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National income
capital reversing (E2)<br />A challenge to the NEOCLASSICAL view that input substitution responds to the relative scarcity of factors of production. Instead of relative prices, changes in the quantity of capital lead to capital reversing. Also known as reverse capital deepening because a lower rate of profit can be associated with a lower capital-labour ratio.
cross-subsidization (Ll, L3)<br />The financing of an unprofitable part of an enterprise by a more profitable part. A public enterprise, instead of following the rule of attributing costs properly to each division to make each part of that enterprise individually financially accountable, could allow the profitable divisions to finance loss-making divisions. In the private sector, cross-subsidization occurs within firms if some of their products are sold at less than incremental cost. To ensure maximum efficiency, firms should avoid this practice as far as possible.
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