Economic Basics

Articles explaining and demystifying every key term and theory in economics.

A Beginner’s Guide to the Big Mac Index

Filed in Basic Concepts, Economic Basics by on November 6, 2014 0 Comments
A Beginner’s Guide to the Big Mac Index

The Big Mac index was first used by The Economist in 1986 as an informal guide to purchasing power parity (PPP). It was chosen because McDonald’s is almost present in every country in the world and the ingredients of making a Big Mac stay pretty much the same.

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Purchasing Power Parity (PPP) Explained

Filed in Economic Basics by on July 21, 2014 0 Comments
Purchasing Power Parity (PPP) Explained

Purchasing power parity (PPP) is a theory developed by Gustav Cassel, a Swedish economist in 1918.

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Game Theory: The Paradox of Collective Action

Filed in Economic Basics by on July 19, 2014 0 Comments
Game Theory: The Paradox of Collective Action

The Paradox of Collective Action is a situation where more than one party is involved in an action but they fail to reach a better Nash Equilibrium because of the free-rider and information problem.

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Third Degree Price Discrimination Explained

Filed in Basic Concepts by on July 9, 2014 0 Comments
Third Degree Price Discrimination Explained

Third-degree price discrimination is a pricing strategy which involves a firm charging different market segments different prices for the same good.

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First Degree Price Discrimination Explained

Filed in Basic Concepts by on July 4, 2014 0 Comments
First Degree Price Discrimination Explained

First-degree price discrimination is a theoretical pricing strategy which involves a firm charging every consumer the maximum price that the individual consumer is willing to pay.

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A Beginner’s Guide to Price Discrimination

Filed in Basic Concepts by on June 24, 2014 0 Comments
A Beginner’s Guide to Price Discrimination

Price discrimination is a pricing strategy which involves a firm charging a variety of prices for the same good.

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Replacement Ratio Explained

Filed in Economic Basics by on June 23, 2014 0 Comments
Replacement Ratio Explained

In an economy, replacement ratio is the ratio of the income received when unemployed to the income received when employed.

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Seasonal Unemployment Explained

Filed in Economic Basics by on June 14, 2014 0 Comments
Seasonal Unemployment Explained

Seasonal unemployment is the unemployment created from seasonal variations in demand for goods and services.

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