Definition of Merit Good A merit good has two characteristics: People do not realise the true personal benefit. For example, people underestimate the benefit of education or getting a vaccination. Usually, these goods also have a positive externality. Therefore in a free market, there will be under consumption of merit goods. Examples of Merit Goods …
A list of different types of economic goods. Income elasticity of demand and types of goods Income elasticity of demand (YED) measures the responsiveness of demand to a change in income. Normal good A normal good means an increase in income causes an increase in demand. It has a positive income elasticity of demand YED. …
Complementary goods are products which are used together. Examples DVD player and DVD disks to play in it. Tennis balls and tennis rackets. Mobile phones and mobile phone credit for making calls. iPhone and Apps to use with an iPhone. Petrol and car. Complementary Goods and Cross Elasticity of Demand Complementary goods will have a …
Price elasticity of demand measures the responsiveness of demand to a change in price. Price inelastic – a change in price causes a smaller % change in demand. Price elastic – a change in price causes a bigger % change in demand. Price inelastic demand We say a good is price inelastic, when an increase …
Definition: Mercantilism is an economic theory where the government seeks to regulate the economy and trade in order to promote domestic industry – often at the expense of other countries. Mercantilism is associated with policies which restrict imports, increase stocks of gold and protect domestic industries. Mercantilism stands in contrast to the theory of free …
Definition: Monopolistic competition is a market structure which combines elements of monopoly and competitive markets. Essentially a monopolistic competitive market is one with freedom of entry and exit, but firms can differentiate their products. Therefore, they have an inelastic demand curve and so they can set prices. However, because there is freedom of entry, supernormal …
Definition: Shrinkflation occurs when firms reduce the size or quantity of a good and keep prices the same. Shrinkflation is an alternative to increasing prices, and you could argue it is a disguised form of inflation because if you wanted to buy exactly the same quantity of the good, you would have to spend relatively …
Absolute advantage means that an economy can produce a greater total of goods for the same quantity of inputs. Absolute advantage means that fewer resources are needed to produce the same amount of goods and there will be lower costs than other economies. Simple example of absolute advantage In this example, Brazil has an absolute advantage …