OLLUSIVE OLIGOPOLY: Perfect Cartel, Market-Sharing by Non-Price Competition and Output Quota Notes

COLLUSIVE OLIGOPOLY: CARTEL AS A COOPERATIVE MODEL The term collusion means to ‘play together’ in Economics. In collusive oligopoly, the firms cooperate with each other in taking joint actions to keep their bargaining position stronger against the consumer. When government action is responsible for bringing the firms together, then it is explicit collusion and when … Read more

Price Leadership- Meaning, Types and Price-Output Determination Under Low cost Price Leadership and Domanant Firm Price Leadership

Price Leadership: Price leadership is an important form of collusive oligopoly. It   takes place when there is only one dominant firm in the industry, which sets the price and others follow it. Sometimes, an agreement may be developed among oligopoly firms of an industry to assign a leadership role to one of them. There is a tacit … Read more

Pigou Effect on Wage Cut and Full Employment

A renowned neoclassical economist, A.C. Pigou, suggested a cut in wage rates in order to remove huge and widespread unemployment prevailing at the time of great depression during the period 1929-33. According to him, under free competition, the tendency of economic system is to automatically provide full employment in the labor market and if there … Read more


The classical economists believed in the existence of full employment in the economy. According to them, an economy based on laissez-faire principles, is always in the state of equilibrium at full employment. The workers are fully employed at the market wage rate. There is neither underproduction nor overproduction. The entire market system works automatically and … Read more

Aggregate Demand and Aggregate Supply

Aggregate Demand: It refers to the total value of final goods and services which all the sectors of an economy are planning to buy at a given level of income during a period of an accounting year. It is measured in the terms of total expenditure on goods and services of households, firms, government of the … Read more


Keynes was the first to develop a systematic theory of employment in his book, “General Theory of Employment. Interest and Money” published in 1936. The classical and the neoclassical economists in other words, aggregate supply price is the total cost of production incurred by employing a certain given number of labors. Almost neglected the problem of … Read more

Consumption Function

The consumption function or propensity to consume shows the “functional relationship between total consumption and the national income.” Symbolically, the relationship is represented as C = f (Y), where C is consumption, Y is income, and f is the functional relationship. C is the dependent variable of Y and Y is the independent variable. This relationship … Read more

Say’s Law of Markets – Notes

An early 19th century French Economist, J.B. Say, states that “supply creates its own demand.” The logic behind this law is that supply of goods itself generates sufficient income to generate a demand equal to the supply of goods. This is how supply creates its own demand. In its original form, the law is applicable … Read more