Category Archives: MICRO ECONOMICS

Economic Efficiency: Definition, Why It Matters, Prerequisites

What it is: The economic efficiency (economic efficiency) is a state where resources are allocated for the use of the highest value in the economy. This involves making the best possible use of resources and avoiding wastage. Under these conditions, no subsequent allocation of resources can further improve anyone’s well-being without making others worse off. It assumes the economy produces… Read More »

Arc Elasticity: How to Calculate, Difference with Point Elasticity

What it is: Elasticity arc (arc elasticity) is a measure of elasticity based on the midpoint of the two points. If you measure the price elasticity of a product, it is the percentage change in quantity demanded divided by the percentage change in price between two points. The arc elasticity produces the same elasticity value whether the price moves… Read More »

Disposable Income: How to Calculate, Impact, Determinants

What it is: Disposable income is the money you have left after paying taxes. You can use it to save or buy goods and services. Disposable income is important to describe household purchasing power. When it increases, we expect them to increase spending. Increased spending stimulates businesses to increase production and recruit workers. As a result, the economy is growing, the unemployment… Read More »

Overcapacity: How to Measure, Impact, Influencing Factors

What it is: The capacity excess or excess capacity (e Xcess capacity) is a situation where the production capacity is not fully utilized to achieve the minimum efficient scale. In other words, the firm is producing at a lower scale of output than it was designed for. Not only companies, this term can also be associated with industry and the… Read More »

Abnormal Profit: Concept and How to Calculate

What it is: Abnormal profit, or abnormal profit (abnormal profit) occurs when a company earns a higher profit than normal profit. It occurs when total revenue exceeds total economic costs (implicit costs plus explicit costs). Also known as supernormal profit or economic profit. When firms in the market post abnormal profits, it attracts new entrants to enter the market. They increase… Read More »

What is the Difference Between Private Sector and Public Sector

Ownership and motives for providing goods and services are the main differences between the private sector and the public sector. Both play a vital role under mixed economies, the economic systems most countries adopt today. What is a mixed economic system? What is the private sector vs. the public sector, and what is the difference between the… Read More »

What are the Five Exceptions to the Law of Demand?

While it applies to most things we encounter on a daily basis, there are exceptions to the law of demand. Two of them are Veblen items and Giffen items . They show a positive relationship between their price and the quantity demanded by consumers. In some cases, consumers do not only consider price in making purchasing decisions. They take other aspects into account. For… Read More »