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A negative externality is defined as the cost suffered by a third party (not involved in the transaction) as a result of the transaction. The consumer and producer are the two main parties in the trans...

Monopolistic markets do not meet the criteria for the most important kind of social efficiency - allocative efficiency. If the market is allocatively efficient, firms will be producing at a point where...

The equation for aggregate demand is defined as C+I+G+(X-M) where C is consumption by households on things such as cars, furniture and petrol, I is investment by firms in new technology, factories and inv...

A situation, allocation or outcome is Pareto efficient if no one party can be made better off without another being made worse off. The outcome of a perfectly competitive market is Pareto efficient wherea...

Fiscal policy is the government's adjustments in taxation and government spending in order to influence the economy. For example, an increase in taxation and a reduction in government spending would re...