Economics

We found 12 articles

How to determine the optimal price of a product as a monopolist
In business, finding the right price for your product is crucial. Price it too high, and few people will buy; price too low and the business leaves money on the table. But how do you determine the right price? We will explore this question with a simplified example, looking at Umbrella Corp (UCorp). Note that in this simplified case, UCorp is a ...
What is deadweight loss?
If you’ve taken economics, you’ve probably heard the term “deadweight loss” thrown around as something that is generally “bad.” But what does deadweight loss even mean, and why do economists try to avoid it? Let’s find out. 
Pareto Efficient Allocations and Fairness in Economics
A very important concept when it comes to thinking about markets in economics is the idea of Pareto efficiency. An allocation of resources is Pareto efficient if it is not possible to make anyone better off without making someone else worse off.
Present Value and Interest Rates
To invest or to not invest? That is the question. Well, maybe not THE question, but it is a question that many investors and students of economics are asked each year.
Learning the basics of Game Theory
Imagine that you and a friend are going to the movies. You like comedies more than action movies, while your friend likes action movies a lot more than comedies. If you go to see a movie alone, however, you’re probably not going to have as much fun, regardless of what type of movie you see. What is the optimal behavior for each person in this ...
Understanding Elasticity of Demand in Economics
You may have heard in your econ class about a good’s elasticity of demand, or about “elastic” or “inelastic” goods. Consumers’ elasticity of demand is just a fancy way economists talk about how sensitive people are to changes in a good’s price.
An Introduction to Supply and Demand
What is supply and demand? In economics, supply and demand is the relationship between the quantity of a commodity that producers wish to sell at various prices and the quantity that consumers wish to buy.  Though it is a seemingly straightforward relationship, in practical application it can become quite complicated.  In this blog, we will use an ...
An Introduction to Choice Theory: are Humans Really “Rational Actors?"
If you are a student of economics, one of the first axioms you are instructed to adapt is that everyone should be considered a “rational actor.” What this means is that all people who take part in economic decisions and transactions are informed by self-interest and do so in a manner that maximizes their potential self-benefit.  This is essential ...
How to Use Probability Trees to Evaluate Conditional Probability
If you’re majoring in economics, you will likely also need to take a statistics course.  One of the trickiest concepts is dealing with conditional probabilities.  In most classes, they teach you a fairly complicated equation known as Bayes’ Theorem. While this isn’t a hard formula to plug values into, it doesn’t give an intuitive understanding of ...
Marginal Rate of Substitution (MRS), Marginal Utility (MU), and how they relate
In this post, I start off by explaining the Marginal Rate of Substitution (Sections II-IV). Then, I cover the concept of Marginal Utility (Sections V-VII). In both cases, I start with a story explanation, then give a formal definition, and finally provide some other useful information about the concept. After that, I connect the two concepts ...
Four Tips for Applying to Economics Graduate School
So you’ve decided to get an advanced degree in economics. Congratulations! You’re well on your way to obtaining one of the most challenging and worthwhile degrees the world has to offer. While economics graduate programs are known for their mathematical rigor, you will be rewarded for your efforts with better job security, autonomy, and ...
How to read and interpret economic graphs
Learning to think like an economist can be a daunting task for beginners. Introductory economics courses often begin with a jargon-loaded discussion of opportunity costs and marginal benefits versus marginal costs—in other words, what is the benefit of continuing to read the rest of this post, and what else could you be doing with your time?  In ...