Economics Basics

The Principle of Equity in Taxation

Taxation traces its origin to the ancient times as a major source of revenue needed for governance. Kingdoms, monarchies and even dynasties had an elaborate form of taxation imposed on their subjects to source funds that were used to run affairs of the government. These taxes were subjective and biased depending on those in power. Advancement in education led to important studies on the possible forms of taxation that reflected the aspirations and welfare of the people.

Owing to this therefore, Adam Smith, accredited as the “Father of modern political Economy” carried out an extensive study in Public Finance seeking to give an in-depth analysis of taxation.… Read the rest

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Types of Unemployment

The population of an economy is divided into two categories, the economically active and the economically inactive. The economically active population (labor  force) or working population refers to the  population that is willing and able to work, including those actively engaged in the  production of  goods and  services (employed)  and those  who are  unemployed. Whereas,  unemployed refers to people who are willing and a capable of work but are unable to find suitable paid employment.  The next category, the economically inactive population refers to people who are neither  working nor looking for jobs. Examples include housewives, full time students, invalids,those below the legal age for work, old and retired persons.… Read the rest

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Economic Dualism

Economic dualism refers to the existence of a developed sector side by side with an under developed or undeveloped sector. We will come across the co-existence of sophistication and primitive characteristics in every walk of life. For example, in the urban areas, one will find the use of modem technology in the production field as well as households, while in the rural areas, the age old, antiquated techniques will be used in the production as well as in households. This dualism retards economic growth. That is, the subsistence sector in the rural areas will pull down whatever little economic progress is achieved with the developed and modem sector.… Read the rest

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Role of Government in Economy: An Economist’s Perspective

The question of government interference in economic activities has been debated for a very long time by the economists. While the early economists considered economics as a handmaid of politics, the modem view is that politics is the handmaid of economics. With the growing importance of the role of government in economic welfare, the modem economists firmly believe that the sphere of government in economic development has no boundary. However, there is no unanimity among the economists about the extent and mode of  government  intervention in the economic sphere. Hence, we can identify the following political ideologies regarding the government intervention in an economy.… Read the rest

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Unemployment – Meaning, Causes and Effects

The economists describe unemployment as a condition of jobless within an economy. Unemployment is lack of utilization of resources and it eats up the production of the economy. It can be concluded that unemployment is inversely related to productivity of the economy.

Unemployment generally defined as the number of persons (It is the percentage of labor force depends on the population of the country) who are willing to work for the current wage rates in society but not employed currently. Unemployment reduces the long run growth potential of the economy. When the situation arises where there are more other resources for the production and no man power leads to wastage of economic resources and lost output of goods and services and this has a great impact on government expenditure directly.… Read the rest

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Principal-Agent Problem – Overview, Examples and Solutions

The significant discussion in business economics is principal-agent problems in organizations. A principal is a top authority who hires agents to act on his/her behalf, while an agent usually aims to achieve the objectives of the principal. A principal-agent problem arises when the activities of an agent impact on the principal’s interests. Although agents may seek to attain the goals set by principals but may sometimes fail to carry out those targets. The conflict between shareholders (as principals) and managers (as agents) is a good example of principal-agent problem. When ownership and control is divided between the principals and agents in an organisations this gives the agents opportunity to pursue the goals that may not agree with the desires of the principals.… Read the rest

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