Economies of Scope
…forms of business consolidation that can bolster economies of scope: Mergers take place when two similar-sized companies combine into one. Acquisitions occur when one company takes over another company. For…
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Business Cycle
…these booms and recessions come concurrent increases and decreases in an economy’s production output levels for goods and services. Sometimes the business cycle is also referred to as the trade…
Profit Maximization Rule
…of operation. You decide to stay open as long as the added revenue from the additional hour exceeds the cost of remaining open another hour. Or it can be applied…
Price Discrimination
…because demand is greater and more inelastic. 2. Quantity Purchased Many sellers offer quantity discounts for bulk purchases as a way to get buyers to buy more. 3. Coupons Companies…
Decisions Involving Uncertainty
…flipped again and it comes up heads again, the investor gets $2. If it comes up heads a third time, $4; a fourth time $8; and so on. Once tails…
Duopoly Market Structure
…and Bertrand duopoly. Cournot duopoly The Cournot duopoly model states that the quantity of goods/services produced structures competition among the two companies in an industry. These two companies decide collaboratively…
Supply Side Economics
…a minimum level of revenue during their initial years. 4. Competition and Efficiency The government will need to increase competition between firms and increase the overall efficiency of the economy….
Structural Unemployment
…makes jobs obsolete, thereby increasing rates of unemployment. It also means that companies have to hire fewer employees across the board; they achieve higher levels of productivity at lower costs…
Introduction to Inflation
Inflation is the sustained increase of the price level. The rate of inflation is the change in general price levels over a period. When the price level rises, each unit…
Price Elasticity of Demand (PED)
…than 1 is relatively elastic (using absolute value since the number is negative). Price Elasticity of Demand Example For our examples of price elasticity of demand, we will use the…
Production Possibilities Frontier
…C is one possible combination of levels of production of both food and clothes (75F, 100C) D is another combination of these production levels (50F, 150C) E shows inefficient utilization…
Washington Consensus
…structural reforms that increased the role of market forces in exchange for immediate financial help. Some examples include free-floating exchange rates and free trade. Critics have pointed out that the…
Subsidies
…oil companies Common examples of individual subsidies include unemployment benefits, welfare payments, and government-subsidized interest rates for student loans. Types of Subsidies 1. Production Subsidy A production subsidy encourages suppliers…
Economic Growth
…IT sector dependent on outsourcing. Most developed economies experience slower economic growth as compared to developing countries. For example, in 2016, India had a growth rate of 7.1% while the…
Monetary System
…treasury, and other financial institutions. There are three common types of monetary systems – commodity money, commodity-based money, and fiat money. Currently, fiat money is the most common type of…
Demand Side Policies
…and less predictable as compared to monetary contractions. For example, if the Central Bank is concerned about weak economic growth or relatively high rates of unemployment. The policy reaction would…
Marginal Utility
…service. Example of Diminishing Marginal Utility Here’s a straightforward example: the utility from eating your first sandwich at lunch is much greater than that of the fifth sandwich you consume….
Theory of Storage
…volatility of spot and futures prices tend to be low, and equal. When available inventory levels of the commodity are low, buyers of the commodity tend to stock up on…
Variable Cost
…levels. There are also semi-variable costs, which are a more complex combination of variable and fixed. Variable Cost Examples The most common types of variable costs include: Raw materials involved…
Absolute Advantage
…producing the same good as it produced more of the same good. Absolute Advantage vs. Comparative Advantage Both absolute advantage and comparative advantage are enormously significant concepts for understanding how…
The 25 Best Economics Podcasts Of 2023
…economic news in a laid-back, easy-to-follow manner. Kai Ryssdal and his industry guests tackle complex issues while leaving out complicated economic jargon. Ideal for the business owner that wants to…
Real Interest Rate
…you purchased this year is 5% more expensive when compared to last year. Continuing with our previous example, the lender would make nothing if he loaned it out at 5%…
Trade Barriers
…reflect higher productivity. Otherwise, there is no comparative advantage in producing that product, or the owners would have to reduce wages to match productivity. For example, the U.S. has import…
Gross Domestic Product (GDP)
…somebody must buy all of the products. Therefore the value of the total product must be equal to people’s total expenditures in buying things. The income approach works on the…
Derived Demand
…to see how the ripple effect of the chain of derived demand can be extremely complex and wide-ranging. And here’s another example, one that showcases the three key components of…
What is Economics?
…one can also say that economists study human behavior and choice regarding buying and selling. Economists use key concepts such as the law of supply and demand to predict how…
The Fisher Effect
…the nominal interest rate minus the expected rate of inflation (note that in this equation, all rates used should be compounded). The result, in practice, is that as inflation rates…
Introduction to Demand
…For example, we say that the price of olive oil has gone up. In comparison to olive oil, other cooking oils such as canola oil or peanut oil suddenly seem…
Crowding Out Effect
…example of the crowding out effect as some economists claim that it occurs. Let’s say there’s a large tech company that is planning to spend $10 million on an investment…
Market Failure
…example, if the government provides vaccines to everyone for free, then there is a social benefit that the country benefits. These benefits are not considered in production costs. 4. Public…
Monopoly Market Structure
…that under a monopoly there is no difference between a firm and an industry. 3. Competition There are no close competitors in the market for that product. 4. Price Maker…
Introduction to Unemployment
…but impossible to eliminate. This type, while temporary, is also caused by failing firms, poor job performance, or obsolete skills. For example, when a company goes bankrupt or has a…
Deadweight Loss
…The result is that allocative efficiency is not as high as it could be–it does not reach its maximum level. When levels of trade are lower, resource allocation across an…
Marginal Cost
…levels of output prior to the increase in production subtracted from the cost from levels of output following the increase in production. Meanwhile, change in quantity is simply the increase…
Welcome to Intelligent Economist
…You can learn more about the people behind The Intelligent Economist on our About page. Explore by categories: Latest Articles: The Federal Reserve Consumer Sovereignty The Accelerator Effect Indirect Tax…
Allocative Efficiency
…put resources of time, money, etc. toward that thing. Economies of scale ensure that opportunity costs decrease as production levels increase, up to a point. Then, past certain levels of…