Tag: Principles of Economics
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Principles of Economics: Imperfect Competition
Monopoly Barriers to entry are the fundamental cause for the rise of monopoly. Barriers appear in three forms: ownership of key resources, exclusive production rights and an efficient (return-to-)scale. A firm’s ability to influence the market price is called market power. It entails that a firm can raise the price above some competitive level in…
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Principles of Economics: Public and Common Goods
To define Public Goods we need two concepts: Excludable goods and Rival goods. Excludable goods can be prevented from use (food) in contrast to non-excludable goods that can always be consumed (radio or air). Rival goods cannot be consumed without diminishing others’ use of it (food) in contrast to non-rival goods (mp3-files). Based on the…
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Principles of Economics: Externalities
Externality An uncompensated impact of one person’s action on the well-being of a bystander. It is a type of market failure as it reduces the efficiency of the market. In general, it is caused by self-interested buyers and sellers neglecting the external costs or benefits of their actions. However, public policy can reduce externalities and…
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Principles of Economics: Efficient Competitive Markets
The goal of the lesson is to understand how markets work. We need a benchmark to analyse a market and it will be perfect competition. It is an idealised world where nobody has sufficient market power to influence the market and therefore good prices are exogenous. Also producers are altruistic inasmuch they do not consider…
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Principles of Economics: Introduction
The course’s objective is to introduce the study of economics, and the economic way of thinking about societal problems. It should provide basic understanding of a market economy and the potentials and limitations of economic policies. Economics is the study of how society manages scares resources to use them in the most efficient way. The…