The Downfall Of Enron

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This is a movie or rather a documentary on the downfall of Enron which was the seventh largest company in the United States. It took 16 years for them to rise from 10 billion dollars of assets to 65 billion dollars of assets and had managed to go bankrupt within a period of 24 days in 2001. This led to the question of whether Enron is amidst an expensive scandal. Some of the economic concepts that were identified in the documentary would be as follows. First, Enron was built on the very concept of “Mark to Market Accounting”. Second, through instruments like “Special Purpose Entities” and an “Off-Balance Sheet”, Enron abused these instruments to deceive investors by hiding relevant information required for the investors. Third, a few aspects in the movie were based on Gregory Mankiw’s ten principles of Economics. People respond to incentives, trade makes people better off, how government can improve market outcomes are few of the principles identified in this movie. The concept of Supply and Demand was also identified in the movie. The…show more content…
It was earlier mentioned that the government should not interfere with the market as it would affect the supply and demand. The government can interfere in situations of a market failure. One possible way market failure is the market power. Market Power is basically the ability of a single person or rather entity to unduly influence market prices. This is the very situation of Enron. Enron has taken control over the electricity board and has unduly influenced the market prices by reducing the electricity supplied. This is a perfect example of a market failure. Hence, the government should ideally interfere in order to balance the prices between the demand and supply. This is also a principle under the ten principles of economics which talks about “How Government can sometimes improve market
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