Introduction Oligopoly is one of the most common forms of market structure found in the real world. It lies between monopoly and perfect competition. In an oligopolistic market, a few large firms dominate the industry, and each firm’s decisions affect the others. This leads to interdependence in pricing and output decisions. In this answer, we […]
Elucidate the features existing under Oligopolistic market structure Read More »
Introduction Efficiency is a central concept in economics that relates to how well resources are used to produce goods and services. It helps determine whether an economy is making the best possible use of its resources to satisfy human wants. Efficient allocation of resources means that no one can be made better off without making
Introduction Markets are generally efficient in allocating resources through the forces of supply and demand. However, in some cases, markets fail to deliver socially desirable outcomes. These failures occur due to reasons like externalities, monopoly power, public goods, or information asymmetry. In such situations, government intervention becomes necessary. This answer explains the key policy instruments
Introduction In consumer theory, the Income Consumption Curve (ICC) is an important tool that shows how a consumer’s demand for goods changes as their income changes, keeping prices constant. It helps us understand the relationship between income and consumption patterns. For different types of goods—normal or inferior—the ICC behaves differently. In this answer, we’ll define
Introduction Excess capacity is a concept in microeconomics that is often discussed in the context of monopolistic competition. It refers to a situation where a firm produces less than the level of output that minimizes its average total cost. In simpler words, the firm is not using its full productive capacity, meaning that it could
What do you understand by the term “Excess Capacity”? Read More »
Introduction Externalities are an important concept in microeconomics that explain how the actions of individuals or firms can affect third parties who are not directly involved in the activity. These effects can be either positive or negative. When the impact is harmful, it is called a negative externality. Negative externalities lead to market failure because
Introduction Wages are the monetary rewards given to labour for their services. However, not all workers earn the same wages. There are significant variations in wage-rates across different professions such as engineers, doctors, teachers, or factory workers. These wage differences exist due to several economic and non-economic factors. In this answer, we will explain why
Introduction In economics, the term “derived demand” is often used when talking about factors of production such as labour, land, capital, and entrepreneurship. These inputs are not demanded for their own sake, but because they help produce goods and services that people want. Understanding the concept of derived demand helps explain why changes in consumer
The demand for factors is called derived demand. Explain. Read More »
Introduction Economic rent is a key concept in the theory of factor pricing. It refers to the payment made to a factor of production over and above what is required to keep it in its current use. In simple words, it is the extra income earned by a factor due to its unique advantage or
What is economic rent? Discuss the Ricardian theory of economic rent. Read More »
Introduction Oligopoly is a market structure in which a few large firms dominate the market. One of the key characteristics of oligopoly is price rigidity — prices tend to remain stable even when costs or demand change. Economist Paul Sweezy attempted to explain this phenomenon using the Kinked Demand Curve Model. This model is based
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