80-20 Rule

Filed Under » ,
Dictionary Says

Definition of '80-20 Rule'

A rule of thumb that states that 80% of outcomes can be attributed to 20% of the causes for a given event. In business, the 80-20 rule is used to help managers identify problems and determine which operating factors are most important and should receive the most attention based on an efficient use of resources. Resources should be allocated to addressing the input factors have the most effect on a company's final results.

Also known as the "Pareto principle", the "principle of factor sparsity" and the "law of the vital few."

Investopedia Says

Investopedia explains '80-20 Rule'

The 80-20 rule was developed by Joseph Juran, a 20th century figure in the study of management techniques and principles. The 80-20 rule has been applied to a number of different facets of business.

An example of the 80-20 rule in economics would be that 80% of a country's wealth is controlled by 20% of the population, although this can be explained by the Gini index.

Articles Of Interest

  1.

    The History Of Economic Thought

    Economics is a vital part of every day life. Discover the major players who shaped its development.

  2. A Practical Look At Microeconomics

    Learn how individual decision-making turns the gears of our economy.

  3. How Influential Economists Changed Our History

    Find out how these five groundbreaking thinkers laid our financial foundations.

  4. How Risk Free Is The Risk-Free Rate Of Return?

    This rate is rarely questioned - unless the economy falls into disarray.

  5. Top 4 Most Scandalous Insider Trading Debacles

    Here we look at some of the landmark incidents of insider trading.

  6. Nobel Winners Are Economic Prizes

    Before you try to profit from their theories, you should learn about the creators themselves.

  7. The Nash Equilibrium

    Nash Equilibrium is a key concept of game theory, which helps explain how people and groups approach complex decisions. Named after renowned mathematician John Nash, the idea of Nash Equilibrium ...

  8. The Copper King: An Empire Built On Manipulation

    Find out how Yasuo Hamanaka's actions in the copper market forever changed the rules for commodity traders.

  9. 7 Controversial Investing Theories

    We take a closer look at the theories that attempt to explain and influence the market.

  10. Breaking Down The Geometric Mean

    Understanding portfolio performance, whether for a self-managed, discretionary portfolio or a non-discretionary portfolio, is vital to determining whether the portfolio strategy is working or ...
comments powered by Disqus
Marketplace
Hot Definitions

  1. Racketeering

    Racketeering refers to criminal activity that is performed to benefit an organization such as a crime syndicate. Examples of racketeering activity include...

  2. Lawful Money

    Any form of currency issued by the United States Treasury and not the Federal Reserve System, including gold and silver coins, Treasury notes, and Treasury bonds. Lawful money stands in contrast to fiat money, to which the government assigns value although it has no intrinsic value of its own and is not backed by reserves.

  3. Fast Market Rule

    A rule in the United Kingdom that permits market makers to trade outside quoted ranges, when an exchange determines that market movements are so sharp that quotes cannot be kept current.

  4. Absorption Rate

    The rate at which available homes are sold in a specific real estate market during a given time period.

  5. Yellow Sheets

    A United States bulletin that provides updated bid and ask prices as well as other information on over-the-counter (OTC) corporate bonds...

  6. Bailment

    The contractual transfer of possession of assets or property for a specific objective.
Trading Center