Economics Essays

Price is closely related to the product itself. It is often difficult to gain a competitive advantage through pricing strategy; it is easy to be come non-competitive through poor pricing practices. It is possible to isolate pricing decisions; two broad areas can be separated. First, business firms are faced with the problem of establishing pricing policies and strategies. These are the broad guidelines under which more specific pricing activities take place. Second, managers are faced with the actual task of determining specific prices. The most important factors bearing on price policy decisions are external environmental elements and internal constraints. Research for policy decisions tends to rely on studies of industry structure and examination of internal secondary data. This research reveals the nature of price as a competitive variable and constraints on the flexibility of pricing.

Discuss.The standard of living of the working class is not only dependent on male real earnings, but also on unemployment, female and child real earnings, environmental conditions (working conditions, housing conditions, sanitary conditions) and institutional conditions (freedom, political rights, civil rights). Economic history has followed the path of development economics and tried to integrate these factors to get a more accurate picture of how living standards changed in the past. The discussion of how the standard of living for the working classes changed during the industrial revolution period from 1750 to 1850 has received new influence from work done by Floud using heights of army recruits during that period as indicator of health status and from work done by Lindert and Williamson (1983) giving new data for male nominal earnings, including rent in the cost of living index and adjusting for the weight of the different items in the index.

Developments in the industry often came from pioneering engineers with components being imported off the continent for the British industry. Britain was lagging behind other European nations. The industry established itself in the inter-war period by relying on entrepreneurs and engineers, such as Herbert Austin who built the first four wheeled English car by 1900. Austin also built the first low horse-power car to substitute the motor-cycle side-car and public transport. The pre-war industry had high production costs with poor managerial leadership with most manufacturers being family run, resulting in little asset growth within the company as profits were quickly distributed to employees or family.

The international oil-price rise of 1973 had a significant impact on the economies of Western Europe because it was the catalyst that aggravated existing and accumulating problems already present in the economic structure. There had been a decline in world economic growth in the late 1960s, and though there was rapid economic recovery in Western Europe by 1973, the economy was still unstable and had inherited problems. I believe this caused the decline of economic growth. The Organisation of Petroleum Exporting Countries (OPEC) had increased the initial price of oil by four times by 1974.

The Austrian born economist Friedrich Von Hayek presented some of the most influential theories on markets in the 20th century. As a defender of the free market and of classical liberal principles he believed that we must move away from a state-controlled or “planned” economy and towards a society based upon freedom of association and exchange according to the rule of law. He is credited as being the most prodigious classical liberal scholar of this century” and has been described as the central pioneering figure in changing the course of economic thought in the twentieth century.

The economist Adam Smith was the first to come up with the hypothesis that a firm’s aim is always to maximise profits. However, in recent decades, economists have questioned the reasoning behind Smith’s neo-classical theory of the firm, and have put forward their own alternatives. This essay will begin with a discussion of what, exactly, the neo-classical theory is, in which I will define the theory, and demonstrate how it works, before moving on to a discussion of its shortcomings. Following this I will go on to explain the reasoning behind criticism of the neo-classical theory, and just why other economists were, and still are compelled to come up with alternatives.

The technical issues of definition and the theoretical justification for using the contingent valuation method are discussed. This is followed by a consideration of what existence value is trying to categorize, and whether the ‘welfarist’ approach embedded in neoclassical welfare analysis is an appropriate framework for understanding such values. Finally, arguments for and against the use of existence value in cont-benefit analysis are assessed, concluding in a ‘third way’ that accepts it as a valid category of values to be considered in the project evaluation process, but asserts that the total valuation framework is not an appropriate method for assessing existence value for both economic and meta-ethical reasons.

The main focus is on whether or not information can be used to predict future returns. Information is given a broad definition in this context and includes all publicly available information. Some of the predictions and truths of the efficient market hypothesis are also examined. In the process, the design of tests used in the evidence contributes significantly to their results. Consequently, mention is made of the procedures of tests prior to results being examined.

Comment briefly on the view that their disagreements are as much a matter of ideology as of economics. John Maynard Keynes, who published “The General Theory of Employment, Interest and Money” in 1936, founded Keynesian Theory. During the 1930s the Classical economic theory failed to state the reasons for the economic problems in the great depression. They could not explain why the economy settled into equilibrium at a high rate of unemployment. While Keynes was convinced that because of imperfect markets a modern economy could be at equilibrium at any rate of unemployment. “[T]he postulates of classical theory are applicable to a special case only and not the general case, the situation which it assumes being a limiting point of the possible positions of equilibrium. Keynes concluded that an active fiscal policy is necessary to reduce high rates of unemployment. Throughout the 1960s and 1970s economists started to critique the Keynesian Theory and propounded a theory that stressed the efficiency of the free-market mechanism and the overriding importance of the money supply in economic policy. The monetarist concepts were originated from the Classical economics but they modified some of the Classical views.

Explain and discuss. An oligopoly is a market with only a few sellers, each offering a product similar or identical to the others. If the product is homogenous , there is a pure oligopoly. If the product is differentiated, there is a differentiated oligopoly. Since there are only a few sellers of a product, the actions of each seller affect the others. That is, the firms are usually mutually interdependent. The key point to make regarding markets price and output decisions are that there is no single theory of oligopoly (equivalent to that of perfect competition or monopoly) that exists because the behaviour of oligopolistic firms are determined by the strategic reaction and behaviour of their rivals and these reactions will differ according to the market situation. Therefore the markets price and output decisions are indeterminate.

The consumer possesses a significant advantage over suppliers who must compete for their custom, effectively placing economic power in their hands. However, problems arise when this theory is applied to the realities of national and international business economics. These disparities will be examined further in this paper.

Known primarily for a single work, ‘An Inquiry into the nature an causes of the Wealth of Nations.’ (1776), the first comprehensive system of political economy, Smith is more properly regarded as a social philosopher whose economic writings constitute only the capstone to an overarching view of political and social evolution. If his masterwork is viewed in relation to his earlier lectures on moral philosophy and government, as well as to allusions in The Theory of Moral Sentiments (1759) to a work he hoped to write on “the general principles of law and government, and of the different revolutions they have undergone in the different ages and periods of society”, then The Wealth of Nations may be seen not merely as a treatise on economics but as a partial exposition of a much larger scheme of historical evolution.

In order to explain this, the labour theory of value can be separated into 2 divisions; (Value in use and value in exchange) “The word VALUE, it is to be observed, it has two different meanings, and sometimes expresses the utility of some particular object, and sometimes the power of purchasing other goods which the possession of that object conveys. The one may be called ‘value in use’; the other, ‘value in exchange’. The things which have the greatest value in use have frequently little or no value in exchange… Those which have the greatest value in exchange have frequently little or no value in use.”

He started of his career as a lecturer at Glasgow University where was appointed Professor of logic and later switched to the post of Professor of moral philosophy. A well-educated man, he had knowledge and interests in a variety of subjects such as history, science, astronomy, philosophy, and physics. He was also a linguist and knew English, Latin, Greek, French, and Italian. His books “The Theory of Moral Sentiments” and “An Inquiry into the Nature and Causes of the Wealth of Nations” were both very well received. He revolutionized trade and economics of the 18th and 19th century by advocating free trade, privatisation and liberalization of the economy. Adam Smith’s ideas on economics have resulted in economic expansion, world trade, and privatisation of the market.

Overt collusion involves an illegal explicit agreement whereby firms cooperate with one another, whereas tacit collusion is an informal agreement with no succinct communication or cooperation regarding actions. Though the firms raise their own surplus by colluding; from a welfare perspective, collusion is inefficient. The monopoly outcome reduces total economic surplus via deadweight loss incurred by higher prices and lower output than what is socially the optimum. Both cooperative and non-cooperative collusion yield this outcome, and so competition authorities wish to deter both forms. This essay will explore the settings in which non-cooperative collusion operates most effectively, which will lead to an understanding of why competition authorities find difficulty in detecting it, let alone deterring it.

Discuss. To understand what the question is asking, a definition of an oligopolistic market is required before I will attempt to answer. An oligopolistic market is characterized by few firms and many buyers, there are a sufficiently small number of firms for interdependence to exist, meaning that each firms prospects depend on rivals as well as their own policies. This interdependence can lead to attempts at communication, coordination and collusion. All decisions made are strategic and rivals responses will have been taken into account. Each time a firm in an oligopolistic market adjusts either price or quantity, any revenue gain is at the expense of its competitors. The competitors whose profit margins are affected are likely to respond by altering their own price or quantity. From this we can understand why there is an incentive for firms to collude.

An externality is something that, while it does not monetarily affect the producer of a good, it does influence the standard of living of society as a whole. A positive externality is something that benefits society, but in such a way that the producer cannot fully profit from the gains made. A negative externality is something that costs the producer nothing, but is costly to society in general. Negative externalities, unfortunately, are much more common. A company that pollutes loses no money in doing so, but society must pay heavily to take care of the problem pollution caused. The problem this creates is that companies do not fully measure the economic costs of their actions. Neither the market nor private individuals can be counted on to prevent this inefficiency in the economy, so the government must intervene.

Specifically review the micro economic relating to externalities and the relative merits of alternative policy instruments. An externality is a cost or benefit from an economic transaction that parties ‘external’ to the transaction bear. Externalities can be either positive, when an external benefit is generated, or negative, when an external cost is imposed upon others. They occur when a decision causes costs or benefits to third parties, often, though not necessarily, from the use of a public good (for example, production which causes pollution may impose costs on people making use of the public good air). In other words, the participants do not bear all of the costs or reap all of the gains from the transaction. As a result, in a competitive market too much or too little of the good may be produced and consumed from the point of view of society, depending on incentives at the margin and strategic behaviour.

In practice, neo-liberal policies bear grave social and ecological consequences, undermine democratic principles, and ensure the rich become richer while the poor become poorer. Ultimately, nobody benefits from the creation of a dichotomous world. Consequently, despite its competitive focus, the neo-liberal system produces no winners. Neo-liberalism originated as a new form of liberalism, a theory prominent throughout the late 19th and early 20th centuries. Liberal theorists championed free trade, free competition, the elimination of government intervention in economic affairs, and individual liberty.

Highlight the usual forms of protectionism employed and the consequent influence on the domestic manufacturing sector – Protectionism is defined as the policy of protecting domestic industries from foreign competition by means of various barriers to trade. These include tariffs, quotas, subsidies, Voluntary Export Restrictions, stringent quality requirements and boycott or sanctions. We will look at each of these later in the paper.Economic theory strongly disapproves of protectionism; the central argument in favour of free trade devoid of restrictions is the Theory of Comparative Advantage. This proposes that each country should produce that good which its particular combination of

Show how they can be used to reveal how a market clears. Using diagrams, show also what might happen to prices and quantities for a normal good if, over several periods of time, there are steady increases in income per head and in technical progress: Where there is demand there is a supplier and sometimes suppliers can create demand. There are many factors that influence demand for goods and services in the market place; some are the result of natural demand born of basic necessity or perceived needs, and however firms can create desire for a product through the study and manipulation of the forces in demand and supply. Every firm which provides goods or services to fee paying customers must, by its very nature, charge a price for that good or service, to pay for its costs, have retained profits for investments and to keep its shareholders happy

This turns out to be a problem for the monopolist if he wants to engage in price discrimination, as he needs to identify various levels of willingness to pay. In this paper we shall look at the different devices that a monopolist can use to extract extra surplus from consumers when consumer type is not directly observable. In the second part of this essay we shall analyse the ways in which the existence of secondary markets affects the monopolist’s ability to price discriminate. In conclusion, we shall consider how the monopolist can interfere in those secondary markets. Before we start tackling the problem of how a monopolist is able to price discriminate when consumer type is not directly observable, we should first briefly define what a monopolist is. A seller is said to be a monopolist when he produces a good or a service for which there is no close substitutes

This assignment will compare the efficiency case for nationalisation with the efficiency case for privatisation in order to find out which theory is seen to be more efficient. By examining the privatisation of former nationalised industries such as the British railway system and highlighting the positive and negative changes that have taken place due to privatisation an assessment as to whether privatisation has increased efficiency will be formulated. To begin this assignment it is essential to highlight the history of privatisation in the UK

What Role Might A Price System Play In Overcoming The Disadvantages Of A Public (NHS) System? The question above challenges the ability of the free market to provide an efficient allocation of resources with regards to social and economic efficiency within the healthcare sector. Economic efficiency is defined as allocative (P=MC), productive (MPPl / Pl = MPPk / Pk) and x-efficiency (operating on the lowest possible AC and MC curves under monopoly); social efficiency results from the aforementioned three measures to create Pareto Optimality. Such a question is posed in response to the weakness of a publicly funded healthcare system despite the advantages that accrue from such a system. The rationale behind free healthcare is twofold; firstly, healthcare is considered by society to be universally desirable and to ration it through the price mechanism is seen as inequitable. This is taken from the moral standpoint of democratic governance and underpinned by welfare economics. Social indicators such as the public quality of life index (PQLI) illustrate the increase in societal well being through the allocation of healthcare on the basis of need and not simply income or wealth

Until now we all have seen how market acts as an invisible hand to maintain balance between suppliers and buyers when competition exists. We say that this type of market drives us to Pareto optimality where no one will be made better off without making the others worse off. This is a concept that will be discussed further in details. In general, where competition prevails, I believe that market works, that is, it takes us to Pareto optimality. However, when the pursuit of private interest does not lead to an efficient distribution of society’s resources; situations where individual behaviour does not lead to Pareto efficiency, it is said that the market has “failed”. Therefore, in this paper, I am going to identify the four major sources of market failure

Tax revenue is the biggest source of income for any government. Higher the tax revenue for the government, results in more funds available for it to spend and less for firms and individual consumers. Hence, the implications and the consequences of tax are a major issue in microeconomics. Individuals and the businesses are the general source of tax revenues for the government in an economy. There are two types of taxation, which the government can use: Direct and Indirect Taxation. Direct tax is that tax which is levied on income, either of individuals as income-tax or on businesses such as corporation tax. On the other hand, Indirect tax is one in which the government levies the tax on goods and services such as VAT in UK. The implication of government levying the tax on a normal good is a case of an indirect tax. Normal good is a good for which, when income rises the demand for product also rises (positive income elasticity). In order to examine the burden of a tax placed by the government on a normal good, we have to look at several demand/supply situations

Why is it important to estimate the cost of equity as accurately as possible? Whenever a firm makes a profit, it can take two possible actions. On one hand it could pay out the cash as a dividend. On the other hand the firm can invest the extra cash in a project. The project could be building a new factory for example. The aim of this project would be to provide future cash flows that would increase shareholder wealth. The project should only be undertaken if its expected return is greater than that of a financial asset of comparable risk. In this study I will be looking at the different ways of measuring the cost of equity and why it is important to measure it accurately

First-degree discrimination where a firm charges each consumer the maximum they are prepared to pay for the product. This is evident at stalls or street sellers where the customer bargains directly with the seller to bring the price of a product down to one they find acceptable. Second-degree discrimination where the prices charged to consumers varies according the amount they purchase. This is commonly seen in the concept of bulk buying, when greater quantities bought results in lower prices. Third-degree discrimination operates when consumers are grouped into two or more separate markets with different prices in each market. This is the most common type of price discrimination, with student discounts, pensioner fares and child prices being good examples of this category

Citizen Welfare can be measured using several economic forms of analysis. The current controversies over the introduction of top up fees have led people to evaluate the effective increase in consumer prices. Any change in policy can have both good and bad effects on different groups in society. For many problems in society, we wish to observe the effects of a policy change and its repercussions on the welfare of society. In this paper I will attempt to discuss the result of an increase in university fees by examining the Marshallian and the Hicksian measures of consumer surplus. I will consider the differences in analysis and the outcome of applying them to the situation

However, in economics the term market does not necessarily refer to a particular place, but to the mechanism or arrangement by which buyers and sellers of a commodity are able to contact each other for the purpose of economic exchange. The structure of market is the subject matter of this essay. Market structure refers to the types of market in which producers or firms operate. Various market forms are broadly classified on the basis of competitiveness of the market structure. The competitiveness of the market structure refers to the extent to which individual firms have the power to influence the market price of the commodity