How to Calculate Consumer Surplus (Title)

How to Calculate Consumer Surplus

Consumer Surplus is defined as the difference between the amount of money consumers are willing and able to pay for a good or service (i.e. willingness to pay) and the amount they actually end up paying (i.e. the market price). Every consumer has an individual willingness to pay for a […]

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Differences between GDP Deflator and Consumer Price Index (CPI)

Differences between the GDP Deflator and CPI

To measure changes in the overall price level in an economy, policy makers and economists monitor a number of different economic indicators. The two most important ones are the GDP deflator and the Consumer Price Index (CPI). Even though they usually show similar results, there are two important differences between […]

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How to Calculate the GDP Deflator

The GDP deflator is a measure of the price level of all domestically produced final goods and services in an economy. It is sometimes also referred to as the GDP Price Deflator or the Implicit Price Deflator. The GDP deflator reflects changes in the average price level within the economy. […]

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Nominal Interest Rate vs Real Interest Rate

Nominal Interest Rates vs. Real Interest Rates

Interest rates are a fundamental part of financial economics. They help us evaluate and compare different investments or loans over time. However, if we compare financial data over time, we have to consider the effects of inflation. This is why we distinguish between two different types of interest rates in […]

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The Three Economic Sectors

The Three Economic Sectors

According to the three-sector theory, all economic activity can be classified into one of three sectors: the primary sector, the secondary sector and the tertiary sector. As a rule of thumb, we say the more advanced an economy is, the more its focus shifts from the primary, through the secondary […]

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Three Types of Unemployment

The Three Types of Unemployment

Unemployment exists in every economy around the world. However, the percentage of workers who are unemployed and the reasons why they were laid off can be very different. Therefore, economists can use unemployment data as an economic indicator to assess the health of an economy. To do this, they differentiate […]

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Types of Costs of Production

Types of Costs of Production

To analyze and understand firm’s production decisions it is important to know the different types of costs they face during this process. There are a number of different types of costs of production that you should be aware of: fixed costs, variable costs, total costs, average costs, and marginal costs. […]

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Factors that Cause a Shift in the Supply Curve

Factors that Cause a Shift in the Supply Curve

The supply curve shows how much of a good or service sellers are willing to sell at any given price. However, it is not constant over time. Whenever a change in supply occurs, the supply curve shifts left or right (similar to shifts in the demand curve). An increase in […]

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Factors that Cause a Shift in the Demand Curve

Factors that Cause a Shift in the Demand Curve

The demand curve tells us how much of a good or service people are willing to buy at any given price (see Law of Supply and Demand). However, we know that demand is not constant over time. As a result, the demand curve constantly shifts left or right. Depending on […]

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How to Calculate the Money Multiplier

How to Calculate the Money Multiplier

In a fractional reserve banking system, most of the money supply is generated by commercial banks. This is possible because the banks only have to hold a fraction of all deposits as reserves. That means, they can use the rest to make loans and thereby create new money. The maximum […]

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