What's it: Duopoly is a market structure in which only two sellers (producers). This is the basic form of oligopoly competition. The two players serve multiple buyers and sell competing goods and services.In this market, players have a high
Microeconomics
Market Power: Determining Factors, Effects, How to Measure
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
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
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
Herfindahl-Hirschman Index: Concept, How to Calculate, Pros and Cons
What's it: Herfindahl-Hirschman Index (HHI) is a measure of market concentration. You compute it by summing the squares of each firm's market share in the industry. This is an alternative to the n-firm concentration ratio.This index is important
Fixed Cost: Meaning, Examples and Why It Matters
What's it: Fixed costs are types of costs whose value is unaffected by changes in the amount of output. When a firm increases output or decreases output, it does not change.For example, the factory machine's rental cost is $15,000,000 for 1 year.
Marginal Product: Meaning, How To Calculate It
What's it: Marginal product refers to the additional output produced when a firm uses one additional input unit, assuming the other inputs are constant. Another term for the marginal product is a marginal return or marginal productivity.How to
Economic Profit: Meaning, Formula, and Key Factors
What's it: Economic profit is the difference between revenue and total costs (implicit costs plus explicit costs). This is another measure of profit besides accounting profit. Implicit costs represent opportunity costs when a firm chooses to use a
Nash Equilibrium: Meaning, Concept and Examples
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
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
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: 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
Market Failure: Types, Effects, and Solutions
What's it: Market failure refers to a condition in which the market mechanism doesn't work, thus creating inefficiency in the market. Demand, supply, and price aren't in equilibrium. As a result, markets fail to allocate economic resources most
Externalities: Meaning, Types, and Solutions
What's it: Externalities are costs or benefits of economic activities borne by third parties who are not involved in it. They are not reflected in the final cost or benefit of the goods or services produced.Economists view externalities as
Cartel: Goals, Examples, Characteristics, Effects, and Reasons for Failure
What's it: A cartel is a formal agreement between several parties to increase economic benefits. It can appear on both the market demand and supply sides, although the latter is more common.Cartel objectivesA cartel is a form of
Cournot Model: Concept, Assumption, Solution, and Criticism
What's it: A Cournot model is one of the economic models to explain the oligopoly market. This model assumes that the firm independently decides the profit-maximizing level of production. I mean, they don't depend on how many competitors are
Economies of Scope: Meaning, Formula, and How to Calculate
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
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
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