Economics
Factors Affecting Long-run Equilibrium Under Each Market Structure
A firm is said to be at equilibrium if the marginal cost (MC) is equal to marginal revenue (MR), and that is the profit-maximizing level of output. Perfectly Competitive Markets In the long run, if firms under perfectly competitive markets…
Use and Limitations of Concentration Measures in Identifying Market Structure
Concentration Ratio The concentration ratio is the sum of market shares covered by the largest N firms. It is determined by finding the sum of sales value for the largest firms and dividing it by the total market sales. Therefore,…
Gross Domestic Product Using Expenditure and Income Approaches
The aggregate output of an economy is the value of all the goods and services produced within a predetermined period of time. On the other hand, aggregate income refers to the economic value of all payments received by the suppliers…
Type of Market Structure Within Which a Firm Operates
Economists focus on the nature of competition and the pricing model in a particular market when describing a market structure. Since firms price their products based on the market structure, pricing, therefore, depends on competition. A market structure is often…
Compare Methods of Calculating GDP
There are two approaches that are used in the calculation of the Gross Domestic Product (GDP). The first one is the income approach. This method measures GDP as a summation of all income generated in the economy in a given…
Comparison Among GDP, National Income, Personal Income, and Personal Disposable Income
GDP GDP stands for Gross Domestic Product. It refers to the market value of all goods and services produced within an economy in a given period of time. Equivalently, GDP also refers to the total income earned by each household,…
Explain the Fundamental Relationship Among Saving, Investment, Fiscal Balance, and Trade Balance
Saving and investing are often used interchangeably, but there is a difference between them. Saving is setting aside money for emergencies or a future purchase. On the other hand, investing is buying assets such as real estate, stocks, or bonds…
Fluctuations in Aggregate Demand and Supply
Economists believe that business cycles and fluctuations in GDP levels result from a shift in the aggregate demand or supply curve. The Business Cycle The business cycle (economic expansions and contractions) is mainly caused by changes in the short-run value…
How IS and LM Curves Combine to Generate the Aggregate Demand Curve
Also known as the Hicks-Hansen model, the IS-LM curve is a macroeconomic tool used to show how interest rates and real economic output relate. IS refers to Investment-Saving while LM refers to Liquidity preference-Money supply. These curves are used to…
Distinguish Long-run Full Employment, Recessionary Gap, Inflationary Gap and Stagflation
Long-run Full Employment Long-run full employment equilibrium occurs when the aggregate demand (AD) curve cuts the short-run aggregate supply curve (SRAS) at a point on the long-run aggregate supply curve (LRSS): Since the intersection occurs at a point on the…
