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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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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The Four Types of Economic Systems

As you probably know, there are countless economies across the world. All of them are unique in their own way, but they still share a significant number of characteristics. Thus, we can categorize them into four types of economic systems; traditional economies, command economies, market economies and mixed economies. All of them rely on […]

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Positive and Normative Economics

There are two fundamentally different approaches to teaching economics: positive and normative economics. This is important to know, depending on the approach chosen, the same topic may be presented in an entirely different way. Thus, being aware of this will help you gain a more comprehensive knowledge on economic issues. In […]

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The Different Types of Goods

In economics, goods can be categorized in many different ways. One of the most common distinctions is based on two characteristics: excludability and rivalrousness. That means, we categorize goods depending on whether people can be prevented from consuming them (excludability) and whether they can be consumed by individuals without affecting their availability to other […]

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Difference between Goods and Services

In economics we often talk about goods and services. They are the most basic products of an economy. Goods are defined as tangible consumable items (e.g. ice cream) while services describe tasks that are performed by individuals for the benefit of others (e.g. teaching). Seems pretty easy, right? Well, if we just look at examples such as […]

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The Basic Circular Flow of Income

The Basic Circular Flow of Income Model is one of the most fundamental models in economics. It is also often referred to as the Two Sector Model, because it analyzes the relationship between two economic sectors; households and firms. More specifically, the model illustrates basic exchange processes between the two sectors, namely the flow […]

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The Four Different Types of Money

Money can be described as a generally accepted medium of exchange for goods and services. Virtually anything can be considered money, as long as it performs the three major functions of money (i.e. medium of exchange, store of value, unit of account). With this in mind, it is not surprising that there were […]

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