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Microeconomics

Consumer Surplus and Producer Surplus

In Economics, consumers are assumed to be trying to maximize their utility, i.e., the satisfaction they gain from consuming a product. They choose a certain quantity of goods that would maximize their utility with their limited income. Consumer Surplus and Producer Surplus represent different areas on demand and supply curve respectively.…
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The Lipstick Effect

The lipstick effect is the theory that when facing an economic crisis or the economy is in a recession, consumers will be more willing to buy less costly luxury goods. For example, instead of buying expensive fur coats, women will instead purchase expensive lipstick or luxury cologne.Psychology Behind The Lipstick Effect The underlying…
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Price Discrimination

In Economics, Price Discrimination occurs when a firm sells a good or service to different buyers at two or more different prices, for reasons not necessarily associated with cost. Price discrimination results in greater revenue for the firm. For example, Hotel rooms, airline tickets and professional services all offer different prices for…
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Price Elasticity of Supply

In Economics, Price Elasticity of Supply is the responsiveness of quantity supplied when the price of the good changes. It is the ratio of the percentage change in quantity supplied to the percentage change in price. Price Elasticity of Supply is always positive because the Law of Supply says that quantity supplied increases with an increase in…
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Cornucopia

The term cornucopia has its roots in Greek mythology. It translates to the"horn of plenty", which magically supplied its owners with endless food and drink. Thus the cornucopians are sometimes known as "boomsters", and their philosophic opponents—Malthus and his school—are called "doomsters" or "doomers."Theory of Cornucopia in Economics…
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Price Control – Price Ceiling

A Price Control occurs when the government feels the current equilibrium price is unfair and intervenes and adjusts the market price. A maximum price or price ceiling is basically when the government believes the price is too high and sets a maximum price that producers can charge; this lies below the equilibrium price.Price ceilings often…
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