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Microeconomics

Natural Monopolies

Most of us are well-acquainted with the idea of a monopoly: when there is only one firm prevailing in a particular industry. However, from a regulatory view, monopoly power exists when a single firm controls 25% or more of a specific market. For example, De Beers is known to have a monopoly in the diamond industry. Natural monopolies are a specific…
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Subsidies

Subsidies defined as a form of support given to producers of a product that help reduce the cost of production, which increases production and consumption of that product. Goods that governments want to increase the use of are subsidized; such as education or healthcare. Government subsidies are usually given in the form of grants or loans.The…
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Price Elasticity of Demand (PED)

Price Elasticity of Demand (PED) is defined as the responsiveness of quantity demanded to a change in price. The demand for a product can be elastic or inelastic, depending on the rate of change in the demand with respect to the change in the price.What does Price Elasticity mean? Demand is said to be elastic demand has a higher…
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Supply and Demand

The result of the interaction between consumers and producers in a competitive market determines Supply and Demand equilibrium, price and quantity. Market forces tend to drop the price if the quantity supplied exceeds quantity demanded and prices rise if quantity demanded exceeds quantity supplied. This movement continues until there are no more…
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Demand

Demand is defined as the amount of good or service a consumer is willing and able to buy per period of time. It is essential to understand the term "willing and able." Many people want to buy products that they cannot afford at prices they cannot pay. However, because they are not able to purchase the product, we cannot include them in the…
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Returns to Scale

Returns to scale describes the rate of increase in production relative to the associated increase in the factors of production in the long run. At this point, all factors of production are variable (not fixed) and can scale. Therefore, the scale of production can be changed by changing the quantity of all factors of production.The difference…
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