The tragedy of the commons is a problem that highlights the fact that people consume resources for their benefit and at the expense of all the other consumers. Resources are scarce but people have infinite needs and demands. Hence, it must be made sure that people do not abuse these resources and have a sense ... Read more

Adverse selection is a huge problem that often exists in the market, it is when the buyers or the sellers hide relevant information from the other party to gain benefits. Whereas the lemons problem refers to the problems that arise when the buyers fail to estimate the premium price of the product and set an ... Read more

The prospect theory is a behavioral theory that aims to explain the psychology of decision-makers. The theory proposes that people interpret and value gains and losses very differently and they are more likely to choose expected gains over perceived losses. The prospect theory has been used in different concepts and fields of finance and economics. ... Read more

The rational choice theory suggests that individuals always choose the options that maximize their self-interest and provide them with the maximum level of satisfaction. It is assumed according to the theory that all decision-makers think rationally and only invest in something as long as they expect its return to be more than its cost. This ... Read more

The approach of rational expectations proposes an insight into how participants of the market make their decisions depending upon their predictions about the future. All the available information in the market regarding any stock or asset influences its price level in the market. The theory of rational expectations has been acknowledged as relevant by many ... Read more

In this article, we will look into two important theories that talks about the nature of consumers and their spending patterns. How does spending depends on expected level of income ? Additionally, we will also see how the spending patterns affect the demand cycle of a country's economy. How the theory of permanent income opposes ... Read more

The efficient market hypothesis is a very famous theory used in financial economics. This theory reflects the importance of the buyer and seller relationship. Over the years this theory has received criticism and there have been instances when the theory proved wrong. In this article, we shall discuss some important aspects of this hypothesis and ... Read more

In this article, we will understand the importance of institutions and its role to implement rule of law in a country for long and sustainable economic growth. In any country, rule of law is the key to regulate system and societies and ultimately make conditions favorable for businesses to grow. At the same time, it ... Read more

The new growth theory is a recent time concept that is based on the fact that human demand and desires for goods and services encourage production, and it also states that people have unlimited needs and wants and to fulfil those requirements they are to work more. It argues that this also increases the per ... Read more

The Solow growth model was introduced by two very famous economists named Robot Solow and Trevor Swan in the year 1956. The Solow growth model is also known as the Swan growth model. This model is considered to be of great importance in macroeconomics. The Solow growth model is usually used in the long run, ... Read more