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Tradability
Tradability is the property of a good or service that can be sold in another location distant from where it was produced. A good that is not tradable is called non-tradable. Different goods have differing levels of tradability: the higher the cost of transportation and the shorter the shelf life, the less tradable a good is. Prepared food, for example, is not generally considered a tradable good; it will be sold in the city in which it is produced and does not directly compete with other cities' prepared foods. Some non-commodities and services such as haircuts and massages are also obviously non-tradable. However, in recent years even pure services such as education can be regarded as tradable due to advancements in information and communications technology. Price equalization Perfectly tradable goods, like shares of stock, are subject to the law of one price: they should cost the same amount wherever they are bought. This law requires an efficient market. Any discrepan ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Penn Effect
The Penn effect is the economic finding that real income ratios between high and low income countries are systematically exaggerated by gross domestic product (GDP) conversion at market exchange rates. It is associated with what became the Penn World Table, and it has been a consistent econometric result since at least the 1950s. The "Balassa–Samuelson effect" is a model cited as the principal cause of the Penn effect by neo-classical economics, as well as being a synonym of "Penn effect". History Classical economics made simple predictions about exchange rates; it was said that a basket of goods would cost roughly the same amount everywhere in the world, when paid for in some common currency (like gold) 1. This is called the purchasing power parity (PPP) hypothesis, also expressed as saying that the real exchange rate (RER) between goods in various countries should be close to one. Fluctuations over time were expected by this theory but were predicted to be small and non-system ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |