Archives: Terms

Definition of Prime Cost Prime cost refers to the direct costs involved in manufacturing a product or providing a service. It includes the cost of raw materials, direct labor, and any other expenses directly associated with the production process. Prime cost is important for businesses to calculate because it helps […]

Definition of Price-Taker In economics, a price-taker is an individual or a company that has no control over the market price of a product or service. Instead, they must accept the prevailing market price as determined by the forces of supply and demand. Price-taking behavior typically occurs in perfectly competitive […]

Definition of Price Stickiness Price stickiness, also known as sticky prices, refers to a situation in which prices do not adjust immediately to changes in supply and demand. Instead, prices remain fixed or change only gradually over time, even when there are changes in the underlying economic conditions. Example Let’s […]

Definition of Price Sensitivity Price sensitivity, also known as price elasticity of demand, refers to the degree to which the demand for a product or service changes in response to a change in its price. In other words, it measures how sensitive consumers are to price changes. Example Let’s consider […]

Definition of Price Leadership Price leadership is a situation in the market where one firm, typically the dominant firm, sets the price for a certain product or service, and other firms in the industry follow suit. This practice occurs in industries where firms have a high degree of interdependence and […]

Definition of Price Fixing Price fixing refers to an agreement between competitors to set the price of a particular product or service, usually to maintain higher prices and reduce competition. This collusive practice is illegal in most countries because it is considered anti-competitive and harms consumers by limiting choices and […]

Definition of Price Elasticity of Demand Price elasticity of demand is a measure that quantifies the responsiveness of the quantity demanded of a good or service to a change in its price. It helps to determine how sensitive consumer demand is to changes in price. Price elasticity of demand can […]

Definition of Price Controls Price controls refer to government policies that dictate the prices of goods and services, often by setting a maximum price (price ceiling) or minimum price (price floor). These controls are implemented to regulate the market and protect consumers or producers from economic fluctuations or perceived unfairness. […]

Definition of Poverty Trap A poverty trap refers to a situation where individuals or households remain stuck in poverty due to a combination of economic and social factors that perpetuate their low income and inability to escape poverty. It is characterized by a cycle of limited opportunities, inadequate resources, and […]

Definition of Positive Economics Positive economics is a branch of economics that focuses on objective analysis and the study of economic phenomena as they are, without making value judgments or prescribing how things ought to be. It is concerned with scientific, fact-based analysis and seeks to provide explanations of economic […]