Types of Market .
Market Power
Concept of
Ability of firm to raise Market
price of a
good
.
·
Greater
Firm can restrict
output Increase
price profits
-
>
-
·
① Perfect competition ex :
Vegetable Market (Close example)
: firs erelative to size
verylargeno of
of indus
is
:allhaveexactlyidenticalprodu Mallet Barriers to y
·
Perfect knowledge.
a
Individual firms Price takers MARKET POWER
-
-· NO
·
efficiency
-
productive
-
allocative
② Imperfect competition
Fairly largesmall
number
of firms
·
firms relative
are to the
industry
·
-
firms are
free to have and enter the industry
.
·
slightly differentiated products PRODUCT DIFFERENTIATION
·
:
BRAND LOYALTY
(H & M )
Clothing Brands Heusen Arrow etc.
ex :
zara van
, , ,
firms -
SOME MARKET POWER
Makers to some extent
price
efficiency productina
-
③ MONOPOLY ex
Railways, Patented Pharmaceuticals.
:
Indian
·
one
firm produces entire output/No close substitutes
supply of firm supply of industry
· -
Barries to
entry-v High
·
.
Individual firm - completelythe
·
Abnormal
Profits .
priemaker based on a
demon
economies scale
of
Barins to
entry Legal Barries
Anti
Patents
Behaviors
-
competitive
Productive x Allocative x.
efficiency
-
Regulators companieto
do NOT
of allow
Lack
Monoply leads to
of efficiency
-·
lowes output
Higher↓ rice forBehaviors
·
Anticompetitive .
·
⑨ OLIGOPOLY
few firms dominate the Market
High Herfindahl
Ratio / Herschman Index
High concentration
.
products7 Homogenous (oil)
·
Differentiated (smartphones)
Phenomenon collusion
of Interdependence s tendering of
· ,
Tendency of Intense
competition
collusion in
formal collusion
OPEC
oligopoly
·
Castel : ex :
~ tacit collusion
one dominant firm -
Mayabuse
its
position
>
·
anticompetitive practices
tendency of price war .
·
-
Individual
firms
Makeu ivex) Callocativx)
MONOPOLIES and
OLGOPOLIES
Potential for
Less
More
oriput ,
anti-competitive
Behaviour
price
.
Abnormal
L
profits
.
iufficiency
Lowes
consumer
choice
Grout Needs to Intervene .
I
How ? competition
Restrict
Mergers/takeovers commission
·
against price fixing
pass Laws
of
·
Selective product Banned
supply/retail India
· -
prevent abuse
Price controls of
dominant
position
·
Fines
for competitive Behaviors
anti
·
Break
up. Monoplies
unbundle
products
J-2
Goods
Types of
① Date v/s Public Goods .
Market
Goods
provided by the
there is "Huis' this determines market
demand
supply price .
a a
Public
goods :Marketmay fail
deliver certain
goods due fre rida
to to
I
Free Rider
. .
problem >Nonexclusionary good
-
Machine that clears air in
:
public
-
from
-
I want exclusive But others cannot be excluded
# I
pay it
consumption using .
-Even in need, desire to .
pay
=0
SOLUTION ?
govttakes general
A a
·
Public
govt-produces goods
.
·
NOTE ALL
goods produced byGort are NOT Publicgoods.
:
Taxpayers tax-Gort-produces public-for .
all
goods
#
opportunity
cost
Transferred from general public to
taxpayers.
:
② Intermediate v/s Final Goods (Based On Position in
production)
↓
to further modification
undergo further
economic
economic
modification
↓
consumed as such .
Ingredients
used as
in the
production process .
-
Capital goods assistants
consumed
in
production
Businesses)
FINAL
goods by
(Based on High Lifespan
-
ROLE in consumer Durables -
production process) goods
consumed
consumer)byNon-
low
lifespan
a
EXAMPLES
Machine Machine
ORE Steel
Body Machine
: Car
Machine Machine
Flower , Extract > Paint Machine
Intermediate
goods
·
Capital goods
·
Consumer Good .
·
Consumer Good
I
Buy
> -
Asian
paints sells Blue
paint
Monas Capital Godhe
-
,
Wholesaler Distributor
Sugar
Mill >
Is
↓ ->
Economic
(sugarcame comodificati - ero
Modificati
&
Retailer
Modificat
sugal) >
- Economic
Modificat
Restaurant You
further No Further er .
Modificate
economic
Modification
!
Congratulations completing
on UNIT-1
Macroeconomics
looks at the overall economic
activity
in the
country
·
economy t consumers (utility
2 children the
of
producers (profits)
parentofthe
gove-good economy
is
Equitable distribution
economic conNos
und
of
low and
Stable rate
of Income .
unemployment of Inflation
Monetary Policy -
enterestResea
>
is
Tools available with
govt
~
Fiscal
policy Taxation
~
govt spending .
The Macroeconomic
Language
:
Market National
Economy
Demand
Aggregate Demand 'Aggregate' Means Total.
supply Aggregate Supply
Price
Average Price Level
quantity National
Output
decrease in demand recession
increase in demand inflation
decrease ni
supply supply shock
increase in
supply economic
growth
.
·
The circular flow of
Income
In a
country
>
- The circular
flow of Money
.
Revenue
products
L J
Households FIRMS
9
F
Labour
wages
INTERNATIONAL MARKET
Z2o
Imports Revenue
products
L
zzo tax .
tax
Households
,
govt ,
FIRMS
9
F
Labour
wages ,
zzo
savings-BANK
C .
INTERNATIONAL MARKET
Z2o
Imports Revenue
-
Exports
products
L J
z2o tax tax
.
Households [
S
govt <
S
FIRMS
PUBLIC GOODS Public Goods
9
F
Labour
LOANS/
INVESTMENT
wages ,
zzo
savings-BANK
·
flow of Money in
circular an
economy
RFDTLeaky, seInjections .
Macroeconomics
CORE
Concepts
① Aggregate Demand
all goods and services in a
period of tima
to talspending
·
on
Total
'aggregate'
· =
.
aggregate demand summationof all privatedemande
·
i the cronomy
.
Components of AD
① Individuals - (households) -
consumption of goods
and services
② Firms ,
spend money on New
Capital,
Money spent on New
Capital INVESTMENT
-
Types of Capital ?
·
Recall -
Investment
<Madeby firms
onNewcapitaeal estate and Homes
capital expenditure
This is borrowed
.
Banks
from
Governments
- Spend
on
public goods .
government spending .
