Barriers to Entry
…down all the cable themselves, which is pretty expensive. 2. Economies of Scale Competitors can’t compete with other firms that have much lower production costs. Ex: Not many firms will…
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Cyclical Unemployment
…and structural unemployment related? It turns out that in economies under prolonged distress, cyclical unemployment may transition into structural unemployment. For example, a worker who gained competency in computer programming…
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…
Financial Institutions
…loans. 2. Insurance Companies Insurance companies collect premiums and pay compensation if certain events occur. They invest the premiums in securities and real estate (main assets). 3. Pension Funds Pension…
Structural Unemployment
…be very good jobs. Structural Unemployment Examples There are numerous examples of structural unemployment worldwide, particularly with the economic shifts that have occurred over the last half-century. Here are a…
Theory of Production: Short-Run Analysis
…then Average Product will be at maximum For example: If you think of scores, in Jack’s sixth test (marginal), he gets a score higher than his average, then his average…
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…
Supply Side Economics
…two economic perspectives later on in this article). Supply Side Economics Examples 1. Labor Market Lowering wages frees up the labor market, which makes a lower-paid job more attractive. To…
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…
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…
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…
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…
Unemployment in India
…quite simply, limited by the amount of materials, equipment, and energy available to fuel it. Shortages of raw materials, facilities, fuel, and electricity means decreased production of goods, which logically…
Expansionary Monetary Policy
…for commercial banks. With lower borrowing costs, commercial banks can charge individuals lower interest rates for loans as well. As a result, the economy has a greater money supply overall….
Money Multiplier
…save some of it, and often quite a lot of it. Bad loans: If a bank lends out money to a company and then that company is forced to file…
Introduction to Game Theory
…used to make decisions on price, output, product development, product promotion and other business scenarios. Game Theory Examples Buyers and sellers negotiating a price Firm and its competitors Auctions Prisoner’s…
Production Possibilities Frontier
…production of another commodity. Production Possibilities Frontier Example The production possibilities frontier is graphed as a curve, or arc. On such a graph, one of the commodities is shown on…
Bill of Exchange
A bill of exchange is a specialized type of international draft used to expedite foreign money payments in many types of international transactions. In addition, a draft is commonly used…
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…
Diseconomies of Scale
…are countless examples of diseconomies of scale manifesting in different areas of operation of the firm. The most common examples of diseconomies of scale include: 1. “X” inefficiency This is…
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…
Negative Externalities
…over-consumed. Negative Externalities of Consumption Example A common example of negative externalities of consumption is the phenomenon of noise pollution. When someone inconsiderately blasts music (“consumes” music) so loudly that…
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 Natural Rate of Unemployment
The Natural Rate of Unemployment (NRU) is the rate of unemployment after the labor market is in equilibrium, when real wages have found their free-market level and when the aggregate…
Economic Profit
…principles (GAAP). It is a company’s total revenue reduced by the explicit costs of producing goods or services. These explicit costs involve expenses such as the cost of raw materials,…
Marginal Revenue
…the revenue obtained from the last unit sold. Marginal Revenue can remain uniform at a particular level of output. However, the MR will eventually slow down as the production level…
Monopsony Market Structure
…to remain competitive. That’s why the buyer’s controlling advantage has the effect of lowering the cost of the good. Monopsony Example One example of this market situation is that of…
Collective Bargaining
…unions and company management come to a collective bargaining agreement. Collective Bargaining Agreements A collective bargaining agreement will typically include elements such as: Working conditions Conditions of employment Work hours…
Seasonal Unemployment
…(source) Seasonal Demand for Commodities Notably, along with seasonal unemployment, there is often seasonal under-use of raw materials used in production. For example, there will most likely be a seasonal…
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…
Cross Price Elasticity of Demand
…are substitutes. For example: Coke and Pepsi If XED < o, then they are complements. For example: Bread and Butter If XED = 0, then they are unrelated. For example:…
About The Intelligent Economist
…at: prateek@intelligenteconomist.com This site is ideal for: Anyone seeking a free (and high-quality) education on important economics topics. Teachers who want to supplement their material for their class or curriculum….
The Multiplier Effect
…flow of income. Here are some examples of injections: Investment (I). Money invested by firms in purchasing capital stock. Exports (X). Money coming from abroad to buy domestically produced goods….
The Lipstick Effect
…data collected by Kline & Company, a market-research group, the effect had been overstated. The team at the Economist were unable to derive a solid correlation from proving the effect….
Deadweight Loss
…One common example would be a sales tax. Taxes increase the price of products, which naturally decreases their demand. In other words, taxes can contribute to deadweight loss by making…
What is Economics?
…so many resources in interaction within the market makes economics an exceedingly complex topic. The field is frequently broken down by the scale of study into the main categories of…