Some of the earliest mentions of the tragedy of the commons date back as far as Aristotle. However, the British author William Forster Lloyd formally introduced the concept of "tragedy…
Public goods, unlike private commodities, possess unique attributes that underpin a fundamental economic challenge. These goods can be utilized by multiple individuals concurrently without diminishing in value. This fundamental quality…
The principal-agent problem sits at the nexus of several modern economic dilemmas. The scenario involves a principal, for example, a shareholder, who entrusts funds or resources to an agent, often…
Though it might seem trivial, information asymmetry plays a profound role in market dynamics, often causing significant issues. Asymmetric information manifests when one entity in an exchange holds a considerable…
Defined within the free market context, market failure denotes the ineffective allocation of goods and services. This imbalance transpires when the volume of services or goods supplied does not align…
The Cobb Douglas production function is named after American economists Charles Cobb and Paul Douglas. They introduced this production function in 1928 in a paper published in the American Economic…
The production of all goods and services is carried out using certain inputs. These inputs include the labour, capital and raw materials used in producing the given good or service.…
The subject matter of Economics is broadly divided into two sub-fields: microeconomics and macroeconomics. Every topic, theory or application in Economics can be broadly classified into these two branches. Although…
To illustrate simultaneous equilibrium, we will consider a 2*2*2 model with two products (X and Y), two consumers (A and B) and two factors of production (L and K). The production…
We already discussed the Production Possibility Curve associated with two outputs and the Economies of Scope. Here, we will analyze how a multi-product firm can achieve equilibrium. It can help…
The Production Possibility Curve is also referred to as the product transformation curve and production possibility frontier. Firms often produce more than one outputs that are closely related to each…
The expansion of output can be accompanied by increasing, constant or decreasing returns to scale. These can also correspond to Economies of scale. As discussed in production theory, returns to…
In the long run, firms have a lot more flexibility in the choice of inputs. In addition to labour, firms can choose to expand their capital by setting up new…
In the production theory, we discussed how inputs are used to generate output in the short run and the long run. We also analyzed the effects of changing technology on…
All factors of production are variable in the long run. Moreover, technology does not remain constant in the long run. Research, development and technical progress in production can have a…
