An attempt to make economics easy to understand
Basic Concepts of Economics
Socialism Definition Socialism is a system that is based on public or collective ownership of means of production and distribution of goods. Ownership of such means might lie in the hands on a government, elected through democratic means or with a cooperative body. As a result, there is no private ownership. Socialists believe that shared … Read more
Public Goods Definition Public goods, as the name suggests are available to the entire public, within a society. These goods might be available in nature like sunlight or might be provided by the government through collective taxation like defense services. For a commodity to be classified as public good, it must have two characteristics: Non-Excludability … Read more
Cartel Definition Cartel is a collusion between different producers. These producers could be individual firms or even countries. The producers enter into a cartel in order to control the price and quantity supplied of their product. This helps them get higher profits for their products and to cut competition. In consultation with each other, members of … Read more
Perfect Competition Meaning It is a market structure in which there are numerous sellers, selling a product that is largely the same. Having said this, it is important to note that perfect competition is a market construct or a theoretical concept, the existence of which in real life rarely exists. But this helps in understanding … Read more
Deflation Meaning Deflation, in simple terms, is a general decline in prices of good and services. Since you are able to buy more from your 100 dollar bill than before, purchasing power of your money goes up. Deflation, is the mirror image of inflation and is measured the same way inflation is, typically using the … Read more
Hyperinflation Meaning Hyperinflation is a rapid and uncontrollable rise in prices of goods and services. Hyperinflation, is different from Inflation, in terms of magnitude and the speed with which prices rise. An economy is said to be facing hyperinflation when the monthly inflation rate exceeds 50% for a sustained period of time. At this rate, … Read more
What are Economies of Scale? In simple terms, economies of scale implies that per unit production cost decreases as the scale of production increases. Why does this happen? This is because, production of a good or service has both fixed and variable costs. Fixed cost, as the name suggests, are constant. As the production level … Read more
Monopoly Definition Monopoly, in economics, implies presence of a single supplier or producer of a product. ‘Mono’ means single and ‘Poly’ means supplier. Thus, monopoly, is a market structure characterized by a single supplier of a commodity which doesn’t have close substitutes. Since there is a single producer and there is lack of competition, the … Read more
Oligopoly Meaning Oligopoly is a market space where only few sellers or producers exist. Oligopoly mostly happens in those markets where goods are broadly the same and provide similar benefit to consumers. Since products offered by these producers are broadly the same, if one firm raises price, they would risk losing market share to the … Read more
Opportunity Cost Meaning Opportunity cost is the benefit foregone or loss of value that is incurred when one alternative is chosen over the other. Mathematically, opportunity cost is the difference between the expected return from option foregone and the expected return from the option chosen. Looking at opportunity costs, might help you make better investment … Read more