Market structure can be defined as a group of industries characterised by number of buyers and sellers in the market, level and type of competition, degree of differentiation in products and entry and exit of organisations from the market. The study of market structure helps organisations in understanding the functioning of different firms under different circumstances.
In economics, Market failure occurs when there is an imbalance in the quantity of a product demanded and supplied, which leads to an inefficient allocation of resources. These failures can occur due to a variety of reasons, such as the existence of externalities, public goods and incomplete information.
Revenue is the total amount of money received by an organisation in return of the goods sold or services provided during a given time period. In other words, revenue of a firm refers to the amount received by the firm from the sale of a given quantity of a commodity in the market.
Long run cost refers to the time period in which all factors of production are variable. Long-run costs are incurred by a firm when production levels change over time. In the long run, the factors of production may be utilised in changing proportions to produce a higher level of output. In such a case, the firm may not only hire more workers, but also expand its plant size, or set up a new plant to produce the desired output.
Economies of scale refer, as a firm expands its production capacity, the efficiency of production also increases. It is able to draw more output per unit of input, leading to low average total costs. Diseconomies of scale refer to the disadvantages that arise due to the expansion of a firm’s capacity leading to a rise in the average cost of production.
A short-run period refers to a certain period of time where at least one input is fixed while others are variable. In the short-run period, an organisation cannot change the fixed factors of production, such as capital, factory buildings, plant and equipment, etc. However, the variable costs, such as raw material, employee wages, etc., change with the level of output.
While computing the total cost of production, there are several types of costs that an organisation needs to consider apart from those involved in the procurement of raw material, labour and capital. 10 Types of Costs - Opportunity, Explicit, Implicit, Accounting, Economic, Business, Full, Fixed, Variable, Incremental.
There are different types of production functions that can be classified according to the degree of substitution of one input by the other. 3 Types of Production Functions: Cobb Douglas, Leontief and constant elasticity substitution (CES) production function.
Production function can be defined as a technological relationship between the physical inputs and physical output of the organisation. It is a statement of the relationship between a firm’s scarce resources and the output that results from the use of these resources.
Production Possibility Curve (PPC) is a curve that shows the alternative combinations of two goods and services by using all the available factor resources, efficiently. In economics, the Production Possibility Curve provides an overview of the maximum output of a good.