Market development strategy

Market development is a growth strategy, associated with the Ansoff Matrix, that identifies and develops new market segments for current products. A market development strategy targets non-buying customers in currently targeted segments. It also targets new customers in new segments. A market development strategy entails expanding the potential market through new users or new uses. New users can

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Marxism

Theories derived from the work of Karl Marx (1818-1883). The influence of Marx and of Marxism may be judged from the fact that Marxism has been compared, in its enormous variety, to Christianity. Starting points, though not conclusions, for Marxism are an understanding of history as moved by class struggle; of economic classes as the principal components of society;

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Material balances principle (20TH CENTURY)

Developed in the early planning programs of the Soviet Union, material balances principle attempts to balance supply and demand for a given commodity. If an imbalance occurs, the planning process may require imports of additional raw materials or reductions in the amount of material used by other parts of the economy or organization. Source:

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Measure theory

Measure theory is a branch of mathematics dealing with the attribution of measure to subsets of a given set. In economics, measure theory is useful in analyzing the influence that individuals or groups have on market operations. It also underpins probability theory and the measure of the frequency of phenomena. Also see: information theory, uncertainty Source:

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Mercantilism (17TH CENTURY- )

Theory of the responsibility of the state to protect and promote national wealth by encouraging exports and limiting imports. Since wealth is limited, trade between nations is a zero-sum game, so one country can only benefit at the expense of another. Mercantilism was advocated by a number of English, French and German writers, many of whom were merchants.

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Modigliani-Miller Theory of the Cost of Capital (1961)

Named after Italian-born American economist Franco Modigliani (1918-2003) and American economist MERTON MILLER (1923-2000), Modigliani-Miller theory of the cost of capital states that the overall cost of capital remains constant as the financial gearing of a firm increases. Critics have suggested that the theory ignores the risk of bankruptcy as a firm’s debt increases. Source: M

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Monetarism

A revival of the quantity theory of money, monetarism asserts that increases in the money supply cause inflation (‘too much money chasing too few goods’). Monetarism emerged as an important economic doctrine under the influence of American economist Milton Friedman (1912-1992). Its adherents challenged the Keynesian approach to macroeconomics, emphasizing the importance of monetary policy in stabilizing

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Monopolistic competition (1933)

Developed by American economist Edward Chamberlin (1899-1967) and English economist Joan Robinson (1903-1983), monopolistic competition refers to competition between several firms producing an almost identical product in a market. The demand for each good is not perfectly elastic. Monopolistic firms command brand loyalty and therefore are not price-takers. Under this form of competition, total product equals the sum

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Monopoly

A market in which one supplier dominates and sets price and quantity of the good. The assumption in monopoly is that there are no substitutes and the firm is thus a price-maker. The firm may be motivated by profit maximization, and restrictive barriers to entry of the market prevent competition. Output is set at

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Monopoly capitalism

An economy dominated by oligopolistic firms earning supernormal profits. The phrase can also mean a centrally planned economy with state-run monopolies organizing economic activity. Source: P A Baran and P M Sweezy, Monopoly Capital: An Essay on the American Economic and Social Order (New York, 1966) The main thesis The main Marxist–Leninist thesis is

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Moral hazard

Moral hazard refers to the idea that certain types of insurance systems might cause individuals to act in a more dangerous way than normal, causing a difference between the private marginal cost and the marginal social cost of the same action. Source: S Ross, ‘The Economic Theory of Agency: the Principal’s Problem’, American Economic

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Multiplier (1931)

Multiplier is defined as the relationship between a change in the national income and the primary alteration in expenditure that brought it about. In a simple model, the multiplier effect depends on the marginal propensity to consume. Also see: multiplier-accelerator Source: R F Kahn, ‘The Relationship of Home Investment to Employment’, Economic Journal, vol. XLI (June, 1931),

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Multiplier accelerator

Proposed by English economist Roy Harrod (1900-1978) and American economist Paul Samuelson (1915- ) as an extension of the work of English economists John Maynard Keynes (1883-1946) and Richard Kahn (1905-1989), multiplier-accelerator is a model analyzing economic fluctuations through the effects of the accelerator and multiplier models. An increase in government expenditure may lead to an increase in consumer incomes which (through

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NAIRU (non-accelerating inflation rate of unemployment) (1968)

Proposed by American economist Milton Friedman (1912-1992), NAIRU refers to the long-term rate of unemployment at which inflation neither rises nor falls, as upward and downward pressures on wage and price inflation are in equilibrium. The vertical Phillips curve illustrates this situation. Source: M Friedman, ‘The Role of Monetary Policy’, American Economic Review, vol. LVIII (March, 1968), 1-17

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Nash equilibrium (1950)

Named after mathematician JOHN NASH, and central to game theory, Nash equilibrium refers to a situation in which individuals participating in a game pursue the best possible strategy while possessing the knowledge of the strategies of other players. It works on the premise that the player cannot improve his/her position given the other players’ strategy.

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National income (17TH-20TH CENTURY)

National income is the total income, over a specified period of time, of all the inhabitants of an economy after allowing for capital consumption. The term can also be used to describe a monetary flow that shows net additions to wealth. National accounting was first conducted by English economist Sir William Petty (1623-1687), and techniques were

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Nationalization (20TH CENTURY)

The process by which privately-owned industries or companies are taken over by the state. Nationalization is often applied to monopolies such as water and gas utilities or transport services, in which social needs are deemed more important than profitability. Since the 1980s, there has been a trend to de-nationalize (privatize) industries in Europe, particularly in

Natural and warranted rates of growth (1930S-40S)

Formulated by English economist Roy Harrod (1900-1978) and Russian-born economist Evsey Domar (1914-1997), natural and warranted rates of growth is a response to the General Theory of English economist John Maynard Keynes (1883-1946). The natural rate is the maximum long-term rate of growth in the Harrod-Domar growth model where population growth increases the labor force and technical advances enable productivity gains. The warranted rate

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Natural monopoly of economics

The existence of an industry (gas, electricity, water, for example) in which the average costs of production per unit fall as output increases. A single firm operating in the industry (a monopoly) can produce output more efficiently than several competing firms under these circumstances. Also see: monopoly Source: W W Sharkey, The Theory of the

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Negative income tax (1962)

Negative income tax was first used by American economist Milton Friedman (1912- ) to describe a form of income maintenance which aims to bring low-income households living below the subsistence level up to a minimum income level set by the government. Source: M Friedman, Capitalism and Freedom (Chicago, 1962) Generic negative income tax The view that

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