What is Supply? Supply is a term in economics that refers to the number of units of goods or services a supplier is willing and able to bring to the market for a specific price. The willingness and ability to bring products to market are influenced by stock availability and the determinants driving supply. Changes…
What is Utility Maximization? Utility maximization is a strategic scheme whereby individuals and companies seek to achieve the highest level of satisfaction from their economic decisions. For example, when a company’s resources are limited, management will implement a plan of purchasing goods or services that provides the maximum benefit. The concept of utility maximization was…
What is Taxation? Taxation refers to the fees and financial obligations imposed by a government on its residents. Income taxes are paid in almost all countries around the world. However, taxation applies to all payments of mandatory levies, including on income, corporate, property, capital gains, sales, and inheritance. Taxation is involuntary; hence it does not…
What are Consumer Surplus and Producer Surplus? Both consumer surplus and producer surplus are economic terms used to define market wellness by studying the relationship between the consumers and suppliers. They explain the opportunity cost consumers forego to gain a marginal benefit for buying a good or service. To the producer, it is the willingness…
What is Market Structure? Market structure, in economics, refers to how different industries are classified and differentiated based on their degree and nature of competition for goods and services. It is based on the characteristics that influence the behavior and outcomes of companies working in a specific market. Some of the factors that determine a…
What is a Private Good? A private good is an item that is purchased for the benefit or utility of the buyer. When a person consumes the private good, he/she restricts another party from using it. Generally, a good is expressed as private if there is a rivalry between individuals trying to acquire it and…
What is Cross-Price Elasticity? Cross-price elasticity measures how sensitive the demand of a product is over a shift of a corresponding product price. Often, in the market, some goods can relate to one another. This may mean a product’s price increase or decrease can positively or negatively affect the other product’s demand. Understanding Cross-Price Elasticity…
What is Dominant Strategy? The dominant strategy in game theory refers to a situation where one player has superior tactics regardless of how their opponent may play. Holding all factors constant, that player enjoys an upper hand in the game over the opposition. It means, regardless of the strategies employed by the opponent, the dominant…
What is an Inefficient Market? An indicator of an inefficient market is when a specific security price at any particular time does not reflect its true value. This market functions differently from the efficient markets hypothesis. For example, when new information from a recent event occurs, an efficient market would quickly disperse this information to…
What is Collusion? Collusion is primarily an illegal secretive agreement or cooperation between two parties intending to disrupt market stability. Generally, individuals or companies who normally compete against each other decide to work together and influence the market to achieve competitive market advantage. An example is when colluding businesses conspire to control the supply of…
