Therefore, in cost benefit analysis to measure whether the project has benefits greater than the cost and if the project is worth investing on, the aspects (whether negative or positive) is expressed in a common unit i.e. money. This means all the all the respective benefits and costs of a project should be measured in their money value and thus the decisions made according to the money of the costs and the benefits obtained. Even for a project that may provide benefits that cannot be measured in money, but there always is some amount of money the people at the receiving end of the benefits would consider equivalent to the project’s
Gravity model is a theory hypothesis proposed by geologist, sociologists and economists to explain and forecast peoples’ interactions in economy, society and polity, which is established by using classical mechanics of Newton’s universal gravitation law. J.Q.Stewart (1941) was inspired from the law, first proposed the Gravity model in economics, which was considered the bridge connecting physics and economics. The gravity model was first applied in an analysis of international flows of commodities by Tinbergen (1962). Pöyhönen (1963) and Linnemann (1966) also joined the precursor group. Gravity models have been widely applied to economic trade analysis due to their high explanatory power (Cinar et al., 2016; Cullinan, Duggan, 2016).
Since the 1930s, economists have developed the theory underlying the demand for money along several different lines, each of which provides different answers to the basic question: „what determines the demand for real money balances”? Starting from regressive expectations model of Keynes and Tobin‟s portfolio approach, money demand function has been examined by incorporating varying influential factors. During the 1960s M. Friedman gave a new impetus to monetarism and redefined money demand function in his seminal paper on restatement of quantity theory of money in 1966. Apart from functional specification, several other dimensions of money demand functions like stability, expectation and adjustment mechanisms are explored as well. Empirical
However, this is not unanimously agreed upon; Rouse and Surban (58) cite numerous sources contradicting this. Brostoff’s 1993 study, presented by Rouse and Surban, into the effects of health service price controls suggests that costs inflate rather than deflate. This could be due to a number of reasons; primarily, it is possible that producers are focusing on a larger quantity of services, rather than the quality of these services. Rouse and Surban (58) cite another study in support of this argument, saying that the likely reaction would be to bundle “additional high-margin services (e.g., tests) along with the service for which the price is
He further states that increasing profit and efficiency is generated by means of accumulating competence based upon processes of learning by doing and learning by using, which feed growth of output with less than proportionate levels of increase of inputs. It is unlikely to be heard but failure to understand marginal cost in relation to social satisfaction causes people to spend more than his/her individual capacity and
There are many reasons why the relationship between health and labour market outcomes in developing economies is of special interest. First and foremost, there is a long tradition of theoretical models of nutrition-based efficiency wages in the development literature. Efficiency wage models are based on a convincing and coherent explanation as to why firms may find it unprofitable to cut wages in the prevalence of involuntary unemployment. This theory basically has alternative implications in explaining the contract farming, internal labour market, higher wage payments, reduction or shirking of work by employees, improvement in average quality of job applicants, real wage rigidity, the dual labour market, the existence of wage distributions
dissertation at Cornell University. In that book, he carefully distinguished between economic risk and uncertainty. Situations with risk were those where the outcomes were unknown but governed by probability distributions known at the outset. He argued that these situations, where decision-making rules such as maximizing expected utility can be applied, differ in a deep way from "uncertain" ones, in which not only the outcomes but even the probability models that governed them, were unknown. Knight argued that uncertainty gave rise to economic profits that perfect competition could not
Market equilibrium: Is the point where the seller is willing to sell, and the buyers are willing to buy at the same price. This price is known as the market clearing or equilibrium price. 33. Law of diminishing returns states that there is a point at which an individual or company begins to produce past their efficient level of production. This means that the cost of producing the last unit is more than the revenue from that unit.
STANDARD COSTING Standard costing is a cost accounting measurement basis that predicts unit costs and production quantities based on predetermined standards before the production even begins and as such it is an alternative method to historical cost accounting. It is suitable for production, which is standardized and mass or repetitive. Standard costing serves as an important input for the budget and can be used within all costing methods (full costing method, variable costing method, throughput costing etc.). Basic steps in standard costing: • Select a standard (see below) • Estimate standard unit costs and production quantity • Ascertain actual unit costs and production quantity • Variance analyses, during which standard costs are compared
• Good procurement processes can facilitate suppliers’ coordination and improve forecasting and planning. Better coordination lowers inventories and improves the matching of supply and demand. • Appropriate supplier contracts can allow for sharing the risk, resulting in higher profits for both supplier and the buyer. • Firms can achieve a lower purchase price by increasing the competition through the use of