An important idea in economic theory is economies of scale. If it wasn’t for the existence of this phenomena it is doubtful that the world economy would look anything like it does today. The reason large companies and multinationals exist is because they take advantage of economy of scale.
In any economy, one thing is certain: the beginner investor is alive and well. In boom economies, this investor is filled with rampant enthusiasm and a desire to strike while the market is “hot” in order to get the maximum value possible. In recessionary economies, the beginner investor is still filled with rampant enthusiasm, albeit from a much different perspective. They are looking to come into the market while it’s down and make out like thieves in the night when it rises again. Perfect prediction is outside the capability of any human-created system, but the system of technical analysis allows us to come pretty close.
Law of Diminishing Marginal Utility
Q – quantity of good
TU – total utility
MU – marginal utility (ΔTU)
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