Business Economics Notes (MBA, BBA, B.Com, Management)

Entry in pure monopoly is blocked. There are strong barriers that effectively block strong competition. Somewhat weaker barrier permit oligopoly-A market structure dominate by few firms. Still weaker barrier may permit the entry of fairly large numbers of competitors giving rise to monopolistic competition. No barrier me... read more

Monopolistic Competition Monopolistic competition is characterized by the presence of relatively large number of sellers selling. Differentiated products promoted by heavy advertising and easy entry and exit from industry. The first and third characteristic provides the competitor aspect while the second characterist... read more

Monopoly is a market structure in which there is only one firm. Its characteristics are: Monopoly is a market structure dominated by single seller. In pure or absolute form of monopoly a single seller is the sole producer of good or service. A firm or the industry is the same thing. No close sub... read more

Factors of U-shaped Long Run Average Total Cost Economies of scale or economies of mass path explain the down sloping part of the long run Average total cost. As plant size increases a host of factors contribute to decline average total cost. The main factors that result in the U-shape of long run average total c... read more

Law of Diminishing Returns Given that technology is fixed and techniques of production don’t change; “If successive units of variable resource for example labor are added to fixed resource for example capital beyond some point marginal product associated with each extra unit of variable resource will ... read more

U-shaped Long Run Average Total Cost Long-run average cost curve displays the organization’s lowest cost per unit at each level of output, if all factors of production are variable. The Long-run average cost curve assumes that the organization has chosen the optimal factor mix, for producing any level of output... read more

Cross Elasticity of Demand Cross elasticity of demand is an economic concept that measures the responsiveness in the quantity demanded of one good when the price for another good changes. Also called cross price elasticity of demand, this measurement is calculated by taking the percentage change in the quantity deman... read more

Cost of Production Resources that are used for production of goods and services are productive, scarce and have alternative use. The opportunity cost of a good is the amount of another product given up to produce it. Economic Costs are resources payments made to attract resources away from alternative uses i.... read more

Price Controls Some government intervenes in the market when it is observed that prices are either too low or too high for either customers or producers. These prices established by government are called Price controls. There are two types of price controls. Price Ceilings Price Floors Types o... read more

Determinants of Price Elasticity of Demand Price elasticity of demand (PED or Ed) is a measure used in economics to show the responsiveness, or elasticity, of the quantity demanded of a good or service to a change in its price when nothing but the price changes. More precisely, it gives the percentage change in ... read more

Price Elasticity of Demand Law of demand tells us that people buy more of the product as its price fall and lesser amount of a product if its prices raises but how much more or less they will buy that amount varies from product to product and for the same product over different price stage price elasticity of demand ... read more

Assumptions of Production Possibility Model Following are the assumptions of production possibility model; Productive inefficiency and unemployment. If economy is productively inefficient and is not using all the resources (Unemployment) then that economy will not lie on production frontier but rather inside ... read more

Supply and Demand Market Market is an institute/mechanism where buyers and sellers of products, services or resources meet. Market exists in many forms. Markets are local, national, or international. Some markets are public while some are private. Demand Demand is a schedule or curve showing amounts of pr... read more

Production Possibilities Model Model is the simple presentation of reality. There are four assumptions of production possibilities model. Resources are used to produce one or both of only two goods. The quantities of the resources do not change. Technology and production techniques do not change. ... read more

Economizing Problems Economizing problem is at the heart of economics. Some of the economizing problems are as follow: Economics wants are unlimited Economic resources are limited. Wants of citizens of a society. Wants are desires of consumers to obtain and use goods and services to obtain u... read more

What is Economic Methodology? Economic methodology is scientific in nature. It include following steps. Observation of facts Development of cause and effect relationship (Hypothesis) Testing of hypothesis against real world observation Acceptance, rejection or modification of hypothesis ... read more

Economics Economics is a social science that deals with efficient use of scarce resources to achieve maximum satisfaction of wants. By efficiency here we mean the small use of waste and target is achieve. There are certain basic things that human beings need for example air, water, shelter and clothing. Certain other... read more

Externality Externality is a consequence of an industrial or commercial activity that other parties or groups without this being reflected in market prices, For example the pollination of surrounding crops by bees kept for honey. Externalities arise from Allocation of funds which means that living your life on th... read more

Positive Externality Positive Externality is a benefit that is enjoyed by the third party as a result of an economic transaction. Third parties include any individual, organization, property owner, or resource that is indirectly affected. A positive externality of production exists if the production of the good o... read more

Black-Scholes Model The Black-Scholes formula also known as Black-Scholes-Merton was the very first extensively defined model for option pricing. It's used to find the hypothetical value of European-style options by means of current stock prices, predictable dividends, the option's strike price, predictable i... read more