Tutor2u Economics Essay Plans
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35 December 99
Explain how a firm within an oligopolistic industry can easily attempt to increase its business An oligopoly is a market dominated with a few manufacturers each of whom has its own degree of market power. The industry is generally characterised by simply barriers to entry over time and each company must consider the likely result of other suppliers when considering changes in prices. Every seller creates branded products - and the strength of brand name loyalty is essential in keeping profits in the long term. Examples of oligopolistic industries must be mentioned in the beginning or created through the response: вЂў
Countrywide Food Suppliers
Package Holiday Industry
Key UK industrial banks and Building Communities
Telecommunications Sector - by way of example suppliers of mobile phone systems
Market power can be assessed in various techniques - like the market share taken by each of the leading businesses available in the market; and the capacity for firms for making abnormal or perhaps supernormal profits in the long run. Limitations to admittance allow makers to prevent the successful admittance of new suppliers into the market. The focus of market power within the oligopoly could be measured by the concentration percentage. The five-firm concentration proportion measures the combined business of the leading five firms in the market. If perhaps two businesses take most of the industry's require, the market can be described as a duopoly. Measures to boost and sustain market electricity: A differentiation should be produced between cost and nonprice competition inside the first half the essay. Refer to should be made from the following: Non-price competition
Spending on advertising and marketing to create and develop company loyalty among consumers. In the event that successful this kind of increases a firm's business and makes the need for individual item ranges more inelastic. Consumer's become less sensitive to price improvements if they tend to consume goods habitually. Influential advertising attempts to change client preferences and may even have the effects of damaging consumer choices by changing the perceived utility or satisfaction from consuming an item.
Consumer devotion cards; Online shopping and home delivery
24 opening hours and Assured after-sales service
Price wars are a prevalent characteristic of oligopolies. Companies may push away from initial profit maximisation in an attempt to boost cash flow or perhaps raise market share by hefty discounting of products sometimes below the average cost of supply (a " loss-leading strategy" ). Those companies able to exploit economies of scale will be better able to lower prices and still call and make an economic income. Economies of scale reduce the firm's long-run average costs and enhance the profit margin on each product sold. Deceptive pricing takes place when a company attempts to push another distributor out of the marketplace by decreasing prices strongly to impose losses about other businesses.
Mergers and take-overs are mechanisms to achieve external growth of a business and raise business. In recent years there has been a surge in merger activity in oligopolies - as an example the global car industry and telecommunications.
Tutor2u Economics Essay Plans
Discuss the many factors the federal government is likely to consider when attempting to assess whether or not a large dominating firm is definitely operating in the public interest (13) The public curiosity might be identified in terms of monetary efficiency inside the use of scarce resources. The answer should consider the economic well being effects arising from monopoly and oligopoly electrical power in a industry. Explicit refer to should be created from productive, allocative and dynamic efficiency. Circumstance against major firms with significant marketplace power
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