Principles of economics Essay Example | Topics and Well Written Essays - 750 words - 1

Principles of economics - Essay Example According to the way people make decisions People face trade-off People face trade-off in the economy. A trade-off occurs where one has to give up something for something else. One can forego a resource so that they can spend it somewhere else (Mankiw, Gregory, 2014). For example, when a student is given upkeep money, they can decide to purchase extra study materials and reduce the amount of snacks they take daily. The price of a good is what you pay to have it To obtain a product, one must pay for it. The cost that one pays to obtain something and fore go the benefit of the other is called the opportunity cost. For example, one has to pay fees to spend time to gain knowledge of a particular skill. Therefore, it is important to consider the opportunity cost so as to make decision as to whether to undertake an action. In most cases, the chosen course of action has a lower opportunity cost. If the forgone choice has a lower opportunity cost, then there is no economic feasibility. Rational people think at the margin Economists take it that individuals are rational in decisions, and that they take the best options to achieve their goals, given certain opprotunities.Example, a company may decide to higher highly competent people who will produce a very high output within a shorttime.This will help maximize returns (Mankiw, Gregory, 2014). Individuals react or incentives – People, being rational decision makers, would be sensitive to rewards and punishments (Mankiw, Gregory, 2014).

Hedge funds Essay Example | Topics and Well Written Essays - 1250 words

Hedge funds - Essay Example The term "hedge fund" involves any pooled investment medium that is (1) organized in private, (2) directed by experienced and professional investment managers, and (3) not accessible to the public. Hedge funds are supported by rich personalities and institutional investors who are regarded as primary investors. Other investors include (1) endowment funds, (2) pension plans, (3) funds of funds, and (4) retail investors. (Boyle, 2007) Other bodies characterized as hedge funds are systematic and limited partnerships and liability companies or most commonly reside outside the United States. (President's on Working Group on Financial Markets, 1999) Hedge fund originated in 1949. By 1968, 140 hedge funds were operating as reported by the U.S. Securities and Exchange Commission. Within the last 20 years, hedge fund industry bloomed and become common in the U.S. market. According to Phelim Boyle (2007), in the year 1990, a total number of 610 funds are controlling $39 billion worth of assets. By 2000, there were 3,873 funds directing $490 billion assets. The estimated size of the hedge fund industry in mid-1998 was in the range of 2,500 and 3,500 hedge funds controlling between $200 and $300 billion worth of capital, totaling more or less $800 up to $1 trillion in total assets. As compared with other U.S. financial market sectors, hedge funds are relatively small. ... (President's on Working Group on Financial Markets, 1999) The Marko Maslakovic (2008) reports that despite the existence of market destabilizations, the hedge fund industry continued to grow in management assets and the number and type of institutions investing in hedge funds. For the assets under management, the hedge fund for this category amounted to over $2,250 billion in the end of 2007. Figure 1 shows the trend of global hedge funds in relation to their assets under management. The number of hedge funds reached over 11,000 in 2007 or 12 percent increase from the previous year (2006). The presence of the increasing credit crisis and increased market volatility did not hinder hedge funds assets from growing by 30 percent in 2007. Hedge funds did not incur any significant influence on the credit crisis because only 5 percent of their assets were examined in mortgage-backed securities in September 2007. Boyle (2007) mentions six (6) reasons for the hedge funds growth: (1) technological innovations, (2) derivatives revolution, (3) special ization, (4) increase of market complexities such as catastrophe bonds and structured products, (5) recent poor market equity performance, and (6) low interest rates. Figure 1 For the distribution of hedge funds in the world, reports of Maslakovic (2008) show that the United States is the major source of hedge fund investments with 67 percent of the total hedge funds assets in 2007. Europe and Asia are the next large sources with 22 percent and 7 percent shares respectively. New York City is the world's leading city for hedge managers and it is followed by London. In New York, around 60 percent of hedge fund managers are stationed in this city.