Economics (from the Greek οίκος [oikos], 'family, household, estate', and νομος [nomos], 'custom, law', hence "household management" and "management of the state") is a social science that typically studies the production, distribution, and consumption of goods and services. Since the early part of the 20th century, economics has focused largely on measurable variables, and employed both theoretical models and empirical analysis. Economic logic is increasingly applied to any problem determining economic value (such as politics, religion, psychology, history and social interaction). A professional working in economics or having an academic degree in the subject is an economist.
The subject is broadly divided into two main branches: microeconomics, which deals with individual agents, such as households and businesses, and macroeconomics, which considers the economy as a whole. An alternate division of the subject distinguishes positive economics, which tries objectively to predict and explain economic phenomena, from normative economics, which recommends one choice over another—such recommendations often involve subjective value judgments.
The mainstream economic paradigm is a combination of neoclassical economics and Keynesian macroeconomics. Crucial assumptions of this paradigm include the idea that resources are scarce while wants are unlimited, which is sometimes characterized as the economic problem, and an understanding that the value of most goods can be represented in terms of their open-market price. Various schools of heterodox economics, for instance socialist economics, green economics and associative economics, seek to explain economic phenomena using different basic assumptions, for example by emphasising that economics is primarily concerned with exchanges of values, and that all value is the created by labor.
Definitions of economics
Broadly speaking, economics is a social science, and its area of study is human activity involved in meeting needs and wants. However, beyond this there are a range of definitions, past and present, which have been applied - first to the term political economy and then to the modern term economics. Broadly, the history of the study moved from the study of "wealth" to "welfare" to the idea of studying trade-offs.
The earliest definitions of political economy were simple, elegant statements defining it as the study of wealth. The first scientific approach to the subject was inaugurated by Aristotle, whose influence is still recognised today by the Austrian School, among others. Adam Smith, author of the seminal work The Wealth of Nations and regarded by some as the "father of modern economics," defines economics simply as "The science of wealth." Smith offered another definition, "The Science relating to the laws of production, distribution and exchange." Wealth was defined as the specialization of labour which allowed a nation to produce more with its supply of labour and resources. This definition divided Smith and Hume from previous definitions which defined wealth as gold. Hume argued that gold without increased activity simply serves to raise prices. John Stuart Mill defined economics as "The practical science of production and distribution of wealth"; this definition was adopted by the Concise Oxford English Dictionary, even though it does not include the vital role of consumption. For Mill, wealth is defined as the stock of useful things.
Definitions in terms of wealth emphasize production and consumption. The accounting measures usually used measure the pay received for work and the price paid for goods, and do not deal with the economic activities of those not significantly involved in buying and selling (for example, retired people, beggars, peasants). For economists of this period, they are considered non-productive, and non-productive activity is considered a kind of cost on society. This interpretation gave economics a narrow focus that was rejected by many as placing wealth in the forefront and man in the background; John Ruskin referred to political economy as a "Bastard science, the science of getting riches."
Later definitions evolved to include human activity, advocating a shift toward the modern view of economics as primarily a study of man and of human welfare, not of money. Alfred Marshall in his 1890 book Principles of Economics wrote, "Political Economy or Economics is a study of mankind in the ordinary business of Life; it examines the part of the individual and social action which is most closely connected with the attainment and with the use of material requisites of well-being."
The welfare definition was still criticized as too narrowly materialistic. It ignores, for example, the non-material aspects of the services of a doctor or a dancer. A theory of wages which ignored all those sums paid for immaterial services was incomplete. Welfare could not be quantitatively measured, because the marginal significance of money differs from rich to the poor (i.e. $100 is relatively more important to the well-being of a poor person than to that of a wealthy person). Moreover, the activities of production and distribution of goods such as alcohol and tobacco may not be conducive to human welfare, but these scarce goods do satisfy human wants.
Marxist economics still focuses on a welfare definition. In addition, several critiques of mainstream economics begin from the argument that current economic practice does not adequately measure welfare, but only monetized activity, which is an inadequate approximation of welfare.
This definition allowed a potentially broader field of study, but it, too, has its critics. It is most amenable to those who consider economics a pure science, but others object that it reduces economics merely to a valuation theory. It ignores how values are fixed, prices are determined and national income is generated. It also ignores unemployment and other problems arising due to abundance. This definition cannot apply to such Keynesian concerns as cyclical instability, full employment, and economic growth.
The focus on scarcity continues to dominate neoclassical economics, which, in turn, predominates in most academic economics departments. It has been criticized in recent years from a variety of quarters, including institutional economics and evolutionary economics.
Saving in economics
In economics, personal saving has been defined as personal disposable income minus personal consumption expenditure. In other words, income that is not consumed by immediately buying goods and services is saved. Other kinds of saving can occur, as with corporate retained earnings (profits minus dividend and tax payments) and a government budget surplus.
There is some disagreement about what counts as saving. For example, the part of a person's income that is spent on mortgage repayments is not spent on present consumption and is therefore saving by the above definition, even though people do not always think of repaying a loan as saving. However, in the U.S. measurement of the numbers behind its gross national product (i.e., the National Income and Product Accounts), personal interest payments are not treated as "saving" unless the institutions and people who receive them save them.
"Saving" differs from "savings." The former refers to an increase in one's assets, an increase in net worth, whereas the latter refers to one part of one's assets, usually deposits in savings accounts, or to all of one's assets. Saving refers to an activity occurring over time, a flow variable, whereas savings refers to something that exists at any one time, a stock variable.
Economic difference from investment
Saving is closely related to investment. By not using income to buy consumer goods and services, it is possible for resources to instead be invested by being used to produce fixed capital, such as factories and machinery. Saving can therefore be vital to increase the amount of fixed capital available, which contributes to economic growth.
However, increased saving does not always correspond to increased investment, since the saving and investment decisions are made by different groups (households, businesses) and for different reasons. This means that saving may increase without increasing investment, possibly causing a short-fall of demand (a pile-up of inventories, a cut-back of production, employment, and income, and thus a recession) rather than to economic growth. (This is often called the "paradox of thrift.") If saving falls below investment, on the other hand, it can lead to a growth of aggregate demand and an economic boom. These statements are conditional since aggregate demand consists of more than investment and consumption (non-saving).
Classical economics posited that interest rates would adjust to equate saving and investment, avoiding a pile-up of inventories (general overproduction). A rise in saving would cause a fall in interest rates, stimulating investment. But Keynes argued that neither saving nor investment were very responsive to interest rates (i.e., that both were interest inelastic) so that large interest rate changes were needed. Further, it was the demand for and supplies of stocks of money that determined interest rates in the short run. Thus, saving could exceed investment for significant amounts of time, causing a general glut and a recession.
SOLAR COLA as an INVESTMENT OPPORTUNITY?
The soft drinks market is a tough place to do business, unless you have something different to offer and the marketing muscle to match.
For nearly 100 years Coca Cola and Pepsi Cola have dominated the marketplace with similar products. Each company spends around $600-800 million dollars a year to maintain its market position. The advertising centers around sport and music, with a scattering of irregular television campaigns. Each company launches (or attempts to launch) new brands every year. So far, they have not proved as successful as their regular cola brands.
Red Bull, although in a different drinks category, spends not quite as much on advertising , but has managed to acquire instant status and volume sales from sponsoring formula one, the Darpa Desert Challenge, and now the New Jersey MetroStars football team.
Solar Cola, apart from it's contemporary name, is a healthier cola based drink. Just as refreshing, it contains a unique blend of added ingredients as an aid to good health and energy levels. The company contributes to and sponsors alternative projects, to include this website, featuring movies, music and several thousand pages of general information, which generates in excess of 3 million visits a month already. Recent acquisitions include the rights to the Solar Navigator World Electric Challenge, and also the new Bluebird Electric land speed record car for 2007. The company may also sponsor the London to Brighton Solar Car Run in 2008 (dependent on the number of university entries received).
It is thought that this marketing strategy will equal several hundred thousand dollars of conventional Ad Agency spending. As an example of the kind of media coverage such nautical antics generate, you have only to look at the newspapers when Ellen Macarthur completed her world circumnavigation. The same holds true for Sir Francis Chichester and Sir Robin Knox-Johnston.
The design of the Solar Cola can is copyright protected, with trademark applications in the USA, Australia and Europe pending in Class 32 and granted rights in the UK. Introduction of the drink is held in abeyance pending official launch of one or other sponsored projects, which will be activated when the time is right, such activation to coincide with the market introduction of the drink.
Solar Cola PLC is shortly to be activated for online investment as their trading arm. The company is forecast to produce excellent results for investors, with sustained growth to be followed by an eventual flotation on the Stock Markets of the world in the next few years. At this point estimates suggest investors will reap substantial gains - in line with international Licensing expectations.
Solar Cola Ltd is managing the funding requirement for the trading company. They are looking for medium term or seed investment between £4-5 million to kick start phase two of the venture.
If you are a Business Angel, or Equity House, looking for an opportunity with the potential for good returns, please contact SOLAR COLA LTD for details. Please ask for the funding project manager: Nelson Kruschandl
+ 44 (0) 1323 831727
+44 (0) 7905 147709
This material and any views expressed herein are provided for information purposes only and should not be construed in any way as an endorsement or inducement to invest in any specific program. Before investing in any program, you must obtain, read and examine thoroughly its disclosure document or offering memorandum.
A taste for adventure capitalists
Solar Cola - the healthier cola alternative
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