Acceleration principle (1917)

Formulated by American economist John Maurice Clark (1884-1963), acceleration principle is one of the basic pillars of modern macroeconomic theory and is an important tool in understanding the development of business cycles. The acceleration principle links investment to output, each level of which needs a specific amount of capital. If output (and the amount

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Adam Smith (1723-1790)

Ideas – Nature provide a basis in sentiment for virtue. – When we adopt the role of impartial spectators, sympathy is the sentiment that is the basis for moral judgments. – Acting from a sense of duty corrects for any lack of appropriate sentiment in particular instances. – The deity has implanted powerful instincts

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Adding-up problem (1894)

Identified by English economist Philip Wicksteed (1844-1927) among others, adding-up problem refers to the difficulty of ensuring that the income earned by different factors of production when added together equals national income. If each factor of production is paid the value of its respective marginal product, cetris paribus, a situation will eventually arise in which total product

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Adaptive expectations principle (1911)

Originally used by American economist Irving Fisher (1867-1947), adaptive expectations principle was popularized and given its current name during the 1950s in the study of hyper-inflation. Adaptive expectations principle posits that future values may be calculated on the basis of previous values and their margin of error. For example, next year’s inflation rate can be estimated

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Administered pricing (1930)

Sometimes known as inflexible pricing, administered pricing refers to the setting of prices by individual or public bodies rather than by the interaction of market forces of demand and supply. In general, prices are set by adding a profit margin to the average cost. Seen in the pricing policies of monopolies, cartels, oligopolies or

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The Nature and Scope of Management

What Is Management? The word management refers to all the tasks and activities undertaken by the people in an organization for the successful achievement of goals and targets. It involves continuous activities such as planning, organizing, leading and monitoring physical, financial and information resources. Any organization’s success depends on the strength of those in

What are Management theories?

What are management theories? Management theories are a collection of ideas that recommend general rules for how to manage an organization or business. They address how supervisors implement strategies to accomplish organizational goals and how they motivate employees to perform at their highest ability. Typically, leaders apply concepts from different management theories that best

Theory of the firm

Theory of the firm is an analysis of the behavior of companies that examine inputs, production methods, output and prices. This is a microeconomic concept that states that a firm exists and make decisions to maximize profits by creating a gap between revenue and costs. The first elementary examination of companies was made by French economist Antoine

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Adverse selection (1970)

American economist George Arthur Akerlof (1940- ) first noted adverse selection problem (sometimes referred to as the lemon problem), which arises from the inability of traders/buyers to differentiate between the quality of certain products. The most cited example is the second hand car industry, in which a trader dealing in, for example, Minis possesses product information

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Agency Theory

Agency theory is a principle that is used to explain and resolve issues in the relationship between business principals and their agents. Most commonly, that relationship is the one between shareholders, as principals, and company executives, as agents. An agency, in broad terms, is any relationship between two parties in which one, the agent, represents

Aggregate demand theory (20TH CENTURY)

Championed by English economist John Maynard Keynes (1883-1946), aggregate demand theory asserts that the total demand within an economy helps to determine the level of output and growth. If demand and consumption are lowered (for example, through wage cuts), overall economic activity will be reduced. What Is Aggregate Demand? Aggregate demand is an economic measurement of

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Alfred Marshall (1842-1924)

Alfred Marshall was born in Bermondsey, a London suburb, on 26 July 1842. He died at Balliol Croft, his Cambridge home of many years, on 13 July 1924 at the age of 81. Professor of Political Economy at the University of Cambridge from 1885 to 1908, he was the founder of the Cambridge School

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Allais paradox (1952)

Allais Paradox was formulated by French economist Maurice Allais (1911- ) to counter principles of game theory proprounded by other economists and to establish a definition of rationality in risky situations. Earlier analysis of game theory had suggested that in the following example, the preference of A over B should entail a preference of

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Alvin Hansen (1887-1975)

Alvin Harvey Hansen (August 23, 1887 – June 6, 1975), often referred to as “the American Keynes”, was a professor of economics at Harvard, a widely read author on current economic issues, and an influential advisor to the government who helped create the Council of Economic Advisors and the Social Security system. He is

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Anarcho-syndicalism (20TH CENTURY)

Anarcho-syndicalism is a political philosophy and anarchist school of thought that views revolutionary industrial unionism or syndicalism as a method for workers in capitalist society to gain control of an economy and thus control influence in broader society. Syndicalists consider their economic theories a strategy for facilitating worker self-activity and as an alternative co-operative

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Ansoff Matrix: four growth strategies and practical examples

The Ansoff matrix or Market Product development matrix, or market product matrix was developed by a famous researcher – Igor Ansoff in 1975. Until now, The Ansoff matrix has been used as a strategic planning tool for revenue growth at firms’ different market segments; thereby facilitating strategic managers in making decisions. Four growth strategies

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Andre Gunder Frank (1929-2005)

Andre Gunder Frank was born in Berlin on February 24, 1929. He was an economics professor and theorist and one of the founders of the ‘Dependence theory’, developed in the sixties. In his more recent work he focussed his attention on the analysis of the crisis in world economy and then also on global

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Antoine Augustin Cournot (1801-1877)

French philosopher, mathematician and economist, Antoine Augustin Cournot has been rightly hailed as one of the greatest of the Proto-Marginalists. The unique insights of his major economics work, Researches into the Mathematical Principles of Wealth (1838) were without parallel. Although neglected in his time, the impact of Cournot’s work on modern economics can hardly

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Arbitrage pricing policy

Arbitrage pricing policy refers to the practice of simultaneously buying an asset (currency or commodity) while trading in a low-price market, and selling it in a higher price market with the intention of making a profit from the transaction. It is argued that the effect of the arbitrageur’s action is eventually to eliminate any

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Arrow-Debreu Model (1954)

Named after American economist Kenneth Arrow (1921- ) and French-born economist Gerard Debreu (1921- ), who examined the dynamics of the whole economic system and were able to prove the existence of a multimarket equilibrium in which no excess demand or supply exists. In mathematical economics, the Arrow–Debreu model suggests that under certain economic

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