Introduction Further elaborating on Porter’s Five Forces, I’ll define each of the forces in a separate post. I defined Barriers to Entry before, below I’ll define Threat of Substitutes. Definition For every industry, the sellers have to deal with the … Continue reading
Introduction Michael Porter was an academic business theorist who wrote on a wide variety of topics. One of the things that he wrote about during his very prolific career was his five forces model, which is one of the most … Continue reading
What is a Bottleneck? In a business system or operations chain, things can only go as fast as the slowest piece. A bottleneck in a system is a part that is slowing down everything else. If the bottleneck is strengthened … Continue reading
Definition A barrier to entry as the name indicates is whatever factors that are in place that prevent some companies from entering an industry. The most common barrier to entry is cost. As mentioned in an earlier post, a company … Continue reading
Introduction Economically, a minimum wage is simply a price floor. The minimum wage employees are the suppliers of labor (they are selling their time) and the companies are the demanders of labor (they are buying that time). So we can … Continue reading
In Short Economics is the study of how people make decisions when in a state of scarcity. It is people choosing one option for another and the allocation of scarce resources. What is Scarcity? In life, people cannot get everything … Continue reading
What is the Forced Rider Problem? A forced rider is when someone is forced to pay for a good/service that they do not benefit from. The forced rider problem is that the good/service is thus overprovided. Assuming that other people don’t … Continue reading
What is the Free Rider Problem? A free rider is when someone enjoys the benefit of a good/service that they didn’t pay for. The free rider problem is that the good/service is thus underprovided. For if there is no penalty … Continue reading
Definition Moral hazard is when the risk/cost of an action is borne by someone other than the person doing the action. If a person receives all the benefit and none of the cost, they will engage in excessive risky behavior … Continue reading
Definition Arbitrage is taking advantage of price differences between identical assets in multiple markets. Those multiple markets could be different in identity or different temporally. Example 1 You are at a garage sale and you see a lamp that costs … Continue reading