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This is a short revision video on some of the key functions of the price mechanism including the signalling and rationing function in the allocation of scarce resources among competing uses.
Demand and Supply Analysis (Economics) Lecture NotesFellowBuddy.com
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This is a short revision video on some of the key functions of the price mechanism including the signalling and rationing function in the allocation of scarce resources among competing uses.
Demand and Supply Analysis (Economics) Lecture NotesFellowBuddy.com
FellowBuddy.com is an innovative platform that brings students together to share notes, exam papers, study guides, project reports and presentation for upcoming exams.
We connect Students who have an understanding of course material with Students who need help.
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Our Vision & Mission – Simplifying Students Life
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Students should be able to:
Understand the characteristics of this market structure with particular reference to the interdependence of firms
Explain the behaviour of firms in this market structure
Explain reasons for collusive and non-collusive behaviour
Evaluate the reasons why firms may wish to pursue both overt and tacit collusion
Individual supply is the supply of an individual producer at each price. Market supply is the sum of the individual supply schedules of all producers in the industry
Students should be able to:
Explain and evaluate the characteristics and necessary conditions for a monopsony to operate.
Evaluate the potential costs and benefits of a monopsony to both firms and consumers.
In this presentation, we will discuss the role and perception of pricing, factors that influences pricing decisions and pricing strategies.
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CONSUMERS, PRODUCERS, AND THE EFFICIENCY OF MARKETSFaHaD .H. NooR
CONSUMERS, PRODUCERS, AND THE EFFICIENCY OF MARKETS
Micro economics
Welfare economics is the study of how the allocation of resources affects economic well-being.
The equilibrium of supply and demand in a market maximizes the total benefits received by buyers and sellers.
The study of welfare economics explains the earlier studied one of the principles of economies that markets are usually a good way to organize economic activity.
The price that balances the supply and demand for a product is the best one because it maximizes the total welfare of consumers and producers.
Students should be able to:
Understand the characteristics of this market structure with particular reference to the interdependence of firms
Explain the behaviour of firms in this market structure
Explain reasons for collusive and non-collusive behaviour
Evaluate the reasons why firms may wish to pursue both overt and tacit collusion
Individual supply is the supply of an individual producer at each price. Market supply is the sum of the individual supply schedules of all producers in the industry
Students should be able to:
Explain and evaluate the characteristics and necessary conditions for a monopsony to operate.
Evaluate the potential costs and benefits of a monopsony to both firms and consumers.
In this presentation, we will discuss the role and perception of pricing, factors that influences pricing decisions and pricing strategies.
To know more about Welingkar School’s Distance Learning Program and courses offered, visit:
http://www.welingkaronline.org/distance-learning/online-mba.html
CONSUMERS, PRODUCERS, AND THE EFFICIENCY OF MARKETSFaHaD .H. NooR
CONSUMERS, PRODUCERS, AND THE EFFICIENCY OF MARKETS
Micro economics
Welfare economics is the study of how the allocation of resources affects economic well-being.
The equilibrium of supply and demand in a market maximizes the total benefits received by buyers and sellers.
The study of welfare economics explains the earlier studied one of the principles of economies that markets are usually a good way to organize economic activity.
The price that balances the supply and demand for a product is the best one because it maximizes the total welfare of consumers and producers.
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Running head Economic Analysis of Business ProposalEconomic A.docxcharisellington63520
Running head: Economic Analysis of Business Proposal
Economic Analysis of Business Proposal 7
Introduction
The onus of this economic analysis paper centers around both the “Thomas Money Service Inc.” and “Will Bury’s Price Elasticity” scenarios that collectively constitute a monopolist market structure. (Crane, 2014) wrote that the market conditions and information concerning the pricing strategies, quantity to supply to the entire market, product differentiation, as well as patenting of the innovations dominate these scenarios. As a result of this, many dilemmas emerge under monopolistic markets given that the commodities produced are not complete substitutes rather close substitutes to each other. A big number of producers and product differentiation about the pricing strategies and the price elasticity of demand are the material factors that this manuscript is tasked to discuss.
Overview of the two scenarios
For the case of “Thomas Money Service Inc.”, the financing institution started providing credit lending facilities back in the year 1940 as a consumer finance firm.Between 1940 and 1945, the company increased its activities from issuing small loans to households to offering business loans, mortgages, and business acquisition financing.Early in the year 1946, a lucrative opportunity emerged of providing equipment financing supplementing the high market demand for forestry and equipment.The year 1951 was a year of opportunities where the company bought an equipment manufacturing firm. Consequently, the company suspended the funding of other equipment brands due to the increased manufacturing, selling, and financing its brand of forestry and building equipment.
On the other hand, Will Bury started as a mere worker at the High Tech Digital Industries, where he gathered necessary innovations skills to start his music and digital business.In the garage operation, Will increased his knowledge and entrepreneurship culture to prompt the decision of starting the digital book enterprise that he invented. Will Burry was faced with many dilemmas of how to ascertain his technological application, which kind of clientele to serve, the way of distribution of the services to the people, the demand for books, as well as the pricing strategies.
Monopolistic competition markets structure
As per the two scenarios of Will Bury and Thomas Money Services, it is crystal clear that they are examples of monopolistic market structures. This form of a market is a blend of the monopoly and perfect competition and has been called monopolistic competition or competing monopolists as stated by (Hushke, 2010). In the real world, there is neither absolute monopoly that is an absence of competition, nor perfect competition, but monopolistic competition. The products are not complete substitutes for one another, but they are close substitutes.
With respect to monopolistic competition, the number of dealers (buyers and sellers) is not large, at any rate not as lar.
Competition is an economic process of interaction, interconnection and struggle between the enterprises acting on the market in order to provide better sales opportunities for their products, meet the needs of customers and obtain the greatest profit.
Learn Free Flow Of Market Economy
A market economy is the free flow of products and services based on supply and demand in the market.
Adam Smith famously coined the concept of the "invisible hand." The invisible hand is the power to allocate resources to production based on supply and demand automatically. Under a market economy, we answer the following questions:
Wajid khan asks What do you produce? We need to have the goods that are in the highest demand. How should it be made? Companies can maximize their profits by improving the quality of their products. Improving quality allows companies to charge higher prices.
Who should you produce for? Businesses must have customers willing to pay for their goods and services. Environmental sustainability is only sometimes included in these conversations. Read how economic power and investment are helping create a more sustainable planet.
What Is A Market Economy?
A market economy is an open economy that allows the free flow of goods and services between producers and consumers based on supply and demand. Wajid khan Mp discusses In a market economy, economic decisions are regulated by the market itself, which constantly finds ways to restore equilibrium.
What do you mean? As industry prices rise due to increased consumer demand, the labor required to produce more output increases proportionately. In this way, producers supply products that meet consumer demand. On the other hand, competitiveness keeps prices at a moderate level, which increases consumption in the long run—an economic system based on supply and demand. The quantity of product produced is determined by supply and demand.
Type Of Economy
There are four types of economies: a traditional economy, a command economy, a market economy, and a mixed economy. A market economy is a system in which economic decisions are made based on supply and demand in the market. The market determines what goods and services are produced, how much is created, and the price of the goods.
In a free market economy, resources are owned by individuals, and individuals rather than governments determine the allocation of resources. No political economy in the world has been recognized as a 100% free market.
Market Theory
A market economy uses the forces of supply and demand to determine the price and quantity of goods and services needed in the market. Entrepreneurs produce products or provide services that they sell to other consumers. Buyers and sellers must agree on terms of trade based on consumer preferences for the price of goods and services.
Profit determines the allocation of resources to various business and production processes the entrepreneur wants to make by producing a product or service that is more valuable than others for the customer. Successful entrepreneurs are given income that can be reinvested in their future businesses.
Modern Market Economy
Most modern world economies are between a pure market economy and a thoroughly planne
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www.onlineassignment.net is a 24*7 online portal dedicated to fulfilling students' need from across the globe. Be it assignment, project or thesis, we can provide you quality solution within the deadline set by you. All levels and from any course of study, you need not worry anymore.
Homework Help | Assignment Help | Project Help | Online Tutoring | Math Help | Programming Help | Engineering | Computer Science | AutoCad
www.onlineassignment.net
We at Online Assignment, embark upon providing high quality online education to our students who are spread all across the globe. Our endeavour is to help you realize your full potential by mentoring and guiding you through the process of doing your assignment.
We empower the academic knowledge and strength of the students and professionals by providing all possible academic assistance such as assignments help, homework help, project and research help, writing help in all the areas of studies broadly covered under Commerce, Arts, Science and Computers.
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Visit : www.onlineassignment.net
We at Online Assignment, embark upon providing high quality online education to our students who are spread all across the globe. Our endeavour is to help you realize your full potential by mentoring and guiding you through the process of doing your assignment.
We empower the academic knowledge and strength of the students and professionals by providing all possible academic assistance such as assignments help, homework help, project and research help, writing help in all the areas of studies broadly covered under Commerce, Arts, Science and Computers.
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The French Revolution, which began in 1789, was a period of radical social and political upheaval in France. It marked the decline of absolute monarchies, the rise of secular and democratic republics, and the eventual rise of Napoleon Bonaparte. This revolutionary period is crucial in understanding the transition from feudalism to modernity in Europe.
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How to Make a Field invisible in Odoo 17Celine George
It is possible to hide or invisible some fields in odoo. Commonly using “invisible” attribute in the field definition to invisible the fields. This slide will show how to make a field invisible in odoo 17.
How to Create Map Views in the Odoo 17 ERPCeline George
The map views are useful for providing a geographical representation of data. They allow users to visualize and analyze the data in a more intuitive manner.
This is a presentation by Dada Robert in a Your Skill Boost masterclass organised by the Excellence Foundation for South Sudan (EFSS) on Saturday, the 25th and Sunday, the 26th of May 2024.
He discussed the concept of quality improvement, emphasizing its applicability to various aspects of life, including personal, project, and program improvements. He defined quality as doing the right thing at the right time in the right way to achieve the best possible results and discussed the concept of the "gap" between what we know and what we do, and how this gap represents the areas we need to improve. He explained the scientific approach to quality improvement, which involves systematic performance analysis, testing and learning, and implementing change ideas. He also highlighted the importance of client focus and a team approach to quality improvement.
2024.06.01 Introducing a competency framework for languag learning materials ...Sandy Millin
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Published classroom materials form the basis of syllabuses, drive teacher professional development, and have a potentially huge influence on learners, teachers and education systems. All teachers also create their own materials, whether a few sentences on a blackboard, a highly-structured fully-realised online course, or anything in between. Despite this, the knowledge and skills needed to create effective language learning materials are rarely part of teacher training, and are mostly learnt by trial and error.
Knowledge and skills frameworks, generally called competency frameworks, for ELT teachers, trainers and managers have existed for a few years now. However, until I created one for my MA dissertation, there wasn’t one drawing together what we need to know and do to be able to effectively produce language learning materials.
This webinar will introduce you to my framework, highlighting the key competencies I identified from my research. It will also show how anybody involved in language teaching (any language, not just English!), teacher training, managing schools or developing language learning materials can benefit from using the framework.
Palestine last event orientationfvgnh .pptxRaedMohamed3
An EFL lesson about the current events in Palestine. It is intended to be for intermediate students who wish to increase their listening skills through a short lesson in power point.
Ethnobotany and Ethnopharmacology:
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Impact of Ethnobotany in traditional medicine,
New development in herbals,
Bio-prospecting tools for drug discovery,
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Reverse Pharmacology.
Synthetic Fiber Construction in lab .pptxPavel ( NSTU)
Synthetic fiber production is a fascinating and complex field that blends chemistry, engineering, and environmental science. By understanding these aspects, students can gain a comprehensive view of synthetic fiber production, its impact on society and the environment, and the potential for future innovations. Synthetic fibers play a crucial role in modern society, impacting various aspects of daily life, industry, and the environment. ynthetic fibers are integral to modern life, offering a range of benefits from cost-effectiveness and versatility to innovative applications and performance characteristics. While they pose environmental challenges, ongoing research and development aim to create more sustainable and eco-friendly alternatives. Understanding the importance of synthetic fibers helps in appreciating their role in the economy, industry, and daily life, while also emphasizing the need for sustainable practices and innovation.
1. Economics
Price Mechanism
The invisible hand – the workings of the price
mechanism
Adam Smith, one of the Founding Fathers of economics
famously wrote of the “invisible hand of the price mechanism”.
He described how the invisible or hidden hand of the market
operated in a competitive market through the pursuit of self-
interest to allocate resources in society’s best interest. This
remains the central view of all free-market economists, i.e.
those who believe in the virtues of a free-market economy with
minimal government intervention.
The price mechanism is a term used to describe the means by
which the many millions of decisions taken each day by
consumers and businesses interact to determine the allocation of
scarce resources between competing uses. This is the essence of
economics!
Adam Smith
The price mechanism plays three important functions in any market-based economic system:
The signalling function
2. The price of digital printing is coming down
– this will have an effect on the demand for
substitute forms of image printing. How will
traditional photo imaging retailers respond?
Firstly, prices perform a signalling function. This means that market prices will adjust to demonstrate
where resources are required, and where they are not.
Prices rise and fall to reflect scarcities and surpluses. So, for example, if market prices are rising
because of high and rising demand from consumers, this is a signal to suppliers to expand their
production to meet the higher demand.
Consider the left hand diagram on the next page. The demand for computer games increases and as a
result, producers stand to earn higher revenues and profits from selling more games at a higher price
per unit. So an outward shift of demand ought to lead to an expansion along the market supply curve.
3. In the second example on the right, an increase in market supply causes a fall in the relative prices of
digital cameras and prompts an expansion along the market demand curve
Conversely, a rise in the costs of production will induce suppliers to decrease supply, while consumers
will react to the resulting higher price by reducing demand for the good or services.
The transmission of preferences
Through the signalling function, consumers are able through their expression of preferences to send
important information to producers about the changing nature of our needs and wants. When
demand is strong, higher market prices act as an incentive to raise output (production) because the
supplier stands to make a higher profit. When demand is weak, then the market supply contracts. We
are assuming here that producers do actually respond to these price signals!
One of the features of a free market economy is that decision-making in the market is decentralised in
other words, the market responds to the individual decisions of millions of consumers and producers,
i.e. there is no single body responsible for deciding what is to be produced and in what quantities. This
is a remarkable feature of an organic market system.
The rationing function
Prices serve to ration scarce resources when demand in a market outstrips supply. When there is
4. a shortageof a product, the price is bid up – leaving only those with sufficient willingness and ability
to pay with the effective demand necessary to purchase the product. Be it the demand for tickets
among England supporters for the 2006 World Cup or the demand for a rare antique, the market price
acts a rationing device to equate demand with supply.
The prices for using the M6 Toll Road are a good example of the rationing function of the price
mechanism. A toll road can exclude those drivers and vehicles that are not willing or able to pay the
current toll charge. In this sense, motorists and road haulage businesses and other road users are
paying for the right to use the road, road space has a market price instead of being regarded as
something of a free good. The current charges are below:
Prices on the M6 Toll Road Day Night
June 2006 (06:00 - 23:00) (23:00 - 06:00)
Class 1 (e.g. motorbike) £2.50 £1.50
Class 2 (e.g. car) £3.50 £2.50
Class 3 (e.g. car & trailer) £7 £6
Class 4 (e.g. van/coach) £7 £6
Class 5 (e.g. HGV) £7 £6
What would happen if the day-time charges increased to £5 for cars?
The growing popularity of auctions as a means of allocating resources is worth considering as a means
of allocating resources and clearing a market. The phenomenal success of EBAY is testimony to the
power of the auction process as a rationing and market clearing mechanism as internet usage has
grown.
The price mechanism is the only allocative mechanism solving the economic problem in a free market
economy. However, most modern economies are mixed economies, comprising not only a market
sector, but also a non-market sector, where the government (or state) uses the planning
mechanism to provide public goods and services such as police, roads and merit goods such as
education, libraries and health.
In a state run command economy, the price mechanism plays little or no active role in the allocation
of resources. Instead government planning directs resources to where the state thinks there is greatest
need. The reality is that state planning has more or less failed as a means of deciding what to produce,
how much to produce, how to produce and for whom. Following the collapse of communism in the late
1980s and early 1990s, the market-based economy is now the dominant economic system – even though
we are increasingly aware of imperfections in the operation of the market – i.e. the causes and
consequences of market failure.
Prices and incentives
• Incentives matter enormously in our study of microeconomics, markets and instances of
market failure. For competitive markets to work efficiently all economic agents (i.e.
consumers and producers) must respond to appropriate price signals in the market.
• Market failure occurs when the signaling and incentive function of the price mechanism fails to
operate optimally leading to a loss of economic and social welfare. For example, the market
may fail to take into account the external costs and benefits arising from production and
consumption. Consumer preferences for goods and services may be based on imperfect
information on the costs and benefits of a particular decision to buy and consume a product.
Our individual preferences may also be distorted and shaped by the effects of persuasive
5. advertising and marketing to create artificial wants and needs.
Government intervention in the market
Often the incentives that consumers and producers have can be changed by government
intervention in markets. For example a change in relative prices brought about by the introduction
of government subsidies and taxation.
Suppose for example that the government decides to introduce a new tax on aviation fuel in a bid to
reduce some of the negative externalities created by the air transport industry.
• How will airlines respond?
a. Will they pass on the tax to consumers?
b. Can they absorb the tax and seek cost-savings elsewhere in their operations?
• If the tax raises price for air travellers, will they change their behaviour in the market?
• Is an aviation tax the most effective way of controlling pollution? Or could incentives for
producers and behaviour by consumers wanting to travel by air be changed through other more
effective and efficient means?
6. Agents may not always respond to incentives in the manner in which textbook economics suggests.
The “law of unintended consequences” encapsulates the idea that government policy interventions
can often be misguided of have unintended consequences! See the revision focus article on government
failure.
7. AS Markets & Market Systems
Theory of Supply
In this chapter we turn our attention to the decisions that producers make about how much of a
product to supply to a market at any given price. Once we have understood the basics of supply, we
can they put supply and demand together to consider the determination of equilibrium prices in a
market.
Definition of Supply
Supply is defined as the quantity of a product that a producer is willing and able to supply onto the
market at a given price in a given time period.
Note: Throughout this study companion, the terms firm, business, producer and seller have the same
meaning.
The basic law of supply is that as the price of a commodity rises, so producers expand their supply
onto the market. A supply curve shows a relationship between price and quantity a firm is willing and
able to sell.
8. A supply curve is drawn assuming ceteris paribus - ie that all factors influencing supply are being held
constant except price. If the price of the good varies, we move along a supply curve. In the diagram
above, as the price rises from P1 to P2 there is an expansion of supply. If the market price falls from
P1 to P3 there would be a contraction of supply in the market. Businesses are responding to price
signals when making their output decisions.
Explaining the Law of Supply
There are three main reasons why supply curves for most products are drawn as sloping upwards from
left to right giving a positive relationship between the market price and quantity supplied:
1. The profit motive: When the market price rises (for example after an increase in consumer
demand), it becomes more profitable for businesses to increase their output. Higher prices
send signals to firms that they can increase their profits by satisfying demand in the market.
2. Production and costs: When output expands, a firm’s production costs rise, therefore a higher
price is needed to justify the extra output and cover these extra costs of production.
3. New entrants coming into the market: Higher prices may create an incentive for other
businesses to enter the market leading to an increase in supply.
Shifts in the Supply Curve
The supply curve can shift position. If the supply curve shifts to the right (from S1 to S2) this is an
increase in supply; more is provided for sale at each price. If the supply curve moves inwards from S1
9. to S3, there is a decrease in supply meaning that less will be supplied at each price.
Changes in the costs of production
Lower costs of production mean that a business can supply more at each price. For example a
magazine publishing company might see a reduction in the cost of its imported paper and inks. A car
manufacturer might benefit from a stronger exchange rate because the cost of components and new
technology bought from overseas becomes lower. These cost savings can then be passed through
the supply chain to wholesalers and retailers and may result in lower market prices for consumers.
Conversely, if the costs of production increase, for example following a rise in the price of raw
materials or a firm having to pay higher wages to its workers, then businesses cannot supply as much at
the same price and this will cause an inward shift of the supply curve.
A fall in the exchange rate causes an increase in the prices of imported components and raw materials
and will (other factors remaining constant) lead to a decrease in supply in a number of different
markets and industries. For example if the pounds falls by 10% against the Euro, then it becomes more
expensive for British car manufacturers to import their rubber and glass from Western European
suppliers, and higher prices for paints imported from Eastern Europe.
Changes in production technology
10. Production technologies can change quickly and in industries where technological change is rapid we
see increases in supply and lower prices for the consumer.
Government taxes and subsidies
11. Changes in climate
For commodities such as coffee, oranges and wheat, the effect of climatic conditions can exert a
great influence on market supply. Favorable weather will produce a bumper harvest and will increase
supply. Unfavorable weather conditions will lead to a poorer harvest, lower yields and therefore a
decrease in supply.
Changes in climate can therefore have an effect on prices for agricultural goods such as coffee, tea and
cocoa. Because these commodities are often used as ingredients in the production of other products, a
change in the supply of one can affect the supply and price of another product. Higher coffee prices for
example can lead to an increase in the price of coffee-flavored cakes. And higher banana prices as we
see in the article below, will feed through to increased prices for banana smoothies in shops and cafes.
Cyclone destroys the Australian banana crop and sends prices soaring
Cyclone Larry has devastated Australia's banana industry, destroying fruit worth $300 million and
leaving up to 4,000 people out of work. Australians now face a shortage of bananas and likely price
rises after the cyclone tore through the heart of the nation's biggest growing region. Queensland
produces about 95 per cent of Australia's bananas. The storm ruined 200,000 tones of fruit and market
supply shortages will be severe because Australia does not allow banana imports because of the bio-
security risks in doing so. Bananas are grown throughout the year in north Queensland, with the fruit
having a growing cycle of around two months.
12. Source: Adapted from news reports, April 2006
Change in the prices of a substitute in production
A substitute in production is a product that could have been produced using the same resources. Take
the example of barley. An increase in the price of wheat makes wheat growing more financially
attractive. The profit motive may cause farmers to grow more wheat rather than barley.
The number of producers in the market and their objectives
The number of sellers (businesses) in an industry affects market supply. When new businesses enter a
market, supply increases causing downward pressure on price.
Competitive Supply
Goods and services in competitive supply are alternative products that a business could make with its
factor resources of land, labour and capital. For example a farmer can plant potatoes or maize.
Farmers can change their crops if there are sizeable changes in market prices and if expectations of
future price movements also change.
13. Thank You
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