Positive Externality Diagram: Subsidies and Underproduction
The positive externality diagram shows how markets underproduce vaccinations, education, and research, and how a per-unit subsidy at marginal external...
Microeconomics
Uncover individual economic decisions, supply-demand dynamics, and market behaviors that drive our world.
Negative Externality Diagram: Taxes and Welfare Loss
The negative externality diagram shows how a Pigouvian tax set at marginal external cost shifts supply to MSC, eliminating the...
Private Cost and Social Cost: Externality Curves Explained
Private cost is what firms pay; social cost adds the spillovers they ignore. The MPC, MSC, and MSB curves explain...
Deadweight Loss: Welfare Cost of Market Distortions
Deadweight loss is the welfare triangle that disappears when taxes, tariffs, monopolies, or price controls cut off mutually beneficial trade...
Core of an Exchange Economy: Blocking Coalitions
core of an exchange economy analysis explains how blocking coalitions restrict feasible trades and why competitive markets shrink the stable...
Contract Curve: Pareto Efficient Allocations
contract curve analysis derives Pareto-efficient allocations in an Edgeworth box by equating two agents’ marginal rates of substitution at tangency...
Giffen Goods: When Demand Curves Slope Upward
Giffen goods are inferior staples whose demand rises with price because the income effect overwhelms substitution. Jensen and Miller's 2008...
Marginal Rate of Substitution: Slope, Concavity, and Choice
The marginal rate of substitution is the slope of the indifference curve at a point and the ratio of marginal...
Hicksian vs Marshallian Demand: Two Curves, One Consumer
Hicksian vs Marshallian demand is the central duality of consumer theory. One holds income constant for empirical work; the other...
Repeated Games and Folk Theorem: How Cooperation Emerges Without Contracts
Repeated Games and Folk Theorem explains how patience, punishment, and reputation sustain cooperation when formal contracts cannot enforce behaviour.