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Tejvan Pettinger Definition Trade diversion occurs when tariff agreements cause imports to shift from low-cost countries to higher cost countries. Trade diversion is considered undesirable because it concentrates production in countries with a higher opportunity cost and lower comparative advantage. Trade diversion may occur when a country joins a...

Tejvan Pettinger Readers Question: When my class and I try to test the Marshall-Lerner condition it doesn’t always work. i.e. we assumed a country with just one export and one import and assumed their price elasticities added up to less than one. We gave each a...

Tejvan Pettinger A carbon tax aims to make individuals and firms pay the full social cost of carbon pollution. In theory, the tax will reduce pollution and encourage more environmentally friendly alternatives. However, critics argue a tax on carbon will increase costs for business and reduce...

I recently wrote an article about Inflation in Zimbabwe, which has recently passed the 100,000% causing widespread hardship for the population. Definition of Hyperinflation: A rapid and unchecked increase in the price level. Typically it may involve inflation rates of greater than 100% or greater than 1000% Hyperinflation...

General strategies Profit maximisation. One strategy is to ignore market share and try to work out the price for profit maximisation. In theory, this occurs at a price where MR=MC. In practice, it can be difficult to work this out precisely.Sales maximisation. Aiming to maximise sales...

C. P. Chandrasekhar The general election is over and a new government has been formed. But the campaign does not seem to end. More than an hour of Finance Minister Nirmala Sitharaman’s maiden Budget speech was largely devoted to underlining what she claimed were the remarkable...