Skip to main content


Difference between Cournot duopoly and stackleberg duopoly

1.Stackelberg's model is a sequentialg gamewhile Cournot's is a simultaneous game. 2. In Stackleberg one firm is a leader and move first while other follows while in Cournot both firms play simulataneously. 3. In stackleberg we calculate only follower's reaction function while in Cournot we calculate both firms reaction function 4. In Stackelberg duopolies, the quantitys sold by the leader is greater than theq sold by the follower, while in Cournot duopolies quantity are the same for both firms. 5. Profit of stacklebergs leader is greater than follower while in Cournot profit of both firm stays same. 6. Profit of stackleberg leader is always grater than profit of any of the firms in Cournot model 7. Price in Cournot model is higher than Stackleberg Model.

Thanks for reading if any problem related this article feel free to comment.
Recent posts

What is Cournot Model ? What are the assumptions of the model, How to calculate equilibrium With numerical ?

Cournot model is developed by Augustin Cournot.

Theory : Under this number of firms compete with each other indipendently and simultaneously Assumptions : All firms produce Homogenous productFirms do not collude or cooperateFirms have market power (each firms output decision affects good price)Number of firms are fixedTo calculate equilibrium quantity and profit And reaction function for both firms .

And reaction function for both firms would be

Thanks for reading if any problem related this article feel free to comment.

Costs of Unemployment and Inflation

Costs of Unemployment and Inflation
In an economy both Unemployment and Inflation adversely affects economy.
Unemployment occurs when there is eligible persons looking for a job but unable to find work and Inflation means when there is overall increases in price level of the economy.
Costs of Unemployment1. Unemployment causes the loss of potential output.
2. It causes the loss of valuable resources like (Manpower).
3. At the household level it causes the loss of income and consequent deterioration in standard of living of the household.
4. Unemployment opens the door for illegal activities in the economy that will lead to higher illegal activities,(drugs supply, contract killing, etc).

Costs of Inflation 1. Inflation decreases the purchasing power of currency due to the rise in prices across the economy.
2. Inflation reduces real income of fixed income groups ( salaried class) as their income does not change at the same pace as price rise.
3. When there is a price rise borrowers gain in fixed …

Philips Curve, graph of Philips curve, equation of Philips.

Philips curve is named after A.W. Philips. Philips Curve describes the relationship between unemployment and inflation.
In 1958, When Philips was professor at London School Of Economics, he took time series  data on the rate of unemployment and the rate of increase in nominal wage rate of the UK for period from 1861 to 1957 and he established the following relationship,

  w = a - bu w is the wage rate  a, b are constant  u is the rate of unemployment.
He found that there exist an inverse relationship between Wage(w) rate and Unemployment(u).  The policy implication for such a result was "An Economy can't have both low inflation and low unemployment simultaneously."
Graph of the Philips curve - TT is the graph of the Philips curve on the Y axis Inflation rate and on the x axis Unemployment rate.

Thanks for reading if any problem related this article feel free to comment.

Unemployment, unemployment rate, and types of unemployment

Unemployment is a situation in which a eligible person searching for the job is unable to find job and Unemployment rate is calculated by dividing the number of unemployed people to all the people in labourforce. Labourforce include employed people as well as unemployed people searching for job and it doesn't include people who are retired or too ill to work or simply not looking for work.

Unemployment rate formulaUnemployment Rate = Unemployed people /  labourforceTypes of UnemploymentThere are mainly three kind of unemployment Frictional, Structural and Cyclical Unemployment.
1.Frictional unemployment- Frictional unemployment takes place because people switch over from one job to another. In many cases the tenure of job gets over and worker remain unemployed till they got another job and in other cases workers migrate from one region to another region in search for better jobs in this searching period they remain unemployed for sort term and this unemployment is called Frictional …

The Ramsey Model of growth

Frank Ramsey  (Philosopher and Mathematician ) derived a theory about inter-temporal consumption and optimal saving function using the standard utilitarian philosophy of Jeremy Bentham. The basic point of Ramsey's Model is that it is a prescriptive theory and not merely predictive. Society has to choose optimal economic growth. Society as being represented by 'representative agent' or a central planning agency. This representative agent or central planner maximizes an objective function.  In optimal growth of Ramsey type the utility function most often used is 
U = U(C/L) or U = U(c) where c = C/L above equation means that only consumption is used as a proxy for all welfare inducing activity .

Let the time period be 0,1,2,......T(starting period is denoted by 0) and there is consumption stream in this period (C₀.C₁C₂,.....Cá´›). The optimization problem is to choose that consumption sequence that maximizes utility. Let U(0), U(1), U(2),...U(T) be the value of utility function at t…

The Real business cycle (RBC)

Real Busiess Cycle Theory (RBC) explains why there are fluctuations in businesses.
RBC model ignores the role of monetary forces and believe, like the classical economist, that money is veil. They insist that Production, supply shocks etc are the real forces behind the fluctuations, and they play down the role of demand side factors of the economy. RBC theory emphasis on relative prices rather than actual prices, believes that money is neutral, and also because it lays emphasis on supply side forces, this theory displays similarity with the earlier classical theorist of growth and development. It is for this reason RBC theory is sometimes put together with some other theories and dubbed 'Neo Classical'.

There can be several kind of shocks in the economy. these shock can originate on the demand side as well as on the supply side or shocks can originate from the monetary or fiscal policies. The RBC theorist focus on the Productivity shocks. Productivity shocks can be of several ty…