Readers Question: what are the pros and cons of price control? Summary Price controls can take the form of maximum and minimum prices. Price controls can also be used to limit price increases as a way to try and reduce the rate of inflation. Maximum prices can reduce the price of food to make it …
This occurs when a firm or consumer has no option but to accept the price set by the market. When a firm is a price taker – it means they have no ability to set a price that they would like to charge. A price taker will lack market power. Conditions for being a price …
Readers Question: Why is the cost of living in the UK so expensive? The cost of living depends on: The price of basic necessities – food, fuel, heating, transport, housing/rent, entertainment. The effective cost of living also depends on real wages. It is expensive to live in Nordic countries, but real wages tend to be …
This decision tree is a simple example of game theory for firms deciding whether to enter the market and how existing firms should respond. If firm A (new firm) does not enter the market it makes £0 profit and the incumbent firm, firm B makes £3 profit. However, if Firm A does enter the market, …
Definition of Concentration Ratios The percentage of market share taken up by the largest firms. It could be a 3 firm concentration ratio (market share of 3 biggest) or a 5 firm concentration ratio. Concentration ratios are used to determine the market structure and competitiveness of the market. For example, an oligopoly is defined when …
Definition A surplus occurs when the amount of a good or assets exceeds the quantity actively used. If a firm supplies one 1,000 Christmas Trees, but there is demand for only 400, then it will have a surplus of 600 unsold Christmas Trees. If the price was stuck at P2, the supply (Q3) would be …
Markets are places where buyers and sellers can meet to sell and purchase goods and services. Markets provide places for firms to sell their goods and gain revenue. Markets provide places for consumers to buy the goods and services that they need. Markets are mostly self-regulated, relying on the principles of supply and demand to …
Readers Question: This is hypothetical, but I wondered what would happen if we developed robots resembling humans who could perform any task a human could perform, but more effectively and essentially for free? More specifically, how would this development affect employment and real per capita GDP, and what would the pros and cons be? What …