Archives: Terms

Definition of Efficient Envy-Free Division Efficient envy-free division is a concept in economics and game theory that refers to a way of dividing resources or goods among individuals or groups such that two important criteria are met: efficiency and envy-freeness. Efficiency, in this context, means that the resources are allocated […]

Definition of Efficiency Wage Efficiency wage theory suggests that employers can boost productivity and potentially overall firm performance by paying their employees wages that are above the market equilibrium. The underlying assumption is that higher wages increase worker morale, reduce turnover, attract more capable employees, and incentivize greater effort. These […]

Definition of Efficiency Dividend An efficiency dividend is a reduction in the amount of funding or resources allocated to an organization or department, intended to drive efficiency improvements and cost savings. The expectation is that the entity will maintain or even improve its level of output or service quality with […]

Definition of Effective Demand Effective demand refers to the total demand for goods and services in an economy at a given overall price level and in a given time period. It contrasts with notional demand, which represents the amount of goods and services that consumers would like to purchase at […]

The Edgeworth Paradox refers to a particular phenomenon in economics that emerges from the Edgeworth Box framework, a classic diagram used in microeconomics to show how trade can lead to an efficient allocation of resources between two parties. This paradox highlights certain limitations and unexpected outcomes when attempting to reach […]

Definition of Edgeworth Box The Edgeworth Box, developed by Francis Ysidro Edgeworth, is a tool used in microeconomic theory to illustrate the potential outcomes of trade between two individuals or parties, given their preferences, endowments, and consumption of two goods. It is a square box that represents all the possible […]

Definition of Economies of Agglomeration Economies of agglomeration refer to the benefits that firms obtain by locating near each other. This concept stems from the theory of agglomeration economies, which suggests that businesses physically close to one another can gain efficiencies and increase their productivity due to various factors including […]

Definition of Economic System An economic system refers to the structured way in which a country or a society organizes its economic activities, including the production, distribution, and consumption of goods and services. It encompasses the institutions, policies, and procedures that a society employs to make economic decisions and allocate […]

Definition of Economic Surplus Economic surplus, also known as total welfare or the sum of consumer and producer surplus, is an important concept in economics that represents the total benefits that traders (consumers and producers) receive from participating in a market. It is defined by the difference between what consumers […]

Definition of Economic Shortage An economic shortage is a situation where the demand for a product or service exceeds the supply available at the market price. Unlike a simple out-of-stock situation, which can be temporary and localized, economic shortages often imply broader systemic issues that prevent the market from reaching […]