Economic Vocabulary Flashcards
What is “Aggregator Model” & “Affiliate Model” with reference to e-commerce?
Aggregator Model:
Electronic commerce business model where a firm (that does not produce or warehouses any item) collects (aggregates) information on goods and/or services from several competing sources at its website.
The firm’s strength lies in its ability to create an ‘environment’ which draws visitors to its website, and in designing a system which allows easy matching of prices and specifications.
Affiliate Model:
Electronic commerce business model that enables a firm to generate revenue streams on hundreds (even thousands) of items without carrying inventories, managing orders, processing payments, or handling packaging and shipping.
In this arrangement, a website concentrates on a relationship with a very specific group of individuals as its core competence (see core competencies). It develops and continuously upgrades content and services to attract and retain the patronage of this group. Once it has a sizable number of regular visitors, it can generate revenue by carrying ads or links to merchants with products that its visitors seek or are interested in.
Crowding-in & Crowding-out
Crowding-in:
An economic principle in which private investment increases as debt-financed government spending increases. This is caused by government spending boosting the demand for goods, which in turn increases private demand for new output sources, such as factories. This is in contrast to crowding out.
Crowding-out:
An economic concept where increased public sector spending replaces, or drives down, private sector spending. Crowding out refers to when government must finance its spending with taxes and/or with deficit spending, leaving businesses with less money and effectively “crowding them out.”
One explanation of why crowding out occurs is government financing of projects with deficit spending through the use of borrowed money. Because the government borrows such large amounts of capital, its activities can increase interest rates. Higher interest rates discourage individuals and businesses from borrowing money, which reduces their spending and investment activities.
For example, the higher taxes required for government to fund social welfare programs leaves less discretionary income for individuals and businesses to make charitable donations. Further, when government funds certain activities there is little incentive for businesses and individuals to spend on those same things.
Another example is increased government spending on Medic-aid, which has been linked to decreased availability of private health insurance.
Tax buoyancy
Tax buoyancy is an indicator to measure efficiency & responsiveness of revenue mobilization (in response to growth in the Gross domestic product or National income.)
A tax is said to be buoyant if the tax revenues increase more than proportionately in response to a rise in national income or output.
Usually, tax elasticity is considered a better indicator to measure tax responsiveness.
Explain Renewable Power Obligation (RPO) with reference to the concept of Renewable Energy Certificates (RECs) in India.
Renewable energy has been promoted by FISCAL POLICIES of Government of India. These include TAX INCENTIVES and PURCHASE OF ELECTRICITY GENERATED THROUGH RENEWABLE ENERGY SOURCES.
Enactment of the ELECTRICITY ACT 2003 (the Act) has lent further support to renewable energy by STIPULATING PURCHASE OF A % OF POWER PROCUREMENT BY DISTRIBUTION UTILITIES FROM RENEWABLE ENERGY SOURCES.
The RENEWABLE POWER OBLIGATION as well as PREFERENTIAL TARRIF for procurement of such power has been specified by various State Electricity Regulatory Commissions (SERCs).
RENEWABLE ENERGY SOURCES ARE NOT EVENLY SPREAD across the state boundaries and the VERY HIGH COST OF GENERATION from RE sources DISCOURAGES local distribution licensees from purchasing electricity generated from RE sources.
RENEWABLE ENERGY CERTIFICATES seeks to address the mismatch between availability of RE sources and the requirement of the obligated entities to meet their renewable purchase obligation by PURCHASING THE GREEN ATTRIBUTES SOURCE OF ENERGY remotely located in the form of Renewable Energy Certificate (REC).
Physiocracy (from the Greek for “Government of Nature”)
Physiocracy (from the Greek for “Government of Nature”) is an economic theory developed by a group of 18th century enlightened French economists who believed that the wealth of nations was derived solely from the value of “land agriculture” or “land development” and that agricultural products should be highly priced.
Wholly Owned Subsidiary: Definition, Advantages & Disadvantages
Wholly Owned Subsidiary: Definition, Advantages & Disadvantages
It’s not unusual for one company to own another company. In this lesson, you’ll learn about wholly owned subsidiaries, their advantages and disadvantages. You’ll also have a chance to take a short quiz after the lesson.
Definition
A wholly owned subsidiary is a company that is completely owned by another company called the parent company or holding company. The parent company will hold all of the subsidiary’s common stock. Since the parent company owns all of the subsidiary’s stock, it has the right to appoint the subsidiary’s board of directors, which controls the subsidiary. Wholly owned subsidiaries may be part of the same industry as the parent company or a part of an entirely different industry. Sometimes companies will spin-off part of itself as a wholly owned subsidiary such as a computer company spinning of its printer manufacturing division.
Advantages
Wholly owned subsidiaries offer some advantages to the parent company. Companies that must rely upon suppliers and service providers can take control of their supply chain by use of wholly own subsidiaries. This is a means of vertical integration where companies in a supply chain are under the control of a common owner. For example, a car manufacturing company may have several wholly owned subsidiaries including a tire company and several different auto parts companies.
Wholly owned subsidiaries also offer an opportunity for company’s to diversify and manage risk. Diversification is a means for a company to reduce risk by developing different types of businesses so that if one business or industry isn’t doing well, its other businesses may be able to pick up the slack and keep the company profitable. For example, a computer company may decide to get into the printer business, the television business and the tablet business and either buy or form a wholly owned subsidiary for each new business. Damage from the failure of one subsidiary will not necessary be fatal to the parent company. Similarly, a company can reduce its risk in entering into a new market or industry by using subsidiaries, which help minimize the parent company’s exposure. For example, if your company wants to enter into an emerging market that hasn’t been established, it can form a subsidiary to enter the market leaving much of the risk of loss on the subsidiary’s shoulders.
A company may also create or purchase wholly owned subsidiaries when conducting business abroad. Sometimes a parent company will create a subsidiary in a foreign country because it will receive favorable tax treatment from the foreign government. Alternatively, a parent company may be required to form a local subsidiary in order to conduct business in the country. The subsidiary may even have to be formed with a local business partner.
imprest
im·prest\ˈim-ˌprest\
noun
: a loan or advance of money
: A fund maintained by the business for small items of expenditure & restored fixed amount periodically
Origin: obsolete imprest to lend, probably from Italian imprestare.
First use: 1568
revenue neutral
Taxing procedure that allows the government to still receive the same amount of money despite changes in tax laws. The government may lower taxes for one particular group of people, but raise taxes for another group. This allows the revenue that they receive to remain unchanged (neutral).
Read more: http://www.investorwords.com/8338/revenue_neutral.html#ixzz3eo1GgFWB
Explain Sunrise and sunset sectors/industries with examples
Sunrise Industry
A colloquial term for a sector or business that is in its infancy, but is growing at a rapid pace, typically characterized by high growth rates, numerous start-ups and an abundance of venture capital funding.
Sunrise industries generally have plenty of “buzz” surrounding them as public awareness about the sector increases and investors get attracted to its long-term growth prospects.
BREAKING DOWN ‘Sunrise Industry’
Examples of sunrise industries include alternative energy in the period from 2003 to 2007, and social media and cloud computing in 2011 and 2012.
A sunrise industry is often characterized by a high degree of innovation, and its rapid emergence may threaten to push into obsolescence a competing industry sector that is already in decline. Because of its dim long-term prospects, such an industry is referred to as a sunset industry.
Over a period of years or decades, as an industry grows and matures, it may pass from the sunrise phase to maturity and, finally, the sunset stage. The compact-disc industry is a typical example of such a transition. It was a sunrise industry in the 1990s as compact discs replaced vinyl records and cassette tapes, but the rapid adoption of digital media in the 21st century could mean that the compact-disc industry’s days are numbered.
The transition from the sunrise to sunset stages is likely to be more rapid in dynamic sectors, such as technology.
