“The law is the survival of the fittest…. The law is not the survival of the ‘better’ or the ‘stronger,’ if we give to those words any thing like their ordinary meanings. It is the survival of those which are constitutionally fittest to thrive under the conditions in which they are placed; and very often that which, humanly speaking, is inferiority, causes the survival.” • Herbert Spencer At any given time, there may be firms of varying sizes and efficiency in an industry, possibly some making profits and others incurring losses. As long as industry is open for anyone to enter freely, an excess of price over the attainable average total costs will encourage the entry of new firms. As such new firms move in, they compete with existing firms and the most inefficient firms are eliminated. In the long-run, therefore, only those firms will remain in the industry, which Continue reading
Economics Principles
Oligopolistic Market – Meaning, Definition, Classification and Characteristics
An oligopoly is defined as a market structure wherein industries are dominated or handled by “few” firms. Oligopolistic market structure dominates the market structures available, accounting half of the total outputs in the world. Industries which adapt to these vary from manufacturers of automobiles to breakfast cereal or even television broadcasting to airlines. In the words of Robert Y. Awh, “Oligopoly is that market structure in which a few sellers who clearly recognize their mutual interdependence produce the bulk of the market output”. Oligopoly differs from other market categories in that, under monopoly we have only one seller, under perfect competition we have many sellers, under monopolistic competition we has a sufficiently large group of small monopolists whereas under oligopoly we have a few sellers constituting a small group. In an Oligopolistic market the firms may be producing either homogeneous or differentiated products. Besides, the element of Continue reading
Introduction to Managerial Economics
Managerial economics is a discipline which deals with the application of economic theory to business management. It deals with the use of economic concepts and principles of business decision making. Formerly it was known as “Business Economics” but the term has now been discarded in favor of Managerial Economics. Managerial Economics may be defined as the study of economic theories, logic and methodology which are generally applied to seek solution to the practical problems of business. Managerial Economics is thus constituted of that part of economic knowledge or economic theories which is used as a tool of analyzing business problems for rational business decisions. Managerial Economics is often called as Business Economics or Economic for Firms. Definition of Managerial Economics: “Managerial Economics is economics applied in decision making. It is a special branch of economics bridging the gap between abstract theory and managerial practice.” — Haynes, Mote and Paul. “Business Continue reading
Fiscal Policy – Definition, Objectives and Techniques
The term fiscal has been derived from the greek word fisc, meaning a basket to symbolize the public purse. Fiscal policy thus means the policy related to the treasury of the government. Fiscal policy is a part of general economic policy of the government which is primarily concerned with the budget receipts and expenditures of the government. All welfare projects are completed under this policy .It also suggests measures to control economic fluctuations which may become violent and create great upheavals in the socio-economic structure of the economy. It also outlines the influence of resource utilization on the level of aggregate demand through affecting the level of aggregate consumption and investment expenditure. Definitions of Fiscal Policy According to U. Hicks “Fiscal policy is concerned with the manner in which all the different elements of public finance, while still primarily concerned with carrying out their own duties, may collectively be geared Continue reading
Price Discrimination in Managerial Economics
In today’s economies where product and service competition is dense, to sell products and services to consumers in the way as expected by the company has become harder but at the same time necessary compared to the past. It has become unavoidable for the firms to use various pricing strategies alongside with the classical selling strategies to reach this goal. In today’s economic conditions in which the markets being far from full competitive state resulted the firms functioning in this market to become more or less a price-maker. For this reason, one of the ways for the firms that aim to increase the total income thus the total profit can use is, to implement different pricing for consumers with different specialties instead of applying the same pricing for all the consumer groups. Because the consumers having different income levels, taste and choice cause them to have a desire to pay Continue reading
Correction of Balance of Payments (BoP) Deficit
Balance of Payments Adjustments The short-term and small deficits in balance of payments are quite likely to emerge in wide range of international transactions. These deficits do not call for immediate corrective actions. More importantly, irregular short-term changes in the domestic economic policies with a view to remove the short-term deficits in balance of payments may do more harms than good to the economy. Since these changes cause dislocations in the process of reallocation of resources and short-term fluctuations in the economy. Therefore, short-term deficits of smaller magnitude are not a serious concern to the policy makers. A constant deficit indicates that the country’s imports dominates exports or depreciation of its foreign exchange and gold reserves. These countries lose their international liquidity and credibility. This situation often leads to compromise with economic and political independence of these countries. India faced a similar situation in July 1990. Therefore, a country facing Continue reading