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 […]
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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 […]
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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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The unemployment rate describes the proportion of a country’s labor force that is without a job even though it’s willing and able to work. It is one of the broadest and most commonly used indicators of the strength and health of an economy (see also most relevant economic indicators). In […]
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In microeconomics, 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 individuals can consume them without affecting their availability […]
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The four factors of production are one of the foundations of economic activity. They describe all the inputs or resources that are used in the production of goods and services. The classical factors of production include land, labor, and capital. In recent years, however, a fourth factor has been added […]
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