First of all is supply. Now straight to
the main point, there are six main factors bring changes in supply. There are
change in the price of factors of production, the prices of related goods
produced, expected future prices, the number of suppliers, technology and the
state of nature. The supply of energy bars increase when the price of a factor
of production used to production used to produce energy bars falls, the price
of a substitute in production falls, the price of a complement in production
rises, the expected future price of an energy bar falls, the number of
suppliers of bars increases, a technology change increases energy bar
production and a natural event increases energy bar production.
Next is demand. The six basic of
determinants of demand are the prices of related goods, expected future prices,
income, expected future income and credit, population, and preferences. The
demand increases if the price of substitute rises, the price of a complement
falls, income rises, expected future income rises or credit becomes easier to
get and the population increases.
Besides that
is competition. I can say that big company such Apple definitely has competitor
among them such as Nokia, Samsung and others. So it is categorised as oligopoly.
An oligopoly is a market form in
which a market or industry is
dominated by a small number of sellers (oligopolists). Because there are few
sellers, each oligopolist such as Samsung, Nokia are likely to be aware of the
actions of the others. The decisions of one firm influence, and are influenced
by, the decisions of other firms. Oligopolistic competition can
give rise to a wide range of different outcomes. In some situations, the firms
may employ restrictive trade practices (collusion,
market sharing etc.) to raise prices and restrict production in much the same
way as a monopoly. Where
there is a formal agreement for such collusion, this is known as a cartel.
These are the following characteristic of oligopoly. Profit maximisation conditions: An
oligopoly maximises profits by producing where marginal revenue equals marginal
costs. Ability to set price: Oligopolies are
price setters rather than price takers. Entry and exit: Barriers to entry are high. The most important barriers
are economies of scale, patents, access to expensive and complex technology,
and strategic actions by incumbent firms designed to discourage or
destroy nascent firms. Additional sources of barriers to entry often result
from government regulation favouring existing firms making it difficult for new
firms to enter the market. Number of
firms: "Few" – a "handful" of sellers. There are so
few firms that the actions of one firm can influence the actions of the other
firms. Long run profits:
Oligopolies can retain long run abnormal profits. High barriers of entry
prevent side line firms from entering market to capture excess profits. Perfect knowledge: Assumptions about
perfect knowledge vary but the knowledge of various economic actors can be
generally described as selective. Oligopolies have perfect knowledge of their
own cost and demand functions but their inter-firm information may be
incomplete. Buyers have only imperfect knowledge as to price, cost and product
quality. Last but not least Interdependence: With a small number of firms in a
market, each firm’s actions influence the profits of all the others firms.
Moreover, elasticity also plays an
important role. Elasticity is
the measurement of how changing one economic variable affects others. Elasticity has two types which are elasticity of demand and supply. Under
elasticity of demand, it has price elasticity of demand. Price elasticity of demand measures the percentage
change in quantity demanded caused by a per cent change in price. As such, it measures the extent of
movement along the demand curve. This elasticity is almost always negative and is usually expressed in terms
of absolute value since the negative can be assumed. In these terms, then, if the elasticity is greater than 1
demand is said to be elastic; between zero and one demand is inelastic and if it equals one, demand is unit-
elastic. A perfectly elastic demand curve is horizontal whereas a perfectly inelastic demand curve is vertical.
Graph below shows the elasticity of demand.
Second one is elasticity of supply; under it has price elasticity of
supply. The price elasticity of supply
measures how the amounts of good firms
wish to supply changes in response to a change in price. In a
manner analogous
to the price elasticity of demand, it captures the extent of movement along the
supply
curve. If the price elasticity of supply is zero the supply of a good
supplied is "inelastic" and the quantity
supplied is fixed. Graph below shows the elasticity of supply.
Last topic that I would like to relate is opportunity cost. Opportunity cost is the cost of any activity measured in terms of the value of the next best alternative forgone (that is not chosen). It is the sacrifice related to the second best choice available to someone, or group, who has picked among several mutually exclusive choices. The opportunity cost is also the "cost" (as a lost benefit) of the forgone products after making a choice. Opportunity cost is a key concept in economics, and has been described as expressing "the basic relationship between scarcity and choice". Opportunity costs may be assessed in the decision-making process of production. Given an example, if the workers on a farm can produce either one million pounds of wheat or two million pounds of barley, then the opportunity cost of producing one pound of wheat is the two pounds of barley forgone. Firms would make rational decisions by weighing the sacrifices involved.
In the
conclusion, what I learnt is I can think like an economist by exploring the
latest policies, data and current global issues.
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