Value-of-Final-Output and Sum-of-Value-Added Methods of Calculating GDP
There are two approaches 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 year. The…
Calculating GDP 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…
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…
Use and Limitation of Concentration Measures in Identifying Market Structure
Concentration Ratio The concentration ratio is the sum of market shares covered by the largest N firms in a market. It is determined by finding the sales value for the largest firms and dividing it by the total market sales….
Pricing Strategy Under Each Market Structure
Pricing strategy can be described as the range of methods that the firms use to price their products and services. Companies and firms always set prices in accordance with the market structure in which they operate.
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…
Optimal Price and Output Levels Under Different Market Structures
An optimal price can be defined as the price at which a seller can make the highest profit possible; that is, the seller’s price is maximized. The rule of marginal output postulates that profit is maximized by producing an output,…
Supply Function Under Different Market Structures
A supply function is a mathematical expression that represents the relationship between the units of quantity of a product or service demanded, its price, and other deterministic factors such as input costs, prices of substitutes, etc. The dependent variable is…
Price, Marginal Cost, Marginal Revenue, 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…
