Economics Assignment 3, (Chapter 8)
This is part 2 of a 3 part series. Feel free to comment on any economics blog, the advice is welcome. As you remember from the blog on chapter 7; the assignment was to read a chapter, take the main ideas and key terms of economics and tie it in with our interest, in my case libraries.
As everyone knows, libraries a famous for lending out books. One book entitled Hitchhiker's Guide to the Galaxy, was often checked out often, because of the movie that came out with the same plotline and title. In one of the books in the series, a creature is described, the perfectly normal beast, which sounds similar to perfectly competitive market. Unlike the creature, the perfectly competitive market didn't receive its name because it is perfectly normal or competitive. Perfectly competitive markets have many buyers and sellers, all the firms selling identical goods, and all relevant information is available to buyers, and there is easy entry and easy exit into the market. This type of market is common, so it can be seen to us as perfectly normal. This is also the same way that a library functions. Using online databases, a patron can see what library has the book that they want. Each library has a materials budget to try and get new materials in order to appease the patron, and all of the libraries have books, music, computers and other resources. The only part of perfectly competitive market that doesn't apply to libraries is easy entry and exits into market. This barrier to entry keeps the market controlled by the government. Libraries are run by the government, they can't be opened by a random person looking to make a profit.
Entry and exit into a market also applies to market structure. Market structure is the setting that a seller finds itself in. Libraries are in a market with a limited competition. This is because no company can survive selling a product for $0.
Price takers cannot sell below the equilibrium price. Libraries are price takers because the "equilibrium price" is so low. ($0) Since the equilibrium price is $0 for libraries, libraries can be considered a price searcher because of the fact that if they need to raise money, they can manipulate fines in order to raise money. Libraries can also sell books that are no longer in circulation. The libraries have complete control of the price that these used books are sold for.
They can go above and below equilibrium price in order to sell books. This is because they aren't competing with franchise bookstores, they are only competing with used bookstores that no one knows about.
Just as the library can be compared to a perfectly competitive market, the library can be compared to a monopolistic market. This is because the library system are the only group that provide books at a price that consumers dream about. No other book store could survive selling goods for free. Libraries control the market for borrowed books. All of the substitutes cost money, which the consumer sees as too much for that goods.
Libraries are a public franchise. They are run by the government and have the right to provide goods and services for free or at a low cost. They are not competing with other corporations, because they are protected by the government. If the government didn't provide funding for libraries, the libraries would have to raise fees, and would be considered a natural monopoly. This is because it would be making just enough profit to survive in the market.
Antitrust laws were drawn up in order to prevent monopolies, but libraries don't hurt anyone's business. They provide used books to borrow. Libraries are techniquely not a business. If a person wanted to buy a high quality book, and take their time reading it they would go to a book store.
A library cannot be considered a monopolistic competitve market. This is because of the fact that there aren't many buyers and sellers. The only "sellers" are the library systems which provide the same product. There is no other seller that provides goods at the same price. Book store provide slightly different products, which would qualify as a monopolistic competitve market, but it isn't because of the fact that all book stores provide the same product in the same way. It is also very hard to enter and exit the market. Libraries are controled by the government, and book stores are mostly franchise businesses.
The oposite of a monopolistic competitve market is a oligopolistic market. An oligopolistic market is a market structure that is characterized by few sellers, (the only people in a market are other libraries in the library system), the production and sale of identical products, (as stated earlier) and signigicant barriers to entry. This supports all of the statements stated earlier.
Since no store attempts to challenge libraries, there is no need for a cartel agreement. A cartel agreement is where businesses act in a coordinated manner in order to eliminate any competition.
Also since libraries charge nothing for their goods, (the borrowing of books), there is no price discrimiation. Price discrimination is where a seller provides different prices to different buyers.
Key Terms to be used in Blog assignment;
Market Structure, Perfectly Competitive Market, Price taker, Monopolistic Market, Barrier to Entry, Price Searcher, Public Franchise, Natural Monopoly, Antitrust Law, Monopolistic Competitive Market, Oligopolistic Market, Cartel Agreement, and Price Discrimination.
As everyone knows, libraries a famous for lending out books. One book entitled Hitchhiker's Guide to the Galaxy, was often checked out often, because of the movie that came out with the same plotline and title. In one of the books in the series, a creature is described, the perfectly normal beast, which sounds similar to perfectly competitive market. Unlike the creature, the perfectly competitive market didn't receive its name because it is perfectly normal or competitive. Perfectly competitive markets have many buyers and sellers, all the firms selling identical goods, and all relevant information is available to buyers, and there is easy entry and easy exit into the market. This type of market is common, so it can be seen to us as perfectly normal. This is also the same way that a library functions. Using online databases, a patron can see what library has the book that they want. Each library has a materials budget to try and get new materials in order to appease the patron, and all of the libraries have books, music, computers and other resources. The only part of perfectly competitive market that doesn't apply to libraries is easy entry and exits into market. This barrier to entry keeps the market controlled by the government. Libraries are run by the government, they can't be opened by a random person looking to make a profit.
Entry and exit into a market also applies to market structure. Market structure is the setting that a seller finds itself in. Libraries are in a market with a limited competition. This is because no company can survive selling a product for $0.
Price takers cannot sell below the equilibrium price. Libraries are price takers because the "equilibrium price" is so low. ($0) Since the equilibrium price is $0 for libraries, libraries can be considered a price searcher because of the fact that if they need to raise money, they can manipulate fines in order to raise money. Libraries can also sell books that are no longer in circulation. The libraries have complete control of the price that these used books are sold for.
They can go above and below equilibrium price in order to sell books. This is because they aren't competing with franchise bookstores, they are only competing with used bookstores that no one knows about.
Just as the library can be compared to a perfectly competitive market, the library can be compared to a monopolistic market. This is because the library system are the only group that provide books at a price that consumers dream about. No other book store could survive selling goods for free. Libraries control the market for borrowed books. All of the substitutes cost money, which the consumer sees as too much for that goods.
Libraries are a public franchise. They are run by the government and have the right to provide goods and services for free or at a low cost. They are not competing with other corporations, because they are protected by the government. If the government didn't provide funding for libraries, the libraries would have to raise fees, and would be considered a natural monopoly. This is because it would be making just enough profit to survive in the market.
Antitrust laws were drawn up in order to prevent monopolies, but libraries don't hurt anyone's business. They provide used books to borrow. Libraries are techniquely not a business. If a person wanted to buy a high quality book, and take their time reading it they would go to a book store.
A library cannot be considered a monopolistic competitve market. This is because of the fact that there aren't many buyers and sellers. The only "sellers" are the library systems which provide the same product. There is no other seller that provides goods at the same price. Book store provide slightly different products, which would qualify as a monopolistic competitve market, but it isn't because of the fact that all book stores provide the same product in the same way. It is also very hard to enter and exit the market. Libraries are controled by the government, and book stores are mostly franchise businesses.
The oposite of a monopolistic competitve market is a oligopolistic market. An oligopolistic market is a market structure that is characterized by few sellers, (the only people in a market are other libraries in the library system), the production and sale of identical products, (as stated earlier) and signigicant barriers to entry. This supports all of the statements stated earlier.
Since no store attempts to challenge libraries, there is no need for a cartel agreement. A cartel agreement is where businesses act in a coordinated manner in order to eliminate any competition.
Also since libraries charge nothing for their goods, (the borrowing of books), there is no price discrimiation. Price discrimination is where a seller provides different prices to different buyers.
Key Terms to be used in Blog assignment;
Market Structure, Perfectly Competitive Market, Price taker, Monopolistic Market, Barrier to Entry, Price Searcher, Public Franchise, Natural Monopoly, Antitrust Law, Monopolistic Competitive Market, Oligopolistic Market, Cartel Agreement, and Price Discrimination.
posted by stolare at
8:30 PM
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