Category: Microeconomics

In an economic context, a monopoly is a firm that has market power. That means, unlike firms in a competitive market, a monopolist has the ability to influence the market price of the good or service it sells. By definition, a firm is considered a monopoly if it is the […]

In economics, the market equilibrium is defined as a state in a market where there is no pressure for change. That is, there is no pressure for price to move up or down. The primary forces behind this are supply and demand. As long as demand is greater than supply […]

The law of demand is one of the most fundamental economic concepts. It states that the quantity demanded of a good decreases as its price increases (and vice versa). While this holds true for most goods and services, there are some exceptions to the rule. Therefore, we can distinguish at […]

The tragedy of the commons is a famous economic story that illustrates why common resources tend to get overused from the perspective of society. The narrative is based on the assumption that every individual tries to get the highest possible benefit from a given resource. In the case of common […]

An oligopoly is a market structure where only a few sellers serve the entire market. Because of their strong position in the market, these firms have the power to influence the price. That means, unlike in a market with perfect competition, they are no longer price takers, but price makers. […]

In an economic context, demand is defined as the quantity of a specific good or service that consumers are willing and able to buy over a given period of time. As you can tell, this definition looks at all consumers combined (i.e. aggregated data). However, individual consumers may have different […]

Producer Surplus describes the difference between the amount of money at which sellers are willing and able to sell a good or service (i.e. willingness to sell) and the amount they actually end up receiving (i.e. the market price). Every seller has an individual willingness to sell. That means, if […]

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 […]

Indifference curves are graphs that represent various combinations of two commodities which an individual considers equally valuable. The axes of those graphs represent one commodity each (e.g. good A and good B). Indifference curves are widely used in microeconomics to analyze consumer preferences, the effects of subsidies and taxes, and a few other concepts. […]