Theory of Purchasing Power Parity

To compare economic productivity and standards of living between countries, economists use an analysis metric called the Purchasing Power Parity that allows them to compare different countries’ currencies through a “basket of goods” approach. The Purchasing Power Parity (PPP) theory is a long-held belief that the exchange rate between two currencies should be the same … Continue reading Theory of Purchasing Power Parity

Tragedy Of The Commons

  People living in groups(societies) and sharing resources(commons) could either act according to their self-interests or seek the common good. This idea was first discussed in a pamphlet published in 1883 by the British economist William Forster Lloyd. He described a phenomenon called “Tragedy Of The Commons” according to which when people have open access to … Continue reading Tragedy Of The Commons

What Is Behavioral Economics?

 Classical economic models assume that people are rational, predictable, and make the most optimal choices, but are we really so? Trying to answer this question, a new economic sub-field emerged and it’s called “behavioral economics”. It is an attempt to prove that there are psychological, social, and emotional factors that influence our decision-making.    Behavioral … Continue reading What Is Behavioral Economics?