Reorder Point

Definition: The reorder point (ROP) or re-order level is a specified minimum level of inventory or stock of a particular product at which a firm decides to replenish or place a new order for that product. This new order (or reorder quantity) may be in the form of raw materials or finished goods. Hence, a … Read more

Purchasing Power Parity (PPP)

Definition: Purchasing power parity (PPP) is a macroeconomic analysis cadent which correlates the exchange rates of the two countries to match their living standards, gross domestic product (GDP) and economic productivity. PPP theory discourages the idea of making arbitrage profit as a result of varying prices of the same product in two different countries. This … Read more

Moral Suasion

Definition: A moral suasion is an influential approach through which the central bank appeals, advise, pressurize and convince the commercial banks from acting or refraining to act in a certain demeanour. It is often mistaken as a legal action however, it is just a persuasive move whereby general interaction is carried out. Being a combination … Read more

Demand-Pull Inflation

Definition: Demand-pull inflation is that form of inflation where an upsurge in consumer demand outperforms the supply of goods within the country. When the supply of the goods falls short to accommodate this outpaced demand, the cost of living upsurges, resulting in inflation. Demand-pull inflation affects the country on a macro-level by increasing the consumers’ … Read more

Market Economy vs Command Economy

The market economy is considered to be an essential factor for the growth of trade and commerce in a country. While command economy, on the other hand, is essential for the overall development of the nation. However, today many nations prefer to have a blend of market and command economy. This mixed economy facilitates the … Read more

Ishikawa (Fishbone or Cause and Effect) Diagram

Definition: An Ishikawa diagram is the pictorial representation depicting the factors responsible for a certain problem in such a manner that the root cause is identified. It is a problem-solving approach which focuses on uncovering the effect of various factors over a particular issue. This visual tool was brought to limelight by a Japanese engineer … Read more

Paradox of Value

Definition: Paradox of value is a puzzle raised by Adam Smith who was one of the great economists in 1700s. Diamond-Water Paradox is defined as the difference between the value in use and the exchange value of any product. Smith questioned the enigma of a diamond being less useful than water, still, it has a … Read more