Absence Of Close Substitute Of Product Economics

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Monopoly refers to a market state of affairs where there is a individual house selling the trade good and there is no close replacement of the trade good, e.g. , Posts and cable, Issue of currency notes by RBI, etc. Monopoly is opposite of perfect competition. Since a monopolizer is more or less free to bear down any monetary value for his merchandise, hence, a monopolizer is said to be the monetary value taker non a monetary value shaper.

In monopoly, the differentiation between the industry and house is non at that place. The monopolist house is non merely a house, it besides constitutes the whole industry. It is the lone house bring forthing the merchandise in inquiry. The house, therefore, takes on the features of the industry and has a demand ( mean gross ) curve, which slopes downward merely as the demand curve for the merchandise of an industry. The demand curve of the monopolizer coincides with the industry demand curve. Its incline represents the extent of control of the monopolizer over the monetary value of the merchandise.

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Single marketer of the trade good:

There is merely one marketer or manufacturer of a trade good in the market. As a consequence, the monopoly house has full control over the supply of the trade good the monopolizer may be an single, affirm or a group of houses or a authorities corporation or even authorities itself. Absence of close replacement of merchandise: The merchandise sold by the monopolizer has no close replacement. Though some Substitutes if the merchandise may be available, yet they are no close replacements in the sense that such replacements are non indistinguishable to the merchandise. Difficult entry of a new house: The monopolizer controls the state of affairs in such a manner that it becomes really hard for a new house to come in a monopoly market and complete with the monopolizer by bring forthing a homogenous or indistinguishable merchandise. The monopolizer tries his uttermost to barricade the entry of a new house. Negative sloped demand curve: The demand curve ( or AR curve ) confronting a monopolizer is negatively aslant which indicates that a monopolizer can sell more merely by the heavy monetary value. Price has to be reduced to sell extra units. Since monopolizer is merely marketer in the market, hence the demand curve confronting him is the market demand curve.

Law OF Demand

The jurisprudence of demand explains the relationship between the monetary value and the measure demanded of a trade good, presuming other factors impacting the demand to be changeless. Harmonizing to jurisprudence, “ others things being changeless, measure demanded of a trade good is reciprocally related to the monetary value of the trade good. Price and demand moves in a opposite way.

In economic sciences, the jurisprudence of demand is an economic jurisprudence, which states that consumer purchase more of a good when its monetary value is lower and less when its monetary value is higher.

The Law of demand provinces that the measure demanded and the monetary value of a trade good are reciprocally related, other things staying changeless. That is, if the income of the consumer, monetary values of the related goods, and penchants of the consumer remain unchanged, so the alteration in measure of good demanded by the consumer will be negatively correlated to the alteration in the monetary value of the good.


Why must a Giffen good be an inferior good, but an inferior good demand non be a Giffen good?

The demand for inferior good lessenings when income rises. Demand increases for normal goods when income rises. The authoritative illustration of an inferior good is Ramen noodles. When income rises, one will purchase better nutrient and no longer hold to eat like a college pupil.

A Giffen good is any good where measure demanded additions when monetary value additions. Most goods have a negative snap of demand ; that is to state, when monetary value additions, measure demanded lessenings. Giffen goods have a positive snap of demand. Giffen goods besides lack close replacements. It is really hard to happen good illustrations of Giffen goods, but sometimes all right vinos are used as an illustration. A all right vino is frequently judged by it ‘s monetary value – high monetary value is declarative of quality. If the monetary value falls, less may be demanded because it is no longer considered a premium merchandise. Additionally, there are non a batch of close subsitutes for a all right, aged bottled of vino.

The negative income consequence is ever greater than the positive permutation consequence ( true for Giffen goods, but non all inferior goods ) . Since Giffen goods ever ever have negative income effects, they must ever be inferior goods. Therefore, a Giffen good is ever an inferior good, but an inferior good is non ever a Giffen good.

Q3. Mention latest alterations in economic systems of different states whose categorization is on the undermentioned footing:

Advanced economic systems: post-industrial states characterized by high per-capita income, extremely competitory industries, and well-developed commercial substructure. E.g. , Australia, Canada, Japan, United States, and Western European states.

Developing economic systems: low-income states characterized by limited industrialisation and dead economic systems. E.g. , most low income states in Africa, Latin America, and Asia, such as Bangladesh, Nicaragua and Zaire.

Emerging market economic systems: a subset of former developing economic systems that have achieved significant industrialisation, modernisation, improved life criterions, and singular economic growing. They are some 27 states in East and South Asia, Latin America, Middle East and Eastern Europe. Examples: Brazil, Russia, Africa, China.

The developed states are the high income states such as the USA and Canada in North America ; UK France, Germany, Norway, Switzerland, Japan and other states etc. These states have strong and diversified economic constructions, good developed industrial, agribusiness, and service sectors, efficient, skilled and good disciplined manpower, all of which contribute to their higher national and guarantee descent populating criterion to their people. The state must hold a strong and diversified economic construction. This means that the economic system must dwell of a figure of diverse and varied economic activities that are good developed. The national merchandise of the state should flux from all these diverse and varied activities and non from merely a few activities. Therefore, states like Saudi Arabia, Kuwait, and some other oil exporting states, are really rich, their people have high incomes that are comparable to the advanced economic states. It is called a developed economic system.

Economy of Japan

The economic system of Japan is the 3rd largest in the universe [ 8 ] after the United States and the People ‘s Republic of China and is the universe ‘s 2nd largest developed economic system [ 9 ] Harmonizing to the International Monetary Fund, the state ‘s per capita GDP ( PPP ) was at $ 34,739 or the 25th highest in 2011. Japan is a member of Group of Eight.

Japan is the universe ‘s 3rd largest car fabricating state, has the largest electronics goods industry, and is frequently ranked among the universe ‘s most advanced states taking several steps of planetary patent filings. [ 10 ] Facing increasing competition from China and South Korea, fabrication in Japan today now focuses chiefly on hi-tech and preciseness goods, such as optical equipment, intercrossed autos, and robotics.

Japan is the universe ‘s largest creditor state, [ 11 ] by and large running an one-year trade excess and holding a considerable net international investing excess. As of 2010, Japan possesses 13.7 % of the universe ‘s private fiscal assets ( the 2nd largest in the universe ) at an estimated $ 14.6 trillion. [ 12 ]


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