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Unit IV Part B Monopoly for Principles of Micro Economics Bcom sem 1 Delhi university

Unit IV Part B Monopoly for Principles of Micro Economics Bcom sem 1 Delhi university

Unit IV Part B Monopoly for Principles of Micro Economics Bcom sem 1 Delhi university syllabus

Objective: Objective of the course is to acquaint the students with the concepts of micro economics dealing with consumer behaviour and make them understand the supply side of the market through the production and cost behaviour of firms.


Unit I: Introduction 12 Lectures

a) Demand and Supply: Determinants of demand, movements vs. shift in demand curve, Determinants of Supply, Movement along a supply curve vs. shift in supply curve; -Market equilibrium and price determination.

b) Elasticity of demand and supply.

c) Application of demand and supply.

Unit II: Consumer Theory 8 Lectures

Ordinal Utility theory: (Indifference curve approach): Consumer’s preferences; Interference curves; Budget line; Consumer’s equilibrium; Income and substitution effect; Price consumption curve and the derivation of demand curve for a commodity; Criticisms of the law of demand.

Unit III: Production and Cost 12 Lectures

a) Production: Firm as an agent of production. Concepts of Production function. Law of variable proportions; Isoquants; Return to scale. Economics and Diseconomies of scale.

b) Costs: Costs in the short run. Costs in the long run, Profit maximization and cost minimization. Equilibrium of the firm, Technological Change: the very long run.

Unit IV: Market Structure 10 Lectures

(a). Perfect Competition: Assumption; Theory of a firm under perfect competition; Demand and Revenue; Equilibrium of the firm in the short run and long run, The long run industry supply curve: increasing, decreasing and constant cost industry. Allocation efficiency under perfect competition

(b). Monopoly: Short-run and long-run equilibrium of monopoly firm; Concept of supply curve under monopoly; Allocation inefficiency and dead-weight loss monopoly; Price discrimination.

(c). Imperfect Competition: Difference between perfect competitions, monopoly and imperfect competition;

(i) Monopolistic Competition: Assumption; Short – run Equilibrium; Long run Equilibrium; Concepts of excess capacity; Empirical relevance.

(ii) Oligopoly: Causes for the existence of oligopolistic firms in the market rather than perfect Competition; Cooperative vs. Non cooperative Behaviour and dilemma of oligopolistic firms.

Unit V: Income Distribution and Factor Pricing 13 Lectures Demand for factors. Supply of factor, backward bending supply curve for labor concepts of economic rent; Functional Distribution of Income.

Unit IV Part B Monopoly for Principles of Micro Economics Bcom sem 1 Delhi university

monopoly exists when a specific person or enterprise is the only supplier of a particular commodity. This contrasts with a monopsony which relates to a single entity’s control of a market to purchase a good or service, and with oligopoly which consists of a few sellers dominating a market). Monopolies are thus characterized by a lack of economic competition to produce the good or service, a lack of viable substitute goods, and the possibility of a high monopoly price well above the seller’s marginal cost that leads to a high monopoly profit.The verb monopolise or monopolize refers to the process by which a company gains the ability to raise prices or exclude competitors. In economics, a monopoly is a single seller. In law, a monopoly is a business entity that has significant market power, that is, the power to charge overly high prices.Although monopolies may be big businesses, size is not a characteristic of a monopoly. A small business may still have the power to raise prices in a small industry (or market).

A monopoly is distinguished from a monopsony, in which there is only one buyer of a product or service; a monopoly may also have monopsony control of a sector of a market. Likewise, a monopoly should be distinguished from a cartel (a form of oligopoly), in which several providers act together to coordinate services, prices or sale of goods. Monopolies, monopsonies and oligopolies are all situations in which one or a few entities have market power and therefore interact with their customers (monopoly or oligopoly), or suppliers (monopsony) in ways that distort the market.

Monopolies can be established by a government, form naturally, or form by integration.

In many jurisdictions, competition laws restrict monopolies. Holding a dominant position or a monopoly in a market is often not illegal in itself, however certain categories of behavior can be considered abusive and therefore incur legal sanctions when business is dominant. A government-granted monopoly or legal monopoly, by contrast, is sanctioned by the state, often to provide an incentive to invest in a risky venture or enrich a domestic interest group. Patents, copyrights, and trademarks are sometimes used as examples of government-granted monopolies. The government may also reserve the venture for itself, thus forming a government monopoly.

Unit IV Part B Monopoly for Principles of Micro Economics Bcom sem 1 Delhi university

Micro Environment Factors

  • The competition: Those who sell same or similar products and services as your organisation are your market competition, and they way they sell needs to be taken into account. How does their price and product differentiation impact you? How can you leverage this to reap better results and get ahead of them?
  • The suppliers: Suppliers can control the success of the business when they hold the power. The supplier holds the power when they are the only or the largest supplier of their goods; the buyer is not vital to the supplier’s business; the supplier’s product is a core part of the buyer’s finished product and/or business.
  • The resellers: If the product the organisation produces is taken to market by 3rdparty resellers or market intermediaries such as retailers, wholesalers, etc. then the marketing success is impacted by those 3rd party resellers. For example, if a retail seller is a reputable name then this reputation can be leveraged in the marketing of the product.
  • The general public: Your organisation has a duty to satisfy the public. Any actions of your company must be considered from the angle of the general public and how they are affected. The public have the power to help you reach your goals; just as they can also prevent you from achieving them.
  • The customers: Who the customers are (B2B or B2C, local or international, etc.) and their reasons for buying the product will play a large role in how you approach the marketing of your products and services to them.

Unit IV Part B Monopoly for Principles of Micro Economics Bcom sem 1 Delhi university

Microeconomics  is a branch of economics that studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms.

One goal of microeconomics is to analyze the market mechanisms that establish relative prices among goods and services and allocate limited resources among alternative uses. Microeconomics shows conditions under which free markets lead to desirable allocations. It also analyzes market failure, where markets fail to produce efficient results.

Microeconomics stands in contrast to macroeconomics, which involves “the sum total of economic activity, dealing with the issues of growth, inflation, and unemployment and with national policies relating to these issues”. Microeconomics also deals with the effects of economic policies (such as changing taxation levels) on the aforementioned aspects of the economy.Particularly in the wake of the Lucas critique, much of modern macroeconomic theory has been built upon ‘microfoundations’—i.e. based upon basic assumptions about micro-level behavior.

Unit IV Part B Monopoly for Principles of Micro Economics Bcom sem 1 Delhi university

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