Category: Videos

Taxes are one of the most controversial topics in economics. While most people agree that they are necessary, there is a lot of disagreement over how the tax burden should be distributed across the population. Nowadays, most taxes are designed according to what we call the ability-to-pay principle. This principle […]

For many people, money is equal to bills and coins. However, even though this is not wrong, it is only one part of the equation. Generally speaking, money is a set of assets that are commonly used and accepted as payment for goods and services in an economy. This suggests […]

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 […]

Money supply (i.e., money stock) is defined as the total quantity of money circulating in the economy at a particular time. Many countries commonly use it as an indicator of economic performance. However, in our financial system, money is not limited to cash anymore. There are several other physical and intangible […]

Gross Domestic Product (i.e., GDP) is one of the most common measures of economic output and strength. Virtually all countries around the world measure and report their GDP regularly. This allows us to compare their economic power. Fortunately, the World Bank provides a comprehensive database of economic indicators, including current and […]

Marginal propensity to consume (MPC) is defined as the share of additional income that a consumer spends on consumption. That means it describes the percentage of additional income they spend on buying goods and services, instead of saving. Hence, the marginal propensity to consume can be calculated as the change […]

Marginal cost is defined as the cost added by producing one more unit of a good or service. It is sometimes also referred to as the cost of the last unit. The concept of marginal cost is an essential part of economic theory because it is the counterpart to marginal […]

Average total cost (i.e. ATC) is defined as the sum of all production costs divided by the quantity of output produced. That is, it measures how much a firm has to spend on each unit of output it produces. This concept is extremely important to understand how firms set prices and […]

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 […]