Category: Economics
Benefits/merits/Advantages (Merits) of Oligopoly
There is competition and leads to the production of high quality production. This enhances the standards of living of the consumers. There is existence of ... Read More
Equilibrium position of a firm under oligopoly
The firm under oligopoly earns abnormal profits both in the short and long run. Equilibrium is attained at a point where marginal cost (MC) curve ... Read More
Examples of non-price competition
Non-price competition is where rival firms compete using other means other than changing (adjusting) the price of the commodity. Examples of non-price competition include; ... Read More
Features (Characteristics) of Firms under oligopoly
Few firms of varying sizes, that is some firms are large and well established while others are small and not well established. Close interdependence ... Read More
Features (Characteristics) of Monopolistic Competition
Existence of many firms. There are many sellers and buyers involved in the exchange of closely related products. There is use of persuasive advertisement. Firms ... Read More
Disadvantages (Demerits) of Monopolistic competition
In the long run, firms earn normal profits and therefore it is not possible to expand on production and enjoy economies of large scale. ... Read More
Advantages (Merits) of Monopolistic competition
Firms undertake product differentiation which enables consumers to enjoy a variety of products. This improves on their welfare due to a wide choice created. ... Read More
Disadvantages (Demerits) of price discrimination
Price discrimination leads to the provision of poor quality services especially to the low income earners. This is because there is no competition since it ... Read More
Advantages (Merits) of Price discrimination
Price discrimination increases the total revenue of the monopolist. This is because, output sold increases due to the act of charging different prices to different ... Read More
Forms (Basis) of Price discrimination
Price discrimination according to personal income. This is where different prices are charged to different income groups for example charging low prices to the low ... Read More
Price discrimination meaning
Price discrimination is the process (practice) of selling the same commodity to different consumers at different prices by the same seller in a given period ... Read More
Disadvantages (Limitations/Weaknesses/Negative implications) of Monopoly
Monopoly firms produce at excess capacity both in the short run and in the long run, They do not fully utilize their resources to the ... Read More
Measures to control Monopoly
Use of price controls. This is where the government fixes the prices of commodities produced by monopolists. This helps to reduce the monopoly power. The ... Read More
Advantages (Merits/Positive implications) of Monopoly
There is a possibility of price discrimination where by similar units of a commodity are sold at different prices to different consumers. This enables the ... Read More
Basis (Origin/Sources) of monopoly power
Monopoly power refers to the ability of the producer to determine the price of the commodity and restrict entry of other producers from entering the ... Read More
Features (characteristics) of monopoly market structure
Entry to the market by other firms is blocked both in the short and long run. Firms aim at profit maximization and therefore produce at ... Read More
Why may a firm continue to operate even if it is making losses In the Short run Or Why may a firm continue to operate between the break even and shut down points? OR Why may a firm keep an operating even if it is not covering the total costs of production?
Under perfect competition, a firm may keep on operating even if it is making losses because of the following reasons. The firm may keep on ... Read More
Break even and shutdown points of a firm under perfect competition
Break even and shutdown points of a firm under perfect competition Break- even point This is refers to the point in the production process at ... Read More
Characteristics of Perfect Competition Market structure
Perfect Competition Market structure is characterized by the following features. Many firms (buyers and sellers). There are many sellers and buyers involved in this market ... Read More
Localization of firms
This refers to the concentration of firms in a particular area. Read More
Factors affecting the location of firms
Availability of raw materials. In situations where the raw materials are bulky the firm finds it cheaper to be near the source of raw materials. ... Read More
Factors which influence the localization of firms
Industrial inertia. This is the tendency of the existing firms to remain established in a given area even when the location factors are exhausted. Availability ... Read More
Advantages/merits of merging of firms
It helps to expand the market in form of increased sales resulting from large firms. It increases employment opportunities as a result of large scale ... Read More
Disadvantages/demerits of merging of firms
It leads to over exploitation of resources. It increases pollution due to the existence of the industry. It leads to congestion of firms within the ... Read More
Factors which make it difficult/hinder for firms to Merge
Fear of complexity in management in form of bureaucracy Fear of losing independence enjoyed by individual firms Differences in aims and objectives of individual firms ... Read More
Types of Mergers
Types of Mergers (a) Horizontal Mergers. This is where two or more firms in the same industry and at the same stage of production join ... Read More
Merging (Integration) of firms
This is where two or more firms join together to form one business unit with the aim of enjoying economies of large scale. Read More
Reasons (Aims/Objectives) for merging/integration
To expand the market in form of increased sales resulting from large production. To ensure efficient management, that is, different firms can combine different ... Read More
Survival of small scale firms alongside large firms/why firm tend to remain small
As firms increase their scale of operation, they enjoy economies of large scale. Therefore every firm must strive hard in order to reap such benefits. ... Read More
Objectives of the firm/business
Profit maximization. This is a major objective of the firm. The firm tries to minimize the costs and maximize the revenue the revenue in order ... Read More
Types of industries
Rooted Industries. These are industries located near the source of raw materials e.g. Cement industries located near lime stone rocks, sugar industries located near, ... Read More
Causes/Examples of external Diseconomies of scale
Causes/Examples of external Diseconomies of scale Congestion. This occurs when a number of firms compete for the available space for expansion. Pollution. When many firms ... Read More
Examples of Internal Diseconomies of scale
1. Managerial internal D.O.S. As the firm over expands beyond its optimum level, supervision of workers, decision making and coordination becomes difficult and this ... Read More
Diseconomies of scale
These are disadvantages accruing to the firm of in form of increased average costs resulting from over expansion of the scale of production of the ... Read More
Examples of external economies of scale
Transport external E.O.S. Firms in one industry can share transport facilities and other social infrastructure which results into reduced average costs of transportation to ... Read More
Economies of scale (E.O.S)
Economies of scale are cost advantages gained by companies when production becomes efficient. Companies can achieve economies of scale by increasing production and lowering costs Read More
Assumptions of the law of diminishing returns (law of variable proportions)
It assumes a short run period It assumes existence of a variable factor It assumes existence of a fixed factor It assumes constant technology All ... Read More
Examples of internal Economies of scale
Technical internal E.O.S. These arise from the use of better methods (techniques) of production which results into lower average costs of production For example, ... Read More
Applications (importance) of the law of Diminishing returns
It makes it possible for the producers to determine the optimum level of a variable factor which can be combined with fixed factor to yield ... Read More
The law of diminishing returns (The law of variable factor proportions)
The law of diminishing returns states that as more and more units of a variable factor (labour) are added to fixed factor (land), marginal product ... Read More
Determinants of the production function
The amount of factor input used like capital, labour, land, etc. The size of the production unit (the firm) The level of prices for factor ... Read More
Advantages (merits) of market production
It encourages the production of high quality output hence better standards of living. It widens the tax base thereby increasing government revenue through taxation. It ... Read More
Features (characteristics) of market production
There is use of money as a medium of exchange. There is existence of profit motive. There is use of modem techniques of production. There ... Read More
Features (characteristics) of subsistence production
There is high degree of dependency on family labour in the production activities; There is use of simple (rudimentary) tools for example pangas, hand hoes ... Read More
Subsistence (direct) production
Subsistence /direct) production is the production of goods and services by and individual for use Read More
Stock exchange market
Stock exchange market is an organized market for the sale and purchase of securities such as shares, stocks, and bonds. Read More
Capital markets.
Capital markets. This is a market where medium and long term financial assets are traded for example bonds, shares etc. Read More
Features of money markets in developing countries
They are mainly urban based They mainly charge high interest rates They mainly operate on a small scale There are still few participants in the ... Read More
Money market
Money market is a market where short term financial assets are traded for example treasury bills. Money markets include markets for such instruments as bank ... Read More
Sources of business finance
From personal savings of individuals Borrowing from relatives and friends Borrowing from financial institutions like banks and micro finance institutions Borrowing from non-bank financial intermediaries ... Read More
Disadvantages of joint -stock companies
Shareholders do not exercise full control over their business. This is because; under joint stock companies management differs from shareholders. Shares are not equally owned. ... Read More
Collateral security
Collateral security refers to the physical/tangible asset presented by the borrower before accessing the loan from the lender, For example land title, tangible house hold ... Read More
Advantages of joint – stock companies
It is easy to raise enough capital from the sale of shares. This increases the scale of operation of the business hence economic of scale. ... Read More
A debenture
A debenture is a document that gives evidence that an individual or company has borrowed a certain sum of money from the person or institution ... Read More
Types of debentures
Naked debentures; this is a debenture where no collateral security is required in order to access the loan by the borrower from the lender. In ... Read More
Dividend meaning
A dividend is a profit earned on the shares by the shareholders of the company. Read More
Types of shares
Ordinary shares; are shares which do not carry a fixed rate of return (dividend). These shares receive only dividends after all preference shares have paid ... Read More
A stock meaning
A stock is a combination of shares contributed by shareholders to the company. Read More
A share meaning
A share is a unit of capital contributed by each shareholder when starting the company with the aim of making profits. Read More
shareholder
A shareholder is an individual who owns and contributes capital to the company with the aim of making profits. Read More