What's it: Market power is the firm's ability to influence its products' prices in the market. Market power enables firms to charge a higher price than the equilibrium price in a competitive market.We call companies having market power as
Economic Context
Labor Force: Composition, Why it Matters
What's it: Labor force refers to the share of the working-age population currently employed and those actively looking for work. The working-age population usually refers to those aged 16 to 64 years. However, in some countries, the definition
Capital Outflow: Risks & Solutions (Factors, Impact on Exchange Rates)
What's it: Capital outflow refers to the going-out capital from a country. If a massive outflow of capital occurs, we call it a capital flight. Several factors trigger capital outflows, which are generally attributed to a combination of
Conspicuous Consumption: Meaning, Reasons, Importance
What's it: Conspicuous consumption refers to consumption expenditure not to maximize basic utility but to give others an impression. Long story short, people buy products because they want to show off their wealth and social status.In
Labor Force Participation Rate: Formula, Determinants, and Impacts on the Economy
What's it: The labor force participation rate is the labor force's proportion to the working-age population. The labor force consists of working-age individuals who are currently employed and those who are not yet employed but are actively
Government Intervention: Examples, Reasons, and Impacts
What's it: Government intervention refers to the government's deliberate actions to influence resource allocation and market mechanisms. It can take many forms, from regulations, taxes, subsidies, to monetary and fiscal policy. In some cases, the
Price Taker: Meaning, Characteristics, and Examples
What's it: A price taker refers to a firm that cannot influence market prices and can only set an output price at the market price. All firms in perfect competition are price taker.Conversely, in imperfectly competitive markets, some firms
Strategic Entry Barrier: Concept, Types, Examples
What's it: Strategic entry barrier is actions taken by existing companies (incumbents) to deter new players from entering their market. It can take various forms, such as limit pricing, product differentiation, and loyalty schemes.Another term
Triangular Arbitrage: Exploit Currency Inconsistencies (Risk-Free Profits?)
What's it: Triangular arbitrage is the simultaneous buying and selling of three different currencies and attempts to exploit inconsistencies between their exchange rates. Profits can arise when the cross rates of the three currencies do not really
Diseconomies of Scale: Types, and Causes
What's it: Diseconomies of scale are the economic disadvantages when a firm increases its production. Instead of lowering average costs, increasing output results in higher average costs.It usually occurs when the company has reached the minimum
Barriers to Entry: Types, and Impacts on Competition
What's it: Barrier to entry is an obstacle that prevents or minimizes the opportunities for a new company to enter a market. A barrier arises because it is deliberately created by existing companies (incumbents) through predatory pricing and
Socialism: Meaning, Characteristics, Types, Pros and Cons
What's it: Socialism is a social, political, and economic philosophy that advocates for collective ownership of the means of production. Socialism and communism are two philosophies that are currently considered left-wing economic thought as opposed