressed in the unit of account, whereas other types of negative wealth such as a contract to deliver 1, bushels of wheat next month are expressed in physical units.

Since every debt obligation is two-sided, the obverse of each debt payable is a claim receivable, which constitutes an asset wealth for the creditor.

Money in most presentday societies consists chiefly of claims upon debtors who are central governments, central or commercial banks, or other credit institutions. For an asset to be liquid, it must be either money or else something which quickly and with a high degree of certainty can be converted into a known amount of money.

In rating assets as more or less liquid, therefore, we should not ask whether all units of such a unit could in fact be converted into money, but whether each unit can be so converted in the opinion of its holder.

Such a shift may be quite sudden, with holders today viewing as illiquid assets which a short time ago they viewed as highly liquid. It seems clear that there were such sudden shifts in the liquidity attributed to deposits in individual banks during the great epidemic of bank failures in the United States in For some holders and upon some occasions, liquid assets may include inventories of commodities, short-term claims upon firms which are not credit institutions, longer-term government securities, and even listed stocks.

For holders in small countries, a large part of the stock of liquid assets may consist of claims upon banks, government bodies, etc.

Such use of foreign claims may or may not involve the use of foreign units of account in domestic dealings and calculations. The meaning of money may be illuminated further by reference to two other terms, not used in the proposed definition.

Legal tender is that which is established by governmental rules as a satisfactory medium for settling debts in case of dispute.

Product has no close substitutes economics essay

Anything that is legal tender must be money; but often as with checking deposits in the United States large parts of the money stock may be excluded from legal tender. Such a standard is, in the inspired definition of D. Such an arrangement based on gold or possibly on a bimetallic standard with both gold and silver coins of full weight was regarded as normal for a developed industrial economy.

But no economist finds it convenient to regard book credit as the primary form of money. But it has the defect of ruling out checking deposits as a form of money—a defect which is fatal for analysis of the economy of the United States and a number of other advanced countries.

Analytical role of money in economics One of the key problems of present-day economics is the role of money and other liquid assets in the structure of economic decisions—particularly in the decisions of firms and households to save and to invest in durable real assets, such as factories, machinery, houses, and vehicles.

Broadly speaking, the funds available to a firm or household for investment within a stated period consist of its saving during the period taking saving gross, to include depreciation charges and the likeplus its net borrowing, plus any reduction it may make in its holdings of liquid assets.

Given the size of current income, the more ample the stock of liquid assets, the more it is possible to realize all these benefits simultaneously.

The scarcer the liquid assets, the more it is necessary to choose to forgo one benefit in order to reap another.

Features of monopoly

Thus, adequacy of liquid assets in the possession of a firm or household is viewed as an incentive to invest, while inadequacy of liquid assets is viewed as an incentive to save and to curtail investment.

In most societies, the firms, households, and governments which account for the bulk of wealth holdings and of economic operations feel a need to maintain substantial holdings of money and other liquid assets. If we measure money by the sum of hand-to-hand currency plus checking deposits which, as we saw at the outset, is a measurement which conforms fairly well to the proposed definitionthe private sector of the U.

Motives for holding money. Monetary economists have developed an interesting array of hypotheses about the motives for holding money. Prior to the great depression of the s, emphasis was placed primarily on the transactions motive—the need to hold a stock of money so as to smooth out the irregularities of inflow and outflow and to carry the holder past a foreseen trough in his money holdings.

During the s, under the leadership of John Maynard Keynes, emphasis shifted to the speculative motive—the benefit of holding money while one waits for an expected fall in the price of some alternative asset one may be interested in buying.According to Mankiw () a monopoly is defined as a market structure characterized by a single seller of a unique product with no close substitutes[1].

When a business dominates a market, it becomes a monopoly by virtue of its power. A monopoly is an industry that produces a good or service for which no close substitute exists and in which there is one supplier that is protected from competition by a .

The product has no close substitutes.

Product has no close substitutes economics essay

In the words of Salvatore, “Monopoly is the form of market organisation in which there is a single fir m selling a commodity for which there are no close substitutes.”. 1. Foreword by David Cameron, Prime Minister of the United Kingdom. Corruption is the cancer at the heart of so many of our problems in the world today.

Coke and Pepsi, McDonald's and Burger King hamburgers, or Crest and Colgate toothpastes are examples of substitute goods. These products are substitutes because they satisfy similar consumer needs and possess significant cross-price elasticity.

The price of Pepsi, for example, has a direct correlation on the demand for Coke. Product has no close substitutes. The product sold by a monopolist should be no close are no other electricity supplier in is only one supplier which is the Tenaga Nasional Berhad (TNB).There is no competition for their Peninsular Malaysia,only Tenaga Nasional Berhad(TNB) supplies electricity to the country.

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