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THE CONCEPT OF DIMINISHING MARGINAL RETURNS TO CAPITAL
January 22, 2012 23:08
The concept of diminishing marginal returns as used in economics refers to a scenario where the addition of an extra unit of the input for instance capital or labor results into less output or quantity being produced (Rasmussen, 2011). Many examples make reference to labor due to the convenience in counting the units of labor. This is because the counting of labor can either be done in terms of number of hours, number of employees or level of skill. It is important to point out that Capital as an input can also be referred to when making discussing the concept of diminishing marginal returns. The following paragraphs gives examples of such scenarios. Consider the case where one acquires a huge amount loan as start up capital for a business which only has a fixed required amount of...
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FISCAL POLICY GONE BAD.
January 20, 2012 06:56
The widely discussed unrests in most of the Arab countries were a disaster waiting to happen. There are many researched works that discuss how theorized economic policies and politically formulated policies can be modified to coexist with each other. Many governements however ignore macroeconomic theory in their economic policy formulation. The most common example is a situation where government engage in heavy borrowing to finance numerous recurrent expenditures. Some governments even went as far as having spending on public service go beyond 40%. In order to keep these activities going, subsidies are cut, punitive fiscal policies like heavy taxations are executed and moreso, the countrie's external borrowing capacities are constrained. This analysis, together with how economies are f...
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