- •Харків. Вид. Хнеу, 2010
- •Харків. Вид. Хнеу, 2010
- •Introduction
- •Module 1. Basics of market economy Lecture 1. Basic economic terminology
- •1. Terminology
- •Economic resources
- •2. Economic reasoning
- •Choices made at the margin(край)
- •Three basic economic decisions
- •5. Economic forces
- •6. The role of theory in economics
- •Value judgments
- •Microeconomics and macroeconomics
- •8. Economics and other subjects
- •Lecture 2. Economic systems: capitalism, socialism and mixed economy
- •1. Evolving развитие Economic Systems
- •2. Socialism
- •3. Capitalism
- •Figure 2.1. The circular of income and expenditure in a market economy:
- •Specialization and Exchange обмен
- •4. Differences between soviet-style socialism and capitalism
- •Table 2.1 Capitalism’s and soviet-style socialism’s solutions to the three economic problems
- •5. Mixed Economy
- •Government and the Economy
- •Some modern models of mixed economy
- •6. Transition economy
- •Government price setting.
- •Passive macroeconomic policies.
- •7. Other classifications of economic systems
- •Lecture 3. Supply спрос and demand требование
- •1. Markets: purposes and functions
- •2. Demand
- •The Market Demand Curve and the Law of Demand
- •Table 3.1 a demand schedule for grade a eggs
- •Foundation for the law of demand:
- •Figure 3.2. Changes in demand
- •Figure 3.3. Changes in quantity demanded
- •3. Supply
- •The market supply curve and the law of supply
- •Table 3.2 a supply schedule for a eggs
- •4. The marriage of supply and demand (market equilibrium)
- •Lecture 4. Elasticity of supply and demand
- •1. Price elasticity of demand.
- •2. Price elasticity of supply.
- •1. Price elasticity of demand
- •Determinants of price elasticity of demand
- •3. The proportion of income consumers spend on the good.
- •2. Price elasticity of supply
- •Determinants of price elasticity of supply
- •Perfectly inelastic and perfectly elastic supply
- •Module 2. Basics of micro and macroeconomics Lecture 5. Business firm
- •3. Functions of business firms.
- •1. Terminology
- •Scale of production
- •2. Basic types of business enterprise
- •Pros and cons of corporate business
- •Other types of enterprises
- •3. Functions of business firms
- •4. Management
- •Lecture 6. Production, cost and profit
- •3. Variable costs, fixed costs, and total costs.
- •1. Production relationships
- •Period of Production
- •2. The law of diminishing marginal returns
- •Total product curve and marginal product curve
- •Average Product
- •3. Variable costs, fixed costs, and total costs
- •4. Measuring cost and profit
- •5. Normal profit and economic profit
- •Theories of profit
- •Profit as a pay for input
- •Table 7.1 Annual production possibilities for food and clothing
- •3. Law of increasing opportunity cost
- •4. Economic growth: expanding production possibilities
- •Lecture 8: Macroeconomics: economic growth, business cycles, unemployment, and inflation
- •2. Business cycles.
- •4. Inflation.
- •1. Economic growth and living standards
- •Productivity
- •2. Business cycles
- •Leading Indicators
- •3. Unemployment
- •Types of unemployment
- •4. Inflation
- •Types of inflation
- •Relationship between inflation and unemployment
- •Economic interdependence among nations
- •5. Macroeconomic policy
- •Types of macroeconomic policy
- •Lecture 9. Monopoly, oligopoly and competition
- •1. Monopoly
- •How monopoly is maintained: barriers to entry
- •2. Perfect competition
- •3. Monopolistic competition
- •Product differentiation
- •Price discrimination
- •4. Oligopoly
- •Concentration ratios
- •The competitive spectrum
- •1) Cartel.
- •Forming a cartel: directions and difficulties
- •2) Implicit Price Collusion.
- •3) Price war.
- •4) The Contestable Market Model.
- •5) Price leadership.
- •6) Price rigidity: the kinked demand curve model.
- •7) Entry-limit pricing.
- •A Comparison of Various Market Structures
- •Lecture 10. Money, banking and financial sector
- •2. The definition and functions of money.
- •1. Financial sector
- •Institutions and financial markets
- •Financial institutions
- •Types of financial Institutions
- •Financial Markets
- •Differences among Money Market Assets
- •The role of interest rates in the financial sector
- •References
- •Contents
Product differentiation
Product differentiation is crucial to monopolistic competition. In fact, product differentiation is really what stands between perfect competition and the real world. People differentiate among many similar products.
Price discrimination
Price discrimination occurs when a seller charges two or more prices for the same good or service.
Examples:
-
Doctors often charge rich patients 10 times as much for the same service as poor patients.
-
Airlines sometimes allow riders under 16 years of age to fly at half-fare ("youthfare").
The firm that practices price discrimination needs to be able to distinguish between two or more separate groups of buyers.
In addition to distinguishing among separate groups of buyers, the price discriminator must be able to prevent buyers from reselling the product (i.e., stop those who buy at a low price from selling to those who would otherwise buy at a higher price).
4. Oligopoly
Unlike a monopolistically competitive market, oligopoly is a market structure in which a few sellers dominate in sales of a product and where entry of new sellers is difficult or impossible. The product can be either differentiated or standardized.
An oligopoly is an industry with just a few sellers. How few? So few that at least one firm is large enough to influence price.
Is the product identical or differentiated? It doesn't matter. In the case of the steel, copper, and aluminum industries, the product happens to be identical; but in most other cases, the product is differentiated.
Concentration ratios
One way of measuring how concentrated an industry is, is to look at the percentage share of sales of the leading firms. This is called the industry's concentration ratio.
Economists use concentration ratios as a quantitative measure of oligopoly.
The total percentage share of industry sales of the four leading firms is the industry concentration ratio. Industries with high ratios are very oligopolistic.
Two key shortcomings of concentration ratios should be noted.
1. Don't include imports.
2. The concentration ratios tell us nothing about the competitive structure of the rest of the industry.
A second way is to calculate the Herfindahl – Hirschman index, which, it turns out, is a lot easier to do than to say.
The Herfindahl – Hirschman Index (HHI) is the sum of the squares of the market shares of each firm in the industry.
Example:
We'll start with a monopoly. One firm has all the sales, or 100 percent of the market share. So, its HHI would be 1002, or 100 x 100 = 10,000.
Find the HHI of an industry with just two firms, both of which have 50 percent market shares. Work it out right here:
502 + 502 = 2,500 + 2,500 = 5,000
Find the HHI of an industry that has four firms, each with a 25 percent market share:
252 + 252 + 252 + 252 = 625 + 625 + 625 + 625 = 2,500
The less concentrated an industry, the lower its HHI. And here's one last question. Imagine an industry with 100 firms, each with an equal market share. Without going through all the work, see if you can figure out the HHI.
It would come to 100: 12 + 12 + 12 . . . + 12 = 100.