The price elasticity of demand measures the responsiveness of quantity demanded to a change in price, with all other factors held constant. Definition The price elasticity of demand, Ed is defined as the magnitude of: proportionate change in quantity demanded ———————————————————————— proportionate change in price Since the quantity demanded decreases when the price increases, this ratio is [...]

The concentration of firms in an industry is of interest to economists, business strategists, and government agencies. Here, we discuss two commonly-used methods of measuring industry concentration: the Concentration Ratio and the Herfindahl-Hirschman Index. Concentration Ratio (CR) The concentration ratio is the percentage of market share owned by the largest m firms in an industry, where m is [...]

Game theory analyzes strategic interactions in which the outcome of one’s choices depends upon the choices of others. For a situation to be considered a game, there must be at least two rational players who take into account one another’s actions when formulating their own strategies. If one does not consider the actions of other [...]

Auctions are mechanisms for determining prices. Auctions often are classified as one of the following auction types:  First-price sealed-bid auction – winner pays his bid. In this case, one should bid below one’s value an amount that depends on how many other bidders there are. The more bidders, the closer to one’s value that one [...]

Economic growth is measured in terms of an increase in the size of a nation’s economy. A broad measure of an economy’s size is its output. The most widely-used measure of economic output is the Gross Domestic Product (abbreviated GDP). GDP generally is defined as the market value of the goods and services produced by [...]

The most commonly reported measure of the consumer price levels in the United States is the Consumer Price Index (CPI). Published by the U.S. Department of Labor ‘s Bureau of Labor Statistics, the CPI is a fixed-weight price index using a fixed basket of goods that are representative of what a typical consumer purchases each [...]

Economic growth is not a steady phenomenon; rather, it tends to exhibit a pattern as follows: an expansion of above-average growth a peak a contraction of below-average growth a trough or low-point The troughs then are followed by periods of expansion and the cycle generally repeats, though not in a regular manner. These fluctuations in [...]

The percentage of the labor force that is seeking a job but does not have one is known as the unemployment rate. The unemployment rate is defined as follows: Unemployed Workers     x   100%   Employed  +  Unemployed Workers Unemployed workers are those who are jobless, seeking a job, and ready to work if they find a [...]