oligopoly

 market dominated by a  few large firms. It can form when significant barriers to entry exist. Examples of oligopolies in the United States include air travel, cola, breakfast cereals and household appliances

                               

BUDGET LINE

Budget Line:

The budget line is an important element analysis of consumer behavior. The indifference map shows people’s preferences for the combination of two goods. The actual choices they will make, however, depends on their income. The budget line is drawn as a continuous line. It identifies  the options from which the  consumer can choose the combination of goods.

Diagram/Figure:

In the fig. 3.9 the line AF shows the various combinations of goods the consumer can purchase. This line is called the budget line.

It shows 6 possible combinations of packets of biscuits and packets if coffee which a consumer can purchase weekly. These combinations are indicated by points A, B, C, D, E and. Point A indicates that 10 packet of biscuits can be purchased if the entire income of $60 is devoted to the purchase of biscuits. Similarly, point F shows the purchase of 5 packets of coffee for the entire income of $60 per week.

The budget line AF indicates all the combinations of packets of biscuits and packets of coffee which a consumer can buy given the assumed prices and income. In case, a consumer decides to purchase combination of goods inside the budget line such as G, then it involves  a total outlay that is smaller then the amount of $60 per week. Any point outside the budget line such as H requires an outlay larger than the consumer’s weekly income of $60.

The slope of the budget line indicates how many packets of biscuits a purchaser must give up to buy one more packet of coffee. For example, the slope at point B on the budget line is ∆Y / ∆X or 8 packets of biscuits, 1 = packet of coffee. This indicates that a move from B to C involves sacrificing two packets of biscuits to gain an additional one packet of coffee. Since AF budget line is straight, the slope is constant at -2 packets of biscuits per one packet of coffee at all points along the line

SUBSTITUTES AND COMPLEMENTS

SUBSTITUTES.
 

Substitutes is an increase in the price of one will increase the quantity demanded for other.For example,when the price of Coke goes up,the quantity demanded of Pepsi will go up..


COMPLEMENTS.

Complements is an increase in the price of one will decrease the quantity demanded for the other.For example,when price of oil is increases,the quantity of car will decreases.

monopoly

monopoly

                       

Since monopoly firm is the only firm in the market, the firm’s demand curve is also the market demand curve, P = D = AR. The demand curve is a downward sloping line. A monopolist will produce at a point where MR = MC because that is the profit maximizing output. However, the price will be charged at higher than AC to reap supernormal profit. 

Electricity can be classified as essential utility. The demand for electricity is relatively inelastic demand as the change in price do not directly affect the quantity demanded. Therefore, the demand curve look steep as shown in the graph.  For example, when the price of electricity rises up, consumers has no choice but to accept the fact. (TNB, 2011)

Graph 2

Malaysia GDP growth was expected to increase by 4.3% in 2013 and with population of 29 million. (The Star, 2013) With that figure, the demand for electricity is expected to increase by five to six percent in the next two years. 

                               

 At this price (P3), demand is more than supply. Consumers are willing to pay more than TNB is willing to supply. This can be result from the rise of production cost when government planned to remove the subsidy on electric. It is estimated that if the subsidy is removed, the true cost of power will exceed 40 sen per kilowatt-hour (kwh) compared with the current rate of 33. 54 sen/kwh (New Straits Times, 2013).

economy no shutdown and shutdown position

BLACKBERRY ETC
Before the iPhone penetrates the smartphone market, Blackberry or its nickname "crackberry" is indeed very popular. Coupled with the emergence of several other competitors, Blackberry failed to meet the demands of today's technology users. In fact, Canada's state-owned company lost $ 4.4 billion in the third quarter of 2013. A rebranding campaign was made to make Blackberry a device synonymous with work requirements. However, he was once again killed in Apple's hands.

shutdown position

DHL GERMANY

Germany's state-owned Deutsche Post or known as DHL in the United States is not able to fight its main competitors such as FedEx and UPS. In 2008, DHL was finally forced to 'close shop' on most of its air and home air operations hub in the US. They have also removed more than 15,000 workers. Currently, DHL still has international shipping operations at multiple locations throughout the US.

economy of scale

 Qu Puteh 

etua pegawai eksekutifnya, Datuk Seri Hasmiza Othman berkata, beliau menurunkan harga produk berkenaan yang sebelum ini berharga RM268 kepada RM168 kerana menyedari bahawa kos sara hidup semakin tinggi.

“Saya tahu ekonomi, kos semakin meninggi. Sebab itu saya turunkan harga Qu Puteh daripada RM268 menjadi RM168.

"Tak apalah saya kurangkan sikit kos iklan saya. Saya bagi pada anda,” kata Hasmiza yang lebih dikenali dengan panggilan Datuk Vida kepada Malaysiakini .

Read more at malaysiakni.com.my

note;Semakin banyak volume out put maka biaya rata-rata produksi semakin kecil sehingga keuntungan semakin besar.


jakel

Tarikh: 8 Disember 2014

Bersempena dengan jualan murah yang diadakan di Gedung Tekstil Jakel, Jakel Trading Sdn. Bhd. telah mengadakan satu sidang media bersama Datuk Mohamed Faroz B. Mohamed Jakel yang berlokasi di Wisma Jakel Kuala Lumpur untuk mengumumkan jualan ‘Jumbo Sale Penghabisan Stok’ yang bermula dari 21 November 2014 sehingga 4 Januari 2015 di semua cawangan.

indiffrence curve between kitkat and cadbury.

EXCLUSIVE: We love that! Wimbledon freezes price of kit kat and cadbury.

It’s the latest in a series of long running skirmishes between Cadbury and Nestlé, two of the world’s largest chocolate manufacturers.which is came with diffrence price and cheap.kit kat  came with 10% less than their competitor costs.its means we can buy a lot of chocolate everyday as like want to buy it.The fact is all of the people in the world like to eat chocolate as a daily meal.But it give a big competition of this company up to the customer like it or not.But the diagram below showed the quantity of chocolates daily of people needed.

oil and gas equilibrium

• Figure 2 is a more explicit representation of the long-run supply curve as we work to provide the world with 96 million barrels of oil per day.[2] The first reserves developed are the least expensive, from the on-shore Middle East at $10-$25 per barrel, then the Offshore Shelf at $40, and then from a variety of sources that keep price near $50 until we need 85 million barrels per day. Then the price to bring on new supplies rises rapidly, with U.S. shale at $65, oil sands at $70 and Artic oil at $75. These marginal suppliers all find themselves on the cusp of the 96.3 million barrels produced in 2015. Looking back, it is hard to imagine the long-run price of oil slipping under $50. Looking forward, global growth in demand at 1.0 to 1.5 million barrels per year will require higher prices near $65-$70.

MARKET EQUILIBRIUM AND GOVERNMENT INTERVENTION

MARKET EQUILIBRIUM

DEFINITION

The quantity in which producers are willing to produce and the consumers are willing and able to purchase.

 QUANTITY DEMANDED = QUANTITY SUPPLIED 

 

DETERMINATION OF EQUILIBRIUM PRICE AND QUANTITY

1. From demand and supply schedules
2.  From demand and supply curves

  
DEFINITION OF GOVERNMENT INTERVENTION
The imposition of certain directives by the government,which interferes with the market mechanism.

TYPES OF INTERVENTION

1. Price control(price floor or minimum price and price ceiling or maximum price)
2. Indirect tax and subsidy

PRICE CONTROL  
a)Minimum price(price floor)

• imposed by the government when market price is extremely low
• Where government help push up the price(agricultural products)
• At minimum price,supply exceeds demand:therefore,its creates SURPLUS. 

       

ADVANTAGES 
=Higher income for FARMERS 

DISADVANTAGES

1. Consumers have to pay higher price
2. The problem of surplus.Government has to buy the excess stock by using taxpayers money
3. The excess stock has to be disposed-causes wastage.

b)Maximum price(price ceiling)

• imposed by the government when market price is exorbitantly high
• usually imposed during inflation or war
• at maximum price,demand exceeds supply:therefore,it creates SHORTAGE.   

 



ADVANTAGES
Consumers pay lower price


DISADVANTAGES

1. Due to the problem of shortage,people are willing to pay higher price.This encourages black market and smuggling activities.
2. Since limited supply,government has to ratio or redistribute
3. Encourages exploitation by the producers.

    

 TAXES
 

DIRECT TAX

Imposed directly on to a person(income tax,company tax).

INDIRECT TAX

Imposed on an entity but that entity can shift the burden of paying tax to someone else(sales tax,import tax).

EFFECTS OF IMPOSING INDIRECT TAXES ON GOODS

 The imposition of indirect tax will cause the producer to reduce supply.Therefore,supply curve will shift to the left(Supply without tax -->Supply with tax). As a result,price goes up and quantity reduced.

    

Elasticity

FORMULA

DEGREE OF PRICE ELASTICITY OF SUPPLY

DEGREE	DESCRIPTION	VALUE OF COEFFICIENT	SLOPE OF SUPPLY CURVE
ELASTIC	%CHANGE Qs > %CHANGE P	SUPPLY ELASTICITY > 1
INELASTIC	%CHANGE Qs < %CHANGE P	SUPPLY ELASTICITY < 1
UNITARY	%CHANGE Qs = %CHANGE P	SUPPLY ELASTICITY = 1
PERFECTLY ELASTIC	AT LEVEL P,Qs is infinity	SUPPLY ELASTICITY = INFINITY
PERFECTLY INELASTIC	NO CHANGE IN Qs ALTHOUGH P CHANGES	SUPPLY ELASTICITY = 0

 

example for Tesco bread

inelastic demand

• for petrol

 petrol has few alternatives because people with a car need to buy petrol. For many driving is a necessity. There are weak substitutes, such as train, walking and the bus. But, generally, if the price of petrol goes up, demand proves very inelastic.

elasticity of supply

Given the following data for the supply and demand of movie tickets, calculate the price elasticity of supply when the price changes from $9.00 to $10.00.

We know that the original price is $9 and the new price is $10, so we have Price (Old) =$9 and Price (New) = $10. From the chart, we see that the quantity supplied when the price is $9 is 75 and when the price is $10 is 105.

So we have:

Price (Old) = $9
Price (New) = $10

Quantity Supplied (Old) = 75

Quantity Supplied (New) = 105