Offer & Acceptance

The typical analysis of English Contract Law is "Offer and Acceptance".  

An offer is an expression of willingness to be bound by the terms of that offer, if accepted. If the proposition is seeking to negotiate or invite offers then it is an invitation to treat. Acceptance is an unqualified assent to the offer.

How can offers be terminated after they have been made?

1. Contracts can state a specified time period under which they are valid, the offeror can also secure the right to revoke the offer at any time before.(Think of online sales and promotions, often you will see "offer valid till xx/xx/xx, we also have the right to revoke the promotion at anytime).  The key point here is that the revocation has to be effectively communicated to the offeree. 

Routledge v Grant 1828: The defendant's offered to buy the claimants house and gave six-weeks time for the claimant to think it over. Before the six weeks ended the defendant revoked the offer and shortly after the claimant accepted the offer. Has an offer been formed? The courts held that a contract had been formed as the revocation was not effectively communicated. 

1. Contracts that set no time period, courts will apply the concept of a “reasonable time”. 

Ramsgate Victoria Hotel v Montefiore 1866 - The defendant offered to purchase shares in the claimant’s company and six month’s later the claimant accepted. The agreement could not be established as the courts held the offer has been made void as the time period involved was unreasonable for an offeror to wait. 

1. Express withdrawal of the offer “revocation”. In these scenarios, the offeror must simply notify the offeree that the offer has been revoked before the offeree has accepted. 

1. If counter-offers are made that terminates the original offer and after making the counter-offer the offeree cannot go back and accept the original offer. 

Hyde v Wrench 1840 - The defendant offered to sell his farm for £1000 to the claimant. The claimant offered £950, which the defendant went on to reject. The claimant then went on to accept the original offer which the courts ruled could not happen as the counter-offer made cancelled out the original offer. 

It is important to note that courts distinguish between “inquiries” and “counter-offers”. 

Stevenson v McLean 1880 - Defendant offered to sell the plaintiff some iron, stating a price and that the offer would be open till Monday. On Monday morning, the plaintiff responded asking what is the longest limit the defendant could give on delivery. Courts distinguished this from the counter-offer made in Hyde v Wrench 1840 and said the offer still has the potential to be accepted.

Acceptance needs to be communicated effectively, however, it is important to note that it can be accepted in the form of performance. 

This is key to understanding why offeror cannot revoke an offer if acceptance has come in the form of conduct. Examples include:

Pharmaceutical society of Great Britain v Boots Cash Chemist Ltd 1953 - Courts held that a product with the price tag is not an offer but rather an invitation to treat and so offer and acceptance in such a scenario is conducted by the act of taking the product to the till and the acceptance of money. 

Brogden v Metropolitan Railway 1877 -The claimant was in a long business relationship of supplying coal to the defendant. They decided to enter into a formal contract, the plaintiff sent a written contracts with the terms. The defendant simply filed it. After some time, disagreements happened and the plaintiff claimed that a contracted did not form in the first place as there was a lack of acceptance. However, the courts rule the conduct of continually supplying coal worked as an acceptance. 

Felthouse v Bindley 1862 - This is an important case because it highlights that although conduct is sufficient for acceptance, silence is not. In this case an uncle wanted to buy a horse off the nephew and in his offer stated that if I hear no response the horse would be considered his. However, his nephew did not intend to sell the horse to him and sold it to someone else. The courts rules silence is not sufficient for acceptance and thus the horse could not be the uncle’s. 

What about acceptance and revocation in Unilateral contracts?

The classic case to understand here is Carlill v Carbolic Smoke Ball Company 1983. Here just because offers are made to a large number of people they are still offers as the offeror is still looking to be bound in contact. There were three arguments put forward by the defendant for why an advertisement cannot be an offer: (i) there was no promise (ii) even if there was a promise it is not binding as it was not made to anyone in particular and (iii) if performance is acceptance it was not communicated to offeror. Courts held it was still an offer and the offeror cannot revoke an offer once the offeree has performed. Lindley LJ went on to say that communication of performance was not necessary in such contexts. 

In order to revoke an unilateral offer, two conditions need to be satisfield:

1. The revocation must be communicated through adequate means 
2. The revocation cannot happen after the performance has happened on behalf of the offeree. For example, in Errington v Errington (1852)  the offer could not be withdrawn once the couple had started making payments. 

There is a wider question here, when is communication effective? 

• According to the postal rule, communication is effective when the letter has been posted, see Adams v Linsell. 

• Although, is this really effective? Sometimes it can lead to absurd results. For example, in Household Fire Insurance v Grant 1879, a letter was lost in the post so can we really say in such a situation a contract has been formed?

• So now postal rule can be dispelled by the offeror giving notice to the the offeree as seen in Holwell Securities v Hughes 1974.

• Modern day communication centres around instantaneous means of communication such as e-mails, can we still apply the postal rule? Lord Denning makes an extremely important point in Entores v Miles Far East Corp 1955, he describes non-face-to-face communication as communicated between two banks of the river. He said that a contract can only be formed when bother parties can hear each other’s response loud and clear. MUST BE HEARD IS THE CRUCIAL THING ABOUT THE FORMATION OF CONTRACTS. 

An interpretation of Marx: A critique of the division of labour: alienation & Commodity Fetishism

Marx provided a great critique into the capitalist system and in this post I want to explore his ideas relating to alienation and commodity fetishism. 

Capitalism at a glance...

Capitalism was founded upon classical economic thought such as those of Smith and Ricardo. 

One could argue that the building block was Smith’s theory of division of labour and specialisation which was later extended by Ricardo to his theory of Comparative Advantage. 

Smith argued that to develop the “division of labour” must take place because this increases productivity. By this he meant that as workers specialise in one particular part of the production process, they are able to produce more and if workers collaborate in specialising them the productivity of goods will increase and development will be in process. 

Do Note: Smith was aware of the negative social implications this could have in society as if he predicted the existence of Marxist “Alienation” theory. 

Marx

Before defining the notion of Alienation and Commodity Fetishism, we need to set out a few points. 

For Marx the whole organisation of society changed in capitalism. 

In the old Feudal system, the economy was run (as seen below):

C -> M -> C

But what does this mean? This means that workers would produce a commodity such as tomatoes (remember as this society didn’t have full division of labour employed), they would use some of their production for  subsistence and they rest would be sold for money (M). This money would be used in exchange for other goods such as apples which the worker may not be producing. The implication of this is that the price of commodities arises out of the time and value of labour used in the production. 

However, in the capitalist system this has changed to:

M -> C -> M’ 

What does this mean? In the capitalist system, we start with the premise that there are two classes of people which are continually diverging: the bourgeoisie and the proletariat's.  The bourgeoisie are the capitalist class they have money [M] (either through getting a loan or previous economic activity) and they use this money to employ labour (the proletariats) and means of production and produce commodities, C. These commodities are then put on the market and are sold separate from the labour and the production process that was used to make them. Given the distance of the production process and that now workers need to use their wages to buy everything (as they own nothing that they make) prices are determined exogenous to the production process and the outcome results in a larger some of money produced for the capitalist who instigated the production process in the first place.

So what do we learn from this? The first critique Marx has for the capitalist system is alienation.

Alienation

For Marx, the capitalist system led to the worker being alienated. Social relations become estranged in such a society because the worker works for subsistence (as he can no longer on his own compete with capitalist productivity) and this subsistence derives it existence from the exchange of labour for a wage. We can summarise that the worker becomes alienated for three reasons:

1. The workers do not own the means of production - so even if they wanted to make the product for themselves, they would have to buy it as they simply do not have the money required to own the means of production - even their own labour is now separate to them - it is a commodity (leads to second point). 
2. Workers do not own the product of their activity.
3. Workers do not control the organisation of productivity process - they merely carry out specific roles. 

Alienation is crucial for Marxian thought because you can see this one of the reasons that has the potential to leads to such high levels of tensions that would eventually cause a revolution and lead us into the new era of socialism (although what that is we do not know - we just know workers would not be alienated).

Commodity Fetishism 

What is commodity fetishism? and how does it link to all we are talking about?

So we have already established in a capitalist society all relations are economic not social such as employer-employee. Workers are compelled to sell their labour to have some kind of subsistence in this new society. 

Commodity Fetishism refers to economists obsession with commodity. The transformation social relations into objectified economic relations because of this obsession.Commodity fetishism is blinding because now products derive their value on what people perceive the product to be worth not their real economic worth which includes the labour that has gone into them.  This value is no longer equivalent to the price - price derives itself from contingent factors whereas value by fetishism of commodities.

The ultimate aim of the whole production and exchange process is to own exchanged values (and these values aren’t real because of commodity fetishism). Furthermore, the capitalist society is now characterised by social stratification - the workers and the capitalist and controlled by one class implying the exploitation of one class over the other. Here you can see exploitation could include alienation that capitalism causes. 

The obscures the notion of division of labour in a way, because there isn’t that collaboration between workers. Yes workers do specialise but for a wage which is used for subsistence - again showing the estrangement of social relation by some objective economic relations. 

Conclusion

The post boils down to Marx’s philosophical and economic ideas that the capitalist society which is characterised by the process of M -> C -> M’( money used to produce commodities which are sold to create a profit). This leads to the alienation of workers which is crucial for eventually spurring a revolution and moving into the Socialist realm of society. Furthermore, it is important to recognise that the capitalist system is essentially based on a lie - products derive their values from what people perceive to be their value not their real labour or exchange value. This turns what were social relations to objective economic relations and this transformation he terms commodity fetishism.

Conditions, Warranties & Innominate Terms

Law of Obligations I: Express & Implied Terms Please note, that I have used “Question & Answer: Contract Law” by Marina Hamilton 2012 to help me put this table together.Classification Definition Condition Fundamental term determined at the time the contract is made. Innocent party can accept the repudiatory breach, treat the contract as discharged and claim. Warranty Minor term added to the root of the contract determined at the time the contract is made. Damages only. Innominate Term Determined.


Conditions, Warranties & Innomiinate Terms by Komilla Chadha

Commercial Bank Operations (Notes)

Lewis, MK and Davis, KT, 1987, Domestic and International Banking, Hemel Hempstead: Plillip Allan, ch. 2, 

Chapter 2: Financial Intermediaries and Financial Assets

2.1 Intermediaries Services: An Introduction

• Essentially comes down to offering some financial product e.g. loans, and means to invest with deposits

• Intermediation services: require an act of joint consumption by the loan and deposits customers. It is contracts with the provision of services arising from differences in the characteristics of contracts entered into depositors and borrowers

• Two types of intermediation: (i) ‘distributive’ or ‘brokerage’ - facilitate the transfer of ownership of existing financial assets, while doing this they supply information/specialist advice yet do not alter the characteristic of the financial asset and (ii) More often however, what is done is that the primary securities (those offered by the borrowers) is altered to the secondary securities (offered by the financial intermediary) and the way this is done is by issuing different contracts.

 We can spilt the types of financial products offered in three categories:

1. Payment services - providing money to pay for goods/services
2. Consumption transfer - where firms can invest now and consumers can pay over time
3. Financial security - ensures the continuance of consumption and investment in the face of a change in economic circumstances, ill health, accidents etc.

2.2 Stages of Intermediation

• This section look at hypothetical states to illustrate the need for financial intermediaries.

1. Absence of Financial Assets - Initially we need money to overcome the inefficiencies and economic costs of barter exchange. It also allows people to invest as they have previously accumulated money balances.

1. Direct Financing - By allowing for borrowing and lending, the constraints upon savings and investment can be more comprehensively lifted. Lenders are encouraged to save as before they could save only in 2 ways: hold on to commodity, whose liquidity and value is not certain or clear or hold onto money which has a certain monetary value yet bares no interest, so financial assets offer a middle choice. For direct financing to occur, borrowers and lenders with common interest need to meet this can either happen by accident or there will be transition cost involved. So by paying an interest rate which is acceptable they eradicate the transaction cost. Two types of problems arise when there is a separation of savings from the accumulation of wealth (i) ex ante problem of imperfect information where the lender cannot get full information of the borrowers and adverse selection where asymmetric information costs arise because of the lender’s inability to observe the attributes of the borrowers and (ii) ex poste problem which is that there is a moral hazard that many borrowers flow because of the inability of lenders

1. Information Services of Intermediaries - Creating a pool of data on investors and borrowers and so providing information quite easily. They can offer specialist advice to customers based on the information they have accumulated.

1. Portfolio Transformation Services - Where the borrowers and investors do not match in size, duration or in any other respect, intermediaries match it by ‘debt substitution’ that is the substitution of the intermediaries own liabilities for those of the ultimate borrowers. Two levels of this are: (i) contract level  - the process of gathering information and monitoring teh investments is also centralized, but in addition to reducing transition costs, this substitution alters the pattern of claims and thus reduces the risk to lenders, if only by the means of the pooling process. (ii) issuing contracts to lenders which are fundamentally different to those issued to borrower, this closes the problem with the gap between lenders and borrowers and this can be done by attaining specialist information. Instead of distributing the liquidity as with the first level, here the ‘creation of liquidity’ happens and this means that where borrowers assets acquired by the intermediary are information and incentive sensitive, they are converted into liquid claims from the viewpoint of lenders.

1. Liquidity production: Intermediaries usually ‘impart liquidity’ and what this means is that the primary securities they attain are usually less liquid than the secondary securities they offer. Liquidity is based on the asset’s marketability, reversibility, divisibility and capital certainty. (1) Marketability realated to the ease and speed within which the value of the asset can be realised. (2) Reversibility refers to the discrpency in value between the contemporeous acquisition and realisation of an asset (3) Divisibility is reflected in the smallest unit in which transactions in the asset concerned can occur. And (4) Capital certainity is the extent to which an asset’s future value in terms of cash can be predicted at future dates. Liquidity is not real science, it is more subjective and it based on teh intermediaries perception of the asset can be defined as having high amounts of these four characteristics.

The Rationale for Intermediaries: A summary

The complete markets paradigm

• Arrow-Debreu general equilibrium model, basically that AD=AS
• There is basically a market failure in a situation where financial intemediaries do not exist, that is they reduce search, monitoring and transaction costs and provide savers with greater safety and financial security than they can obtain from their own portfolios without access to makrets for contingent claims. 
• Orginally it was understood that financial intemediaries represent the final stage in the evolution of the financial system and now the new view is that it should be seen no more than transitory phase in the evolution path to a full set of Arrow-Debreu markets. 

2.3 Pooled Investment Funds

• Both mutual funds, or open ended investment companies (US name), and unit trusts (UK name) are legal constructions which permit the ‘pooling of a large number of small unequal amounts of money belonging to different induviduals in a common fund to be invested by skilled managers’. 
• Open-ended and close-ended are both funds of pooled investment the difference is in how they both are managed. Open-ended fund issues and redeems shares on demand, whenever investors put money in or out the fund. The close-end fund is a different animal. Like a company, it issues a set number of shares in an initial public offering and they trade on an exchange.
• The point of these is to create a size sufficiently large for risk diversification to operate.
• The three functions of open-ended pools which allow induviduals to purchase a share of managed portfolio:

1. ‘Brokerage’ - information is processed and collected for resale
2. ‘Diversification’ - As the fund is large it allows risk to be diversified
3. ‘Liquidity’ - units can be readily encashed, and open-ended funds are more liquid than direct shareholdings.

2.4 Money Market Mutual Funds

• Whereas mutual funds had their origins in Britain in 19th C & were well estabilished in the US by the 1930s, money market mutual funds are of very recent origin.
• The pooled funds for Money markets is placed mainly on short-term ‘prime’ paper. This paper is only issued in large denominations e.g. $1 mil minimum and without pooling the investment would clearly be beyond the resource of most induviduals. Thus the funds untertake a size intermediation , enabling induviduals to aggregate their resources in order to take advantage of the higher interest rate avaliable on large job lots.
• Also very low risk and examples include: t-bills, CDs, Broker’s Call, Federal funds. Essentially what we have to remember is that money market securities are low risk and low return.
• http://www.investopedia.com/articles/mutualfund/04/081104.asp#axzz290qnaunV 

2.5 Savings Institutions 

• Common elements in savings instituitions: 

1. most liabilities take the form of deposits whereby gathering of funds is facilitated and the attractiveness of the liabilities enhanced, by the ability of customers to make small-scale deposits and withdrawals upon savings account with the intermediary.
2. No depositer has an account which could be regarded as of significant size relative to intemediary’s total deposit liability.
3. The asset portfolio is on average of longer maturity than the liability portfolio
4. The asset portfolio contains a reserve of highly liquid assets 
5. Thos earning assets mostly consist of a large number of small claims on different households or firms which in most cases are induvidually not marketable.

• They are different to mutual funds in two regards (i) the savings institutions may be able to get a spillover effect from their deposit business to their loan portfolio and (ii) in the course of monitoring the deposit business of customers, the instiutions build up a profile as to a customer’s ability to repay loans. 

2.6 Insurance Institutions 

• Insurance companies take in funds, called premiums, invest them in securities to generate investment income, and then pay out to policy-holders.

Life Insurance

• For term policies the insurer holds prepaid premiums on behalf of those insured. With whole-life policies the same principle applies, but on a larger scale. Endowment insurance policies require the insurer to manage an accumulating balance of the insured’s savings. Annuities require the insurer to manage a decumulating balance of the annuitants’ savings. 

General Insurance

• General insurers are in no sense savings institutions or providers of other forms of wealth accumulation. But the basis of almost all insurance is the accumulation of a fund of assets from which uncertain losses can be met.

Maturity Transformations

• This relates to the function of commercial banks above which is to create liquidity and take risks upon itself (which isn’t as irrational as it sounds given that they should have less risk as they have information and specialist knowledge).
• They buy assets which are long and small in size and they transform them into short-term larger securities.
• The issue is still how is it logical for banks to give liquidity guarantees which don’t exist and guarantees of deposit which as with the nature of any security they use the deposit for, cannot actually exist.

Four Major concerns for bankers while profit-maximizing

1. Liquidity Managements : Reserves in banks earn zero interest especially as the law says there are no reserve requirements in UK or USA. So the concern is how many liquid assets such as T-bills to keep in reserves for when there is an emergency yet profit maximize as much as possible.
2. Asset Management: Loans are asset and default risk is absolutely crucial as banks have to make that up elsewhere because it is depositors money not their own money they use to give out loans. So the issue is how can you essentially get that idea low risk high return which doesn’t necessarily exist.
3. Liability Management : Liabilities are deposits and bankers are searching low cost ways to increase liabilities. They do this by offering deposit insurance to a certain extent, but again they are constantly questing are there cheaper ways to attract funds.
4. Capital Adaquency Management : Similar to liquidity management, where that was focused on the nature of reserves that banks keep capital adaquency questions the size question, how much capital should exist in reserves.

Trends in the realms of Banking and Finance

1. Merger & Acquisition - The trend that investment banks are merging with commercial banks and the motivation behind this is that the nature of mergers reduce costs thus providing incentives for shareholders to vote for it.
2. Executive Pay - Incentives for board members to get bonuses by getting involved with risk strategy issues and mis calculating risk as a result.
3. Capital Adquency Management -Banks are not keeping enough capital, in some cases they are so blinded by the risk calculation they lend 167% of capital to just one borrower. There are new regulations coming now. 
4. Growing Competition - Competition and new ways of banking are changing the face of banking. For example the surge in internet banking and  the enormous cost incentives has resulted in the closure in many bank branches, leaving the few banks remaining with merely operational staff.

Introduction to Consideration

What is consideration?

Lush J’s definition of consideration is one that has been taught and used by lawyers for a substantial period of time. He describes, “a valuable consideration, in the sense of law, may consist in some right, interest, profit or benefit accruing to the one party or some forbearance, detriment, loss or responsibility given, suffered, or undertaken by another” (Currie v Misa 1875). 

Consideration, like offer and acceptance is the third neccessary component for the formation of a legally binding contract as under English Law without consideration the promise is not binding. So what is consideration? and what is Lush J trying to communicate in Currie v Misa. The best way t understand this is in an example, as this is what lead to my epiphany moment! To take it simply then, if I make an offer to sell you this bottle of water for 50p, you accept this offer and say yes I will buy it. The consideration can be viewed as the transition of the water bottle from one party to another showing that the offeror has had a detrimental effect and the offeree a benefit. This difference from the actual execution of the contract as that would include the transmission of the 50p and other terms which may be present in the contract.

It is important to understand the notion of ‘past consideration’ as that thus shows that for each legally binding contract that is formed a specific consideration is required, as an interest or forbearance of the past is unjust. It is one that allows a party to benefit without incurring any legal liabilities. Of course, with any such clear rule in law there as exceptions such as if the offeror has requested that a past consideration should be given.

So what are some of the crucial rules associated with consideration...

1. ‘Consideration must move from the promise’ - This again links to the notion that consideration is making a bare or gracious promise into a more sophisticated legal contract. If the act cannot demonstrate this shift, it fails to be classified as consideration.
2. ‘Consideration need not be adequate’ - so consideration doesn’t need to be adequate i.e. fair or valuable, it can be anything which has value in the eyes of the law, e.g. chewing gum wrappers in Haelan Laboeratories Inc v Topps Chewing Gum Inc
3. ‘Motive is not the same as consideration’ - Although intention and consideration play a great role in making a promise or an agreement legally binding, it must be understood they are not the same. Intention refers to the parties intention to enter into a formalistic legal contract where is consderation is the forebearrance or the interest gained by entering into such an agreement.

Lewis Dual Sector Model

This is quite a long and advanced video (not designed for Alevel like my other videos) on the Lewis two sector model and the criticisms of it. This video is created and presented by Komilla Chadha.


 

Property Law: Blomley: "Law, Property and the Geography of Violence"

In this video I extend my introduction on property law by exploring Nicholas Blomley's article on "Law, Property & the Geography of Violence".

Property Law: Cohen's Dialogue on Private Property

In this video I introduce the concept of property by exploring Cohen's dialogue on private property.

Banking&Finance: Introduction to Financial Markets& Intermediaries

In this video I explore the who, what, why and how of financial markets and intermediaries. 

Introduction into the macroeconomic field of enquiry....

• The first point to note is that the infamous economist, John Maynard Keynes, is important because he was responsible for diving macroeconomic field of inquiry. 
• The second is that the macroeconomic field of inquiry concerns four main economic aggregates; unemployment, inflation, productivity and GDP rates (growth).

Short term vs Long Run

Short-term analysis = divergence between actual level of output and potential level of output, so basically studying output gap. Fluctuations and study of it are called business cycle and these are two part of the short-term. 

Long term analysis: Path followed by the potential output in a period of 10 years or more. What drives economic growth?

Stable business cycles v Growth...

• Stable business cycles are preferred because it is predictible, better confidence levels and less resources will be wasted (particularly unemployment). Both Classicists and Keynesians agree stable is better than unstable, where they differ is the policies which should be implemented. 

What is the method of macroeconomics? 

• Economists do not agree on policies because different schools approach economics on different ideologies. They differ even on the fundamentals such as out of the four main study points which is the most important and which is the least. 
• Two main schools of economics exist and those are Neo-Classical economists, then of course you have Keynesians and the other Heterodox economics (such as post-Keynesian - they follow Keynesian but differentiate from neo-classicalism, marxism, Austrian, Sraffian, complexity theory, evolutionary economics etc). 
• Note there is a difference between Keynesian and post-Keynesian.

Main features of the Neoclassical of macroeconomic methodology

• Macroeconomics can be found as aggregation of microeconomics based on 2 assumption as seen below.

• Methodological individualism - understanding of economy as being composed of self-interest individuals who are rational who want to maximize utility subject to resource constraints. This is why macroeconomics is micro founded. 
• Existence of general equilibrium - Individuals are rational  and self-interested so markets will always end up at an equilibrium where demand = supply (link to invisible hand theory). When all the markets are in equilibrium the whole economy is in what they call a "general equilibrium". This is demonstrated mathematically by Leon Walrus by beginning of 20th century - he identified a price vector (list of prices) and proved its mathematical existence.

• The primary concern regarding the analysis is market exchange - i.e. the consequence of assumptions that markets are self-regulating.

Criticisms

• Legitimacy of the assumption, neglect of the role of structures and mechanisms (i.e. governments) - the assumptions do not hold - perhaps individuals are not rational and self-interest, markets are perfectly competitive etc. methodological individualism fails to recognize that consumers may be affected by external features
• Trade-off between static efficiency and dynamic changes? - their study is focused upon static analysis even though we know things do not change they evolve. Conflict between static and dynamic goals and this is not recognized by neo-classical economics.

Main features of Keynesian methodology

• Macroeconomics is not aggregation of microeconomics.
• You need a separate theory for macro which has its own method, providing a holistic approach
• Introduction of uncertainty in analysis - economic agents are uncertain about the future and this affects behavior. Existence of uncertainty is why individual behavior cannot be used and aggregated.
• Expectations that people have and it is on basis of this economic agents make decisions. Investment decisions of firms are also based on expectations.
• Focus is on long-term and that it is affected by the short-term and expectations of people. He said business cycle affects long-term economic growth as it affects things like investment levels, confidence etc.

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Capital Market

Here is a short slideshow I created on the basic notions in Capital Markets Capital Market PPT by Komilla Chadha Tweet

Labour Market

A short powerpoint I made on  the labour market...Labour market ppt by komilla chadha

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Oligopoly and Game Theories

Here is short slideshow I made on Game Theory and different Oligopoly models :) Game Theory PPT by Komilla Chadha

Monopolistic Competition - some key points..

Here is a basic understanding on M.C, for video tutorial please see http://a2withkomilla.blogspot.co.uk/2011/01/monopolistic-competition.html 
Monopolistic comeptition by komilla chadha

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Statutory Interpretation

Here is a mindmap I created on Statutory Interpretation, it is very informal and breif, these are my personal notes but I thought I'd share it with you...

Theory of Production Decisions

Here is a short booklet I made to introduce some of production concepts in microeconomics....  

Theory of Production Decisions by Komilla Chadha

Insuring Against Bad Outcomes: Risks and Utilities

Here is a small booklet I created on risks and utilities, vital for understanding theory of consumer demand.Insuring against bad outcomes by komilla chadha

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Economics of Information...

The Economics of Information: Communicating/Signaling

Usually in economic models like perfect competition or utility modeling we assume that perfect knowledge exists but this isn’t usually the case, there is uncertainty caused by information asymmetry and this is what this mini booklet or post will explore.

What do we call communication in Economics?

In economics when information is conveyed we call this signaling and signals must fulfill two characteristics if they are to happen between rivals or adversaries (we can already see how important this notion is especially in terms of game theory etc):

1. The signal must be costly to fake. Essentially this characteristic is what it says it is, that it is extremely difficult to fake because it can easily be caught out or financially cost a firm. An example of this is Product Quality Assurance.
2. If the signal conveys information which is favorable for the firm then this automatically reveals information about the other firm even if it is not favorable information. This characteristic linked to the full-disclosure principle which states that firms are often forced to reveal unfavorable information about themselves because their silence can be taken to mean much worse. I guess this characteristic is more conditional on the content of the signal.

A bit of background...

The economics of information is arguably a new genre of economic study which has become popular largely due to the creation of the world wide web in 1973. The market for lemons was a piece written by the Nobel laureate in Economics, George Akerlof who talks about the market of used cars (lemons) and how the existence of inferior goods destroys the market for quality goods , this is caused by information asymmetry. Ultimately, it is up to the plum (good quality car) owner to signal to buyers using things like warranties to the consumers why their car is better. This signalling forces lemon owners to reveal information about themselves which is not favorable, bringing the full-disclosure principle into action.

I guess this example by Akerlof demonstrates why the study of information economics is so important, because ultimately such a situation can lead to unfavorable outcomes. The main two unfavorable outcomes most commonly discussed are:

1. Adverse Selection - this is what can be seen in the market for lemons that the buyer risks trading with the less desirable trade partners as those are the ones who volunteer to exchange.
2. Moral Hazard - Incentives such as insurance that lead people to file fake claims or be negligent in their care of goods.

Theory of Consumer Demand

This post will look at two models (Cardinal and Ordinal|) which explain why the law of demand is what it is. Theory of Consumer Demand by Komilla Chadha