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Economic power

From Academic Kids

There is no agreed-upon definition of power in economics. At least four definitions of power have been used:

  • purchasing power, i.e., the ability of any amount of money to buy goods and services. Those with more assets (or, more correctly, net worth) have more power of this sort. The greater the liquidity of one's assets, the greater one's purchasing power is.
  • managerial power, i.e., the ability of managers to threaten their employees with firing or other penalties for not following orders. This exists if there is a cost of job loss, especially due to the existence of unemployment and workers' lack of sufficient assets to survive without working for pay.

In general, those with more power also have more freedom than others and may be able to exploit others in society and/or cause some sort of market failure.

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