Trending December 2023 # Barriers To Entry: Meaning, Examples, Types, Importance # Suggested January 2024 # Top 19 Popular

You are reading the article Barriers To Entry: Meaning, Examples, Types, Importance updated in December 2023 on the website We hope that the information we have shared is helpful to you. If you find the content interesting and meaningful, please share it with your friends and continue to follow and support us for the latest updates. Suggested January 2024 Barriers To Entry: Meaning, Examples, Types, Importance

What are Barriers to Entry?

Barriers to Entry are the obstacles a company may face while starting a business in a new industry. These barriers can be startup & fixed costs, patents, technological issues, etc.

For example, if an industry has one or two well-known brands with a loyal customer base, it can become challenging for new companies to compete. This represents the brand recognition barrier.

Download Corporate Valuation, Investment Banking, Accounting, CFA Calculator & others

Key Highlights

The barriers can be financial, technological, natural resources-based, political, or legal.

Different markets may have different competitive dynamics, so companies should assess their competitive landscape carefully before entering, including high capital requirements or the need for specialized knowledge.

Companies should devise a clear plan to overcome these potential barriers to be successful.

Examples of Barriers to Entry Example #1: Smartphone Market

Samsung, with its large screen, and Apple, with a face ID, have dominated the smartphone market for the past decade. However, with new technologies like foldable displays and 5G networks, we are seeing a shift in power in this industry.

Example #2: Retail Banking Sector

The retail banking sector is one of the most competitive in the financial industry, with a pervasive network, making it impossible for a new entrant to compete with the already established players.

Types of Barriers to Entry Patent

The company gets the special rights to produce a particular good for a specified period. It prevents competitors from entering the market.

Pharmaceutical and technology fields often get patented goods.

Economies of Scale

As a business grows, it enjoys reduced cost prices. For example, Grocery stores can get basics like milk and bread at lesser prices, whereas smaller shops do not have that privilege.

Sunk Cost

It is the necessary cost an entrant must make and is unrecoverable.

Since it is impossible to recover these costs, a company may be discouraged from making the first investment.

Technological Advancement

Starting a new business, owners need to have a specific know-how level. One can work in supermarkets and learn the nitty-gritty before owning one.

Companies like software and airlines have a bit of a knowledge barrier.

The software business owner should either be an expert or hire a coder.

Brand Loyalty

For instance, brands like Coca-Cola or Nutella are essentially unmatched in their quality and price, making it impossible to compete with a company that has historically invested worth trillions in establishing itself.

Consumers have formed a habit of trusting these brands.

Difficulties in Changing Suppliers

In some markets, consumers feel restrained because of the procedures required to switch suppliers.

For example, the banking, insurance, and electricity industries are too complicated.

Control Over Distribution Channels

Some businesses, like Amazon, have complete control over their channels and distribution networks, making it difficult to find their rivals.

Due to its endless choice and display of products in each category that fits all pockets, customers have to look no further.

Business Response Tactics

The existing established players try to block the new companies from entering the market.


Regulations require extra cost, time, and effort before a business can catch momentum. A restaurant owner must handle many health and safety regulations besides others.

Often companies have to hire a lawyer. When a new entrant enters the market, the existing ones may create additional barriers for them by offering benefits or offers to the targeted customers.

Importance of Barriers to Entry Increased Profitability

Existing businesses can enjoy increased profitability by making it harder for new competitors to enter the market.

Their cost of production stays low, and demand for their services remains high.

Brand Recognition

With fewer competitors in the market, existing businesses can benefit from increased brand recognition and credibility.

Customers will be more likely to seek out their services due to their reputation.

Established Footprint

They prevent new competitors from undercutting them on price or offering better products or services.

It helps preserve its customer base and market position.

Security of Investments

Existing businesses can protect their investments and assets from devaluing by creating barriers.

They prevent new competitors from entering the market with deeper pockets and more resources from taking their investments.

Reduced Price Wars

With fewer competitors in the market, price wars are less likely to occur as businesses become more difficult to undercut each other’s prices.

Barriers to Entry can make it difficult for new businesses to compete against established ones.

It enables businesses to control the supply of goods and services to maximize profits. It can be challenging for those who do not have the capital required to start a business.

Final Thoughts Frequently Asked Questions (FAQs)

Answer: The main barriers are Economic obstacles, scale and scope economies, product differentiation, substantial capital requirements, legal impediments, and concentration of strategic assets.

Q4. What are the examples of barriers? Q5. What are the characteristics of tariff barriers?

Answer: Barriers are instruments of control that also produce international rules, allowing you to determine whether a product is regulated and legal. But in many nations, it works against them, and they struggle with new economic development. The least developed countries, including Chad and the Bahamas, have the highest tariff barriers.

Recommended Articles

It is a guide to Barriers to Entry. To learn more, please read the following articles

You're reading Barriers To Entry: Meaning, Examples, Types, Importance

Certificate Of Insurance (Coi): Definition, Types, Importance

What is a Certificate of Insurance?

A certificate of insurance is proof of an insurance policy issued by an insurance company. For example, James wants to rent an office space in New Jersey. His landlord requests property insurance. As James has renters insurance, he provides his landlord with the COI and rents the place.

Start Your Free Investment Banking Course

Download Corporate Valuation, Investment Banking, Accounting, CFA Calculator & others

Key Highlights

It provides evidence that the individual/company has valid insurance, which they can provide for customer documentation.

Businesses, customers, and others need it to confirm the coverage they require.

Types of this certificate would include a certificate of general liability, automobile liability, and workers’ compensation insurance.

It is crucial when one wants to renew their insurance policies, and it also safeguards the insured against insurance fraud.

Certificate of Insurance Types Certificate of Liability Insurance:

It is a policy that protects the insured from any losses that may arise from a third-party lawsuit

General Liability Insurance covers the insured for liability arising from accidents or injuries to a third party, property damage, and other risks.

Another is Professional Liability Insurance, which covers professionals who may be liable to their clients for damages, such as architects, engineers, lawyers, accountants, and doctors.

Certificate of Automobile Liability Insurance:

It is a report to certify that the person has their vehicle insured. For instance, the Department of Motor Vehicles (DMV) issues the certificate for the State of California.

If the insured causes an accident, the insurance pays for the other vehicle’s repairs and medical expenses incurred by the other driver or passengers.

One must submit their certificate to the automobile department, like DMV, if they get into an accident with an uninsured driver.

Certificate of Workers Compensation Insurance:

Its purpose is to prove that the employer has the policy to cover any injuries an employee/worker may sustain on the job. Additionally, the employee cannot sue the business with a COI.

This document shows up on an injured employee’s insurance claim. Thus, the employer must give them the certificate within 24 hours of the injury.

Workers’ compensation insurance covers medical expenses, income replacement, and death benefits. One can get this insurance through a private company or their state’s workers’ compensation program.

Who may Require a Certificate of Insurance?

Firms with customers or clients requiring proof of insurance must obtain the certificate. This document provides evidence that they have the necessary coverage in place.

Businesses must have certain types of insurance, such as workers’ compensation and liability insurance, to protect those employees.

Landlords, event venue managers, and others sometimes require to have COI

It is necessary for vehicle and property owners as well.

How to Obtain a Certificate Of Insurance?

The first step will be to gather all essential information regarding the insurance and fill out a COI form with the respective insurance company.

It could be through most companies’ customer support areas and even online.

The company may take a few days or weeks to create the certificate to verify the data.

Once done, the insured receives the certificate via email, mail, or the website. The insured can print it as a paper version of the certificate if it is a soft copy.

Importance of Certificate of Insurance

It protects businesses from being liable for damages caused by employees or customers.

It is an essential document for employees in the workplace. And it also verifies that the employee has insurance coverage in case of an accident or injury while on the job, especially in high-risk jobs like construction.

It’s an important document when one wants to get new insurance, transfer their policy, or need to renew current policies.

It saves the insured from insurance scams or frauds as they possess proof of insurance.

It also offers a quick overview of the insurance plan.


Insurance certificates provide many benefits to businesses. It shows customers the firm’s commitment to protecting them from harm. It also makes it easier to get a new policy when there’s a change in the business structure or location. Consult with an insurance agent or broker to ensure you have the correct type of certificate for your needs. Finally, remember to keep the document safe to access it when needed.

Frequently Asked Questions(FAQs) Q1. What is the certificate of insurance? Q2. What is the difference between an insurance policy and a certificate?

Answer: While an insurance policy is a contract between the insured and the insurer, a certificate is simply evidence of insurance coverage.

Q3. What is a transport insurance certificate?

Answer: A transport insurance certificate is a document that details the policy number and the coverage contracted. It attests to establishing risk coverage on the goods/logistics operations during international transport.

Q4. When is a certificate of insurance needed from a provider?

Answer: It is typically required when contracting with another business or individual. This document provides proof that the insured has the minimum insurance required by the other party. The certificate also states the effective dates of the policy, the policy limits, and the named insured.

Recommended Articles

This is a guide to the Certificate of Insurance. It explains its meaning, types, participants, etc. Please read the following article for more details,

Universal Life Insurance: Meaning, Types, Components, Benefits

What is Universal Life Insurance?

Universal life insurance (UL) is a lifetime protection policy that promises death benefits whenever the insured dies. It is in contrast to term life insurance which guarantees protection only for a specific period (5 to 75 years). UL also builds a cash value account for the individual, where the surplus money from the premiums grows with monthly interest.

For example, Mrs. Patricia purchases a UL policy of $1,000,000 and deposits a yearly premium of $15,000. The company reduces $5,000 (fees) from the premium and adds the $10,000 to the cash value account. The cash value account grows with time and accumulates $50,500 (assuming 1% yearly interest) in 5 years. Suppose Patricia passes away, so her family will receive the benefits ($1,000,000) but not the $50,500. However, if she closes the policy before she dies, they will receive the $50,500. The benefit is that as it is a lifetime policy, her family will get the reimbursement even if she passes away later (Eg. 101 years).

Start Your Free Investment Banking Course

Download Corporate Valuation, Investment Banking, Accounting, CFA Calculator & others

Key Highlights

Universal life insurance is life insurance that includes an investment savings scheme and requires small premiums

The various types of UL are guaranteed, indexed, variable, and traditional

Death benefit and cash value account are its two crucial components

One of the significant benefits is that there are no tax allegations for policyholders who borrow from their policy’s accrued cash value.

How Universal Life Insurance Works?

Once the person buys the insurance and pays a premium, the insurance company reduces the administrative fee and the insurance cost from it and transfers the rest to the cash value account

The cash value account is a savings account where the excess money is accumulated, and the company provides monthly interest on it. Therefore, it grows with time

In case the person is unable to make the premium payments, the company will extract the amount from the cash account to keep the policy valid

If the policy is active during the insured’s demise, the inheritors only obtain the life insurance disbursement, as the surplus funds in the cash account go to the insurance company

However, if someone chooses to terminate the policy while they are still alive, they receive most or all of accrued cash from the cash value account.

Universal Life Insurance Types Traditional or Non-Guaranteed:

The traditional policy offers the basic UL approach, but the policy may lapse if the holder makes any changes to the contract

However, this policy is a good option if one wishes to save premiums.


It allocates the cash value into indexes, stocks, money markets, or accounts

Also, they diversify the investments, ensuring rapid growth, though the amount you receive has a cap.


It builds cash value that lasts for the entire life

This policy allows cash value growth through an equity index account


It is an extension of the traditional policy, as it has all essential benefits with the assurance that the policy will not lapse.

Components of a Universal Life Insurance Policy Death Benefit:

After the insured person passes away, the policy beneficiaries receive the death benefits

For several policies, the insurance company retains the cash account. However, according to the plan, the beneficiaries can claim the cash account money.

Cash Value Account:

When one makes premium payments, a percentage of that money funds the death benefit while the extra amount goes to the cash value

In some cases, when the insured cannot pay the premium, the company takes money out of the cash value

The holder can borrow capital from this account or keep it for their inheritors.

Benefits of Universal Life Insurance

There are no taxes on current income or interest because the cash value cultivates on a tax-deferred basis. However, taxation can depend on various elements of the policy

It allows alteration and modification of the premium amount unless it is enough to retain the policy

The policy starts from the first day and works till the death of the insured person, ensuring that the beneficiaries receive the benefits

It has an in-built cash value that cultivates over time and produces interest.

Universal Life Insurance vs. Term Life Insurance vs. Whole Life Insurance

Universal Life Insurance

Term Life Insurance

Whole Life Insurance

Universal Life Insurance is a life insurance that offers its holders flexibility in paying premiums, a death benefit, and a cash value account Term Life Insurance is a death benefit policy that pays the inheritors of the policyholder for a definite period Whole Life Insurance is permanent life insurance with a cash savings component

Insurance premium prices may change with interest and as the holder ages, but it is primarily inexpensive As it expires, the policyholder can either change the policy to permanent coverage, apply for its renewal for another term, or let the policy lapse It is considerably expensive as it presents guaranteed benefits for the insured’s lifetime

It permits borrowing against cash in savings, which grows tax-deferred over the lifetime. These policies do not have savings components like the other two. It has only guaranteed death benefits. It does not allow the insured to take a loan from the cash account.

Universal Life Insurance Taxation

As long as the cash account receives consistent addition of cash, it sustains tax-free development

Once the holder withdraws these funds, taxes will be levied on the amount the person takes

Suppose a person borrows from the cash value account and pays back the whole amount. This amount will be tax-free.


It accumulates a cash value that is available to the policyholder for use during their lifetime The policyholder has to bear various costs and fees to enjoy its benefits

It offers flexibility in paying premiums as long as they are enough to keep the policy active If one fails to maintain the premiums and the cash value, consequently, the policy will lapse

The policyholder can increase the death benefits, consequently gaining more benefits for the inheritors Sometimes lower premiums result in a decrease in death benefits, which leaves a lesser amount for inheritors

Conclusion FAQs Q1. What is universal life insurance?

Answer: A universal life insurance policy provides the insured lifetime protection rather than for a specific period. It also ensures a cash value savings benefit. Additionally, it gives policyholders a choice to pay flexible premiums.

Q2. Which is a better option, whole or universal life insurance? Q3. How can I cash out my universal life insurance policy?

Answer: You can cash out your policy in three ways. You can withdraw the cash either in whole or in installments. Furthermore, you can raise loan money against your cash account with a nominal interest credit. Another method is to surrender the policy.

Recommended Articles

This article explains universal life insurance’s meaning, types, benefits, components, and more. Here are a few articles to learn more about it,

Deregulation: Meaning, Causes, Effects, Examples, And Benefits

What is Deregulation?

Deregulation is removing, reducing, or replacing government rules to increase competition within the sector or industry. For instance, during covid, laws regarding doctors obtaining licenses before using telehealth systems were deregulated, as these laws were restricting Medicare beneficiaries’ access to remote treatment.

Deregulation aims to open up business operations, improve decision-making, and eliminate corporate constraints. It enables private banks to regulate their financial functions regarding their capital investments and allocations. It provides them the edge to compete globally.

Key Highlights

Steep competition fosters innovation, and consumers enjoy lower prices when there is perfect competition.

It encourages economic development by allowing businesses to operate more freely.

Also, smaller companies won’t be able to compete with bigger firms due to legacy growth over the years.

How Does Deregulation Work?

Start Your Free Investment Banking Course

Download Corporate Valuation, Investment Banking, Accounting, CFA Calculator & others

Reducing rules, regulations, and workings allows for greater investment, money, market, and exchange opportunities. Before the great depression, there was proper regulation of financial institutions. However, the learned lesson post the year 1929 was autonomy and independence. Banks had more freedom in deciding their financial standing, which helped them balance valuations and reduce the operating costs that the government controls in power.

Discourses concerning rules evolve; the fundamental reason is that some laws become ineffective and restrictive over time. An illustration would be how former US President Donald Trump relaxed various laws that acted as barriers to accessing health care, including telehealth, as part of his policy reaction to COVID-19. Hence, it is a must for positive economic growth.

Examples #1: Banking Industry

Banks in the United States were not allowed to undertake their client’s money to buy securities exchanges due to higher volatility. However, after the deregulation of the Glass-Steagall Act’s repeal in 1999, banks started investing the client’s money leading to further crashes in the market and loss of client’s money.

#2: Aviation Industry Importance

It provides autonomy that eases the mode of doing business and provides greater flexibility in the decision-making process.

The banks can enjoy lower prices as a capital investment due to the match-up of supply and demand variables that affect the financial world.

It helps create physical capital and financial resources.

Causes Market-growth Acceleration

It helps in accelerating market growth and the opportunities attached to it.

Business profitability improves economic growth.

Innovation Encouragement

Entrepreneurs can foster innovation and creativity in the financial landscape by experimenting with numbers.

Unnecessary regulation inhibits innovation.

Ensure Business Freedom

Businesses can have the freedom to innovate and experiment with new modus operandi.

The company gets the flexibility to follow less stringent policy measures.


New business opportunities exist in the marketplace due to less or no regulation that enhances investment opportunities.

It also increases competition among the firms, leading to perfect competition and lowering prices.

Due to the autonomy provided, businesses develop new products, cut costs, and focus on operational optimization.


It caters to economic growth by fostering autonomy, innovation, and higher expansion of production services.

Allows the new private players to try their hands at creating a healthy business environment.

It gives more flexibility to the government to keep a check on the market by introducing technology without getting into IT Acts.

Final Thoughts

Market failures are the key reasons to remove deregulation in the economy. An economy cannot function effectively without regulation as it keeps autonomy in check and restricts the stakeholders from making informed decisions. It comes with easing stringent policy restrictions concerning the internal economy, as it will boost the country’s reputation at a global level.

Frequently Asked Questions (FAQs) Q1. What is deregulation?

Answer: Deregulation is a procedure for reducing government control in a segmented market that typically helps gain a competitive edge. The fiasco between the components of regulation and the government non-interventions has created chaos in the market condition.

Q2. What is an example of deregulation?

Answer: There have been many instances of deregulation in the world. Some examples are the Airline in the US, Mail Delivery in the UK, and the Energy sector in the UK.

Q3. What are the reasons for deregulation? Q4. Who benefits from deregulation?

Answer: Deregulation benefits Businesses, corporations, and governments due to policy ease and higher autonomy.

Q5. What is another term for deregulation?

Answer: Privatization, re-regulations, and centralization are some other deregulation terms.

Q6. How deregulation helps the banks?

Answer: Deregulation provides a free hand to increase investment, capital, market, and exchange opportunities by slashing laws, regulations, and workings. It gives financial institutions and global banks autonomy to make informed decisions on investment opportunities.

Recommended Articles

We hope this practical guide from EDUCBA on deregulation was helpful. For further knowledge, we recommend these articles,

Circular Flow Of Income: Definition, Examples, Types, Methods

Circular Flow of Income Meaning

The Circular Flow of Income is a macroeconomic concept explaining how income or money flows through various sectors of an economy. 

For example, McDonald’s uses dollars to pay the landlord for the space it rents or its employees’ salaries. In either scenario, the dollar returns to someone’s wallet after entering their household’s income. The family or someone from the family then uses the received payment to spend on food at McDonald’s. Thus, the money finally returns to the beginning of the flow.

Start Your Free Investment Banking Course

Download Corporate Valuation, Investment Banking, Accounting, CFA Calculator & others

Key Highlights

The circular flow of income explains the flow of money from producers to households and back to the producers.

There are two aspects to this concept, namely, real flow and money flow

The three primary methods involved in the process are value-added, income, and expenditure method

Its analysis helps the government determine and adjust its monetary and fiscal policy.

Circular Flow of Income- How Does it Work?

Usually, businesses, individuals, and the government runs an economy

In a free market, companies produce and sell products to earn revenue. They use the income to pay wages to people who outsource their services to these firms

The households then partially spend their income on food, clothing, entertainment, etc., and use the rest for savings and buying things outside of the economy (imports), also called leakages

To equalize the leakages, some firms do business outside the country (exports), and some borrow money for investment. It is known as an injection, as the money eventually returns to the flow

The money spent on necessities by the citizens returns to the firms, which explains the Circular Flow of Income.

Example of Circular Flow of Income Example #1:

A ketchup factory’s factors of production are tomatoes, industrial land, and laborers. As a result, the households enjoy monetary compensation for the rented industrial land, farmers profit from selling tomatoes, and the laborers get wages.

Once the final ketchup bottles are in the market, the households purchase the ketchup bottles using wages, rent, or profits. The money goes to the producers, and factory owners, eventually completing the circular flow.

Example #2:

As a result, she uses the money from the rent to buy the furniture. Therefore, the money the XYZ company paid as the rent came back to them as business profits. It explains the income circular flow.

Circular Flow of Income Types Real Flow

It is the flow of factor services, like land, labor, and entrepreneurship, from households to companies

There is no involvement of money; both sides only exchange services

It generally helps determine an economy’s growth.

Money Flow

It explains the movement of money from the flow of factor payments, such as rent, wages, and interest from firms to households.

Here, there is an exchange of funds between households and firms

Nominal flow is another name for money flow.

Methods of Calculation & Formulas Value-added Method

This method calculates the national income as per the different production phases of goods and services

It aims to calculate the value added to the product during the various stages of production.

Formula: National Income = Net Domestic Product at Factor Cost + Net factor income from abroad

Income Method

This method totals the income individuals earn in exchange for their services. It takes into account the rent, interest payments, wages, and profits

It is also known as NDPfc, i.e., net domestic product at factor cost.

Formula: National Income = Rent + Wages + Profit + Interest + Mixed Income

Expenditure Method

It calculates the expenditures of individuals, businesses, and the government

The formula sums the consumer purchase (C), government expenditure (G), investments by business firms (I), and net exports (NX).

Formula: National Income = C + G + I + NX

Final Thoughts

The Circular Flow of Income is the economic concept of the constant flow of money. It shows the interdependence of different economic sectors. In addition, it highlights the link between earning and spending in an economy. Thus, it becomes vital to understand the income flow to understand the economic wealth of a nation.

Frequently Asked Questions(FAQs) Q1. What are the four sectors in the circular flow of income? Q2. What are the three primary income flows of an economy?

Answer: Total production, income, and spending are the three ways income flows in an economy. Production concerns the entire demand and supply of goods and services. On the other hand, income and spending consider the cash inflow and outflow through the economy.

Q3. What are Leakages and Injections in the Circular Flow of Income?

Answer: While leakages are withdrawals of money from the circular flow, injections are the addition of money. Leakage happens when individuals save money that does not pass through the regular flow—for example, savings, imports, and taxes. Injection occurs when households/firms borrow money from institutes like banks. It helps increase the flow of income in an economy—for example, investment, exports, and government expenditure.

Q4. What are the different phases of the Circular Flow of Income?

Answer: There are three phases in the circular flow of income: Generation, distribution, and disposition. In the generation phase, the firms initiate the production of goods and services with the aid of the factor service. In the distribution phase, income factors like rent, wages, etc., move from the firms to households. The last phase, i.e., the deposition phase, the public utilizes their income on the goods and services the firms generate.

Recommended Articles

This article entails information about the circular flow of income. It explains its types, examples, and more. You can learn more about similar topics from the following articles,

What Is A Shared Economy? Examples, Models, Types

Shared Economy Definition

A shared economy is a peer-to-peer economic model where individuals and businesses can easily exchange resources, goods, and services. For example, eBay enables customers to trade in or buy new or used items and deliver them to their houses using their interface.

In a shared economy, products and resources are allocated cooperatively among groups. One of its models, a peer-to-peer (P2P) based system, enables access to goods and services through a community-based online platform for purchase and sharing. The most common example is crowdfunding. It allows people to support one another’s initiatives financially, raise money for them, or buy their goods.

Start Your Free Investment Banking Course

Download Corporate Valuation, Investment Banking, Accounting, CFA Calculator & others

Key Highlights

A shared economy is based on pooling and sharing goods and resources. It utilizes a community-based digital platform that connects buyers and sellers to the marketplace.

The types include Real Sharing, gift-giving, and commercial shared.

There are three models: Peer-to-peer lending, crowdfunding, and co-working.

Peer-to-peer networks allow decentralized exchanges to occur and organizations to benefit from underutilized resources. However, it has legislative barriers and incidences of misuse.

Examples Example #1

An example of the shared economy is carpooling. The leading company in this industry is “Uber.” If two riders travel the same route, the platform encourages them to share a ride. It helps you save a lot of money.

Example #2

Co-working spaces like We Work provide sharing spaces for different businesses and startups to work under one roof. Budding organizations with low capital prefer using these workspaces over renting. The spaces boast conference rooms, canteens, recreational areas, and coffee machines.

Example #3

Education sharing has gained popularity recently. Businesses like Udemy bring teachers and students across the world together. Using technology, teachers can provide up-to-date lessons to their students no matter where they are.


Real sharing: It is when something is shared free of expectations. For example, you are donating money to an NGO.

Gift giving: When the sharing occurs with expectations. For example, you offer a good or service, hoping others will return the favor, like fixing a bug for a coworker.

Commercial sharing: Sharing happens to intend to earn money out of it. It includes investing in a business or using services like Uber and Airbnb.

Models Peer-to-peer Lending

It utilizes decentralized networks to transfer money without banks.

The platform stands as a middleman between buyer and seller.

Many platforms also provide loans that banks do not give.

These platforms help people borrow money at much lower interest rates than most banks.


Connecting donors and investors with entrepreneurs and business owners.

One can use this whenever one requires funding for a project or venture.

The owner offers a share in return.

Crowdfunding is less time-consuming and provides more success.


Various businesses share a single workspace.

Employees can come and work from a common shared space.

All the companies split the costs for electricity, rent, and maintenance.

Apartment Renting

Notable platforms like OYO or Airbnb provide accommodations to travelers who need them.

Hosts specify the price and the availability for travelers.

Education Sharing

With the help of technology, one can learn on online platforms.

Teachers can reach students around the world and deliver the latest learnings.

For example, there are online educational platforms like Coursera, Skillshare, Udemy, etc.

Fashion Sharing

Specific platforms allow people to share apparel and clothing with those who might need it.

Some examples are Rent the Runway, Y Closet, golden tote, and more.

Difference Between Shared vs. Gig Economy

Shared Economy

Gig Economy

It centers on the sharing, buying, and offering of products and services through an Internet platform. A gig economy offers flexible and transient employment opportunities for contract and freelancers.


It closes the gap between consumers and the owners of unutilized assets. It fills the gap between businesses and independent contractors.


The use of idle assets generates extra cash for asset owners and the accessibility of these assets to customers at a lesser cost while simultaneously providing convenience. There is a rise in accessible, cost-effective services and the ease and flexibility of flexible work schedules.


Prevent underutilization of assets – Sharing the same resources increases their use. No proper regulations – This is a rapidly growing model that authorities cannot keep up with.

Save money and resources – You can share resources for some time instead of renting or purchasing. Tax categories uncertain – Working abroad can incur different kinds of tax burdens.

Offers flexibility – You can finish the task according to your convenience. Few incentives and perks – Freelancers do not get the same perks and bonuses as regular employees.

Better utilization of resources – Sharing enables better utilization. Reduced Safety– Potential fraud and scams on digital platforms are risky.

Get the best price – You can compare prices with other platforms to find your best price. Volatile – May be vulnerable to market fluctuations.

Less impact on the environment –  It reduces the effects of wastage and pollution. Cooperation – Relies on close collaboration between people on both sides.

Final Thoughts Frequently Asked Questions (FAQs) Q1. What is a shared economy?

Answer: A shared economy is an economic model in which individuals share goods and services. It is also known as a collaborative economy. A peer-to-peer model uses a digital platform to connect buyers and sellers.

Q2. What platforms come under the shared economy?

Answer: This can change from place to place. But certain popular apps like Uber, Udemy, Airbnb, and businesses like We Work come under the umbrella of the shared economy. These platforms encourage users to pool and share their resources and divide costs.

Q3. What impact has the shared economy had?

Answer: The shared economy is relatively new and has disrupted traditional business sectors. It has multiplied post-pandemic. Companies that have ignored its benefits have found it difficult to survive in a rapidly changing world. The economy has revolutionized transportation, consumables, and services, among others. The healthcare sector will likely adopt it in the next few years.

Q4. How is the shared economy different from the gig economy?

Answer: The shared economy focuses on goods and assets. The gig economy is a model where a person performs a task in return for monetary compensation. It includes part-time gigs and freelance contracts as opposed to full-time employment. TaskRabbit and Lyft are examples of gig economy apps.

Recommended Articles

This article is a guide to the shared economy. We discuss its definition, types, models, and more. Read the following articles to learn more,

Update the detailed information about Barriers To Entry: Meaning, Examples, Types, Importance on the website. We hope the article's content will meet your needs, and we will regularly update the information to provide you with the fastest and most accurate information. Have a great day!