What's it: Nash equilibrium is a game theory concept that determines the optimal solution in non-cooperative competition in which each player has no incentive to change their initial strategy. John Nash, an American mathematician, put it in
Economic Context
Disinflation Explained: A Slower Inflation Rate – Causes, Impacts and Examples
What's it:Â Disinflation is a situation in which the price level increases at a slower rate of growth. In other words, inflation is still positive but lower than the previous period. For example, suppose the inflation rate slowed from 3% inflation in
Invisible Hand: Theory, Mechanism, Criticisms and Modern RoleÂ
The invisible hand is a powerful metaphor in economics, representing the unseen forces that guide a free market toward an equilibrium. Imagine millions of individuals and businesses making independent decisions, yet somehow, the market magically
Economic Union: Deep Cooperation, Shared Prosperity (Trade, Money, Policy) – Features, Goals, Examples, Pros, Cons
What's it: An economic union is a form of regional economic integration in which goods, services, and factors flow freely between member countries. Plus, members also integrate economic policy. It is a more advanced form of the common
Liquidity Trap Explained: Stuck at a Zero Rate – Causes, Impacts, Solutions
What's it? A liquidity trap is a situation in which an expansionary monetary policy cannot further lower interest rates. As a result, these policies are unable to generate economic growth or push up the inflation rate. In simpler terms, the central
Collusion: Meaning, Influencing Factors, Types, Pros and Cons
What's it: Collusion is tacit cooperation or agreement to deceive others and achieve mutual benefits for the parties involved. Such agreements exist to avoid direct competition, reduce market uncertainty, and achieve higher profits. Collusion is
Macroeconomic Equilibrium: Short Run Vs. Long Run
What's it? A macroeconomic equilibrium occurs when aggregate supply equals aggregate demand. Aggregate supply represents the total output of goods and services produced by firms within an economy at a given price level. On the other hand, aggregate
Purchasing Power of Money Explained: How Much You Can Buy (Inflation’s Impact)
What's it: The purchasing power of money is a currency's ability to convert it to goods and services. In other words, it is the conversion rate of money towards goods and services. Another term for the purchasing power of money is the real value of
Economies of Scale: Types, Benefits, How to Achieve It
What it is: Economies of scale are the cost savings when a company increases its production scale. An increase in output allows the firm to reap a decreasing average cost of production. Production becomes more efficient because the firm can
Labor Productivity: Key Drivers and Economic Impact
Labor productivity is a critical metric that measures how efficiently an economy, business, or industry produces goods and services. In simpler terms, it reflects the amount of output (goods or services produced) generated per unit of labor input
Monopoly Power: Meaning, Sources, and Effects
What's it:Â Monopoly power refers to a firm's ability to influence market prices. It is weak when the market is made up of many players, and products are relatively homogeneous. Market power is higher when firms operate under an oligopoly, where the
Infant Industry Argument: Nurturing Domestic Industries (Reasons, Criticisms, Examples)
What's it? The infant industry argument is an economic rationale used in international trade to justify trade protectionism. The idea behind this argument is that a new domestic industry is vulnerable to competition from established players in the