The quantity of a good or service demanded by an individual household is called the Individual Demand. The sum total of all such demands over a period of time for any commodity in the market is described as Market Demand.
What is Demand?
In economics, demand is how much of a product or service is demanded at a given price. In the real world, this can be quantified in terms of wholesale prices and retail prices. A sudden change in demand will result in a shift along the supply curve if it results from a change that does not affect the cost of production.
What is the definition of Individual Demand?
Individual demand refers to the desire or wants for a particular product or service that an individual has. The amount of money that one is willing and able to spend on a good can be analyzed by looking at different types of products. For example, if you were to look at consumer goods versus capital goods, there could be a difference in the amount of money someone is willing to spend on each type.
What are some examples of Individual Demand?
Some examples include –
- The amount of gasoline that is demanded by an individual on any given day.
- The amount of money that someone spends on a pair of shoes versus the amount spent on a car.
What is the meaning of Market Demand?
Market demand refers to the total amount of a good or service that consumers in general are willing and able to buy at any given price. It is important to note that the Market Demand curve will shift based on changes in supply, prices, income levels, etc. Examples of Market Demand include –
- The total amount of gasoline that is demanded by consumers in general.
- The total amount of money that consumers, in general, will spend on a particular good or service.
Individual Demand vs Market Demand: What’s the difference?
The main difference between individual demand and market demand comes down to the fact that market demand includes everyone in a given market, while individual demand only takes into account, one person.
Some major differences between Individual Demand and Market Demand are –
- Individual demand only considers the wants and needs of one person. In contrast, Market demand can be measured as a whole, such as by looking at market data.
- Individual demand is based on an individual‘s willingness and ability to buy any given product or service at any given price point due to their own personal preferences. Market demand is based on the willingness and ability of all individuals in a market to buy a good at any given price.
- Individual demand can be analyzed by looking at individual preferences for specific goods, while market demands are determined by the entire population‘s preferences for products or services.
- Individual demand can take into account income, wealth, and any other economic factors that are specific to the person in question. Market demand only looks at macroeconomic factors such as inflation rates or GDP growth rates when determining how much of a good or service people will buy at any given point in time.
- Individual demand will change based on a person‘s age, economic status, and other factors that are specific to the individual in question. Market demand can only be altered by macroeconomic factors such as inflation rates or GDP growth rates.
- Individual demand has no relation to how much of a good or service is produced in a given market. Market demand is based on how much of a good or service is produced in a given market and will change if production levels rise or fall.
- Individual demand only takes into account how an individual views certain goods and services, while market demand can take into account the entire population‘s viewpoint on a product or service.
- Individual demand can be analyzed by looking at individual consumption patterns, while market demands are determined through consumption data that is collected for all individuals in a given population or economy.
What is the meaning of Oligopoly?
Oligopoly is a market structure that occurs when a few firms dominate the industry. It can occur naturally or as a result of government intervention. There are only very few oligopolies in the economy, and they have been studied extensively by economists due to their relatively rare occurrence and importance in shaping an economy.
What is Collusive Oligopoly?
Collusive oligopoly is a type of oligopoly where the firms decide among themselves to fix prices and production so as to take advantage of each other’s market power. It involves collusion or secret agreements between competitors. Collusive oligopolies can occur naturally in some industries due to economies of scale and product differentiation.
An example of a collusive oligopoly is OPEC, which involves a few oil-producing countries agreeing to limit the amount of oil they produce and thereby influencing prices in their favor. Another example is diamond mines, where the companies have historically had very close relationships with each other and have been more interested in maintaining the status quo than in increasing production.
What is Non-Collusive Oligopoly?
Non-collusive oligopoly is a type of oligopoly where there are no secret agreements among the firms in an industry. It does not involve collusion between companies and can be difficult to distinguish from perfect competition at first glance. However, there are considerable differences between the two market structures that make non-collusive oligopoly far more difficult to sustain than perfect competition.
Non-collusive oligopolies can occur due to economies of scale, product differentiation, and high barriers to entry into the industry. An example of a non-collusive oligopoly is that found in banking. The banks are not colluding with each other, but the barriers to entry for a new bank into the industry are very high, due to economies of scale and customer loyalty.
Collusive Oligopoly vs Non-Collusive Oligopoly: What’s the difference?
The main difference between collusive oligopoly and non-collusive oligopoly is that in the former there are secret agreements between firms whereas, in the latter, such interactions do not take place.
The main similarity between both market structures is that they involve few competitors and a considerable degree of control over the industry by these companies.
Here are some important differences between Collusive & Non-Collusive Oligopoly –
- The collusion agreement is a secret in a collusive oligopoly whereas, it is not in a non-collusive oligopoly.
- Price and production are fixed by the firms themselves in the case of collusive oligopoly, while no such fixing occurs in non-collusive oligopoly. This means that prices are determined by the market forces of demand and supply in a non-collusive oligopoly.
- There is no collusion between firms in a non-collusive oligopoly, but there is in a collusive oligopoly. For example, OPEC is an example of a collusive oligopoly whereas, U.S.’s banking industry is an example of a non-collusive oligopoly.
- Collusion between firms can occur naturally in a collusive oligopoly whereas, it does not in a non-collusive oligopoly. For example, OPEC is a natural case of a collusive oligopoly because oil producers have a natural incentive to keep prices high.
- Non-collusive oligopoly can occur due to economies of scale and product differentiation whereas, collusive oligopoly does not require such reasons for its existence.
- Collusion is never sustained in non-collusive oligopoly whereas, collusion may be sustained for longer periods of time due to its inherent stability in collusive oligopoly.
- Collusion in a non-collusive oligopoly can lead to higher prices and profits for the firms involved, but collusion in a collusive oligopoly leads to lower prices and better efficiency of production. For example, OPEC has the power to keep global oil prices high due to its market share.
- Collusion in a non-collusive oligopoly is not illegal whereas, collusion in a collusive oligopoly is illegal because it violates antitrust laws which are designed to prevent monopolies from gaining too much control over an industry.
- There are high barriers to entry for firms in non-collusive oligopoly whereas, there are low barriers to entry for these companies in collusive oligopoly. For example, banks have a high barrier of entry due to economies of scale and customer loyalty that would take a long time and considerable investment to overcome.
- Collusion in a non-collusive oligopoly leads to a decline in the quality of goods and services since it results in less competition, while collusion in a collusive oligopoly can lead to an increase or no change at all depending on the extent of the collusion agreement.
These are some of the major differences between Collusive Oligopoly and Non-Collusive Oligopoly! Share your thoughts on Oligopoly by commenting below. Thank You 🙂
What is the meaning of Factor Income?
Factor Income refers to incomes that accrue as rewards for the services provided by land, labor, capital, and entrepreneur. These factor incomes are usually distributed among three main factors of production i.e. land or natural resources, labor, and capital.
For example, wages paid to a laborer after working 8 hours for a day, interest on money invested in the bank, rent on land which is used for cultivation or manufacturing, etc.
What is the definition of Transfer Income?
Transfer Income refers to a payment received by a person without providing any service in return. There is no exchange of goods and services during transfer income. An example of a transfer income is the payment received by a person as unemployment compensation, retirement benefits, or social security. These incomes are not added while calculating National Income.
Factor Income vs Transfer Income: What are the differences?
The main difference between factor income and transfer income is that factor incomes are received as payment for services rendered whereas transfer incomes are not linked with the provision of any service. These incomes can be distributed among land, labor, capital, and entrepreneur. On the other hand, transfers cannot be shared between factors of production i.e. they do not form part of national income.
Other main differences between Factor Income & Transfer Income are –
- Factor Income is included in National Income whereas Transfer Income is not added.
- Factor income includes only factor incomes which are received by the factors of production while transfer income includes all types of payments without any exchange of goods and services.
- The source of factor income is mainly land, labor, capital, and entrepreneur while transfer income is not contributed by any of the factors.
- Factor income is distributed among three factors of production while transfer income can be received by any factor.
- Factor income is added to the national product whereas transfer income is not included in National Product.
- Factor Income causes the transfer of resources between different sectors and regions of the economy whereas Transfer incomes do not cause any transfer of Resources.
- Factor income comes in the form of profits and interest while transfer income can come in the form of pensions and subsidies too.
- Factor incomes are distributed among different factors while transfers cannot be distributed among different factors and regions of the economy.
- Factor income and Transfer Income refer to economic and financial concepts respectively.
These are some of the main differences between Factor Income and Transfer Income!!
What is the meaning of Re-Order Level?
Re-Order Level (ROL) is the point at which new supplies are ordered. It usually occurs when the inventory level reaches some predetermined point, known as reorder point so that fresh supply can be received in time without any delay.
Reorder Point denotes the stock level at which a particular material will be considered to be exhausted and necessitate its replacement. ROL is also used to determine the optimal size of a purchase order.
What is the meaning of Re-Order Quantity?
Re-Order Quantity (ROQ) is the maximum number of units to be ordered when the stock on hand falls below a given reorder level. It can also be defined as the quantity of items in an inventory that will allow zero safety stock, i.e., no safety stock is needed between ordering points.
ROL vs ROQ: What’s the main difference?
The main difference between ROL and ROQ is that the first one denotes the point at which new supplies are ordered while the second one defines a quantity of items in an inventory that will allow zero safety stock between ordering points. The terms ROL and ROQ can be used interchangeably as long as they carry this meaning.
Other major differences between Re-order Level and Re-order Quantity include –
- Re-order Level is a fixed value while Re-order Quantity can be changed according to the needs of an organization.
- ROL definition includes the reference point from which reordering takes place while ROQ does not consider this factor.
- While Re-Order Level is used for all items, Re-Order Quantity is used to determine the optimal size of a purchase order.
- ROL is also known as reorder point while ROQ can be called reorder quantity or reorder level depending on the situation.
- ROL is often used in conjunction with EOQ (Economic Order Quantity) to determine the optimal purchase quantity and the best time at which it should be ordered.
- ROL is calculated based on safety stock while ROQ can be determined without taking into account any safety stock.
- ROL is calculated by dividing the number of units on hand with the reorder point while ROQ formula does not consider this factor.
These are some of the main differences between ROL and ROQ. It’s important to note that ROL denotes the point at which new supplies are ordered, while ROQ addresses the maximum number of units to be ordered when stock on hand falls below a given reorder level.