What's it: Economies of scope is a reduction in the unit cost of production when companies produce two or more products using the same production facilities or resources.The example is more or less like this. Automakers use one production
Microeconomics
Perfect Competition: Characteristics, and Implications
What's it: Perfect competition is a theoretical market structure concept with many companies producing identical goods or services. In other words, each company offers goods that substitute each other entirely.The perfect competition enables
Marginal Benefit: Definition, Examples & Relationship With Demand Curve
What's it: Marginal benefit is an extra utility you get when adding one more consumption of goods. The utility can be satisfaction or happiness you get.Suppose we quantify the value of marginal benefits. In that case, it is equal to the
How the law of diminishing marginal utility explains the demand curve
The law of diminishing marginal utility states that marginal utility decreases when you consume one more good. Marginal utility is a measure of the extra satisfaction (benefit or utility) you get when you add another consumption of goods or
What is the difference between a change in demand and a change in quantity demanded?
The difference between a change in demand and a change in quantity demanded lies in the determining factor. Economists use the first term to describe the effect of a non-price factor on a change in quantity. Meanwhile, they use the second term to
Law of Supply
Law of supply states quantity supplied of good has a positive correlation with its own-price, ceteris paribus. If the price of a product rises, the quantity supplied will increase. A higher price encourages producers to increase output to get more
Market Equilibrium: Meaning, How It Works
Market equilibrium occurs when the quantity demanded is equal to the quantity supplied. In a curve, it represents the point of intersection between the demand curve and the supply curve.At the equilibrium point, the market determines prices and
Market Mechanism: Meaning, How It Works
In economics, a market mechanism refers to a system of market work in which the power of supply and demand determines the price and quantity of goods traded. This mechanism allows the market to go to a new equilibrium point when disequilibrium
Supply Curve: Means, Determinants
A supply curve is a graphical representation of the law of supply. The law states a positive relationship between the quantity supplied and the own-price of the product. When its own price rises, the quantity supplied will increase. But, when prices
Elastic Demand: Meaning, How to Calculate It
Elastic demand means the quantity demanded is responsive to price changes. When prices rise by 5%, according to the law of demand, the quantity demanded falls by more than 5%. Conversely, when prices fall by 5%, the quantity demanded rises by more
Necessities: Meaning, Elasticity
Necessities are types of normal goods that their demand is inelastic in income. When consumer income changes, their demand quantity also changes but at a lower percentage than the change in income. For example, if consumer income rises from 5%, then
Luxury Goods: Meaning and Its Elasticity
Luxury goods are types of goods whose demand is higher than the increase in consumer income. Consumers ask for more when their income rises.Although they don't always have a high-quality connotation, they are often considered to be at the top in