Economics
Price, Marginal Revenue, Marginal Cost, Economic Profit, and the Elasticity of Demand
Marginal revenue (MR) and marginal cost (MC) affect how a company makes its production decisions. Marginal cost (MC) refers to the increase in cost that is occasioned by the production of an extra unit. It is the additional cost of…
Economies and Diseconomies of Scale
Economies of Scale Economies of scale refer to the cost advantage brought about by an increase in the output of a product. Economies of scale arise due to the inverse relationship between the per-unit fixed cost and the quantity produced…
Describe the Business Cycle and Its Phases
A business or economic cycle is defined as the persistent fluctuation in the gross domestic product of a given economy within a specified period. A business cycle can be described by periods of expansion and recessions. During a recession, the…
Types and Measures of Unemployment
Unemployment happens when individuals who are capable and willing to work at the current wage rates cannot acquire jobs. Similarly, when there are few available jobs in an economy, and yet the labor force of that economy is growing, then…
Compare Inflation Measures, Including Their Uses and Limitations
[vsw id=”IP3HiHY1YA0″ source=”youtube” width=”611″ height=”344″ autoplay=”no”] There are two major measures of inflation: the consumer price index and the producer price index. Consumer Price Index (CPI) The consumer price index is an inflationary measure that considers using a consumption basket…
Economic Indicators, Their Uses and Limitations
Economic indicators are variables that give information about the condition of the economy. Generally, economic indicators are grouped according to whether they are leading (forward-looking), lagging (backward-looking), or coincident (simultaneous with the economy). Leading Indicators Leading indicators include share prices,…
Effects of Combined Changes in Aggregate Supply and Demand on the Economy
[vsw id=”cRMasYNNsVA” source=”youtube” width=”611″ height=”344″ autoplay=”no”] Aggregate Demand Aggregate demand is the total demand for goods and services in an economy. It is defined as the sum of the amount spent on real goods and services by all economic agents….
Production Function Approach to Analyzing the Sources of Economic Growth
The production function (or Solow growth model) is used to determine the economy’s underlying source of growth. It attributes the growth of the gross domestic product (GDP) and productive capacity to: the application and discovery of new technologies that…
Tools of Fiscal Policy
The government possesses two major fiscal tools for influencing the economy. These tools can be divided into spending tools and revenue tools. Spending tools refer to the overall government spending. On the other hand, revenue tools refer to taxes collected…
Implementation of Fiscal Policy
Fiscal policy refers to all the methods used by a government to influence the economy through tax rates and government expenditures. For example, a government may decide to reduce taxes. These moves should, in theory, stimulate the economy and thereby,…
