hnd经济学1微观经济学outcome1.docx

1、hnd经济学1微观经济学outcome1Table of Contents1.0IntroductionMarco and Micro economic knowledge we had learned in this period is mainly to discuss about some major market structures in the entire market now. And they are oligopoly, monopoly and pure competitive market and so on. In this case, the Virgin Mobi

2、le had entered in mobile phone market in the UK, which is an oligopoly market. In this market, Orange, Vodafone, BT Cellnet and One2One are the oligopolists. 2.0OligopolyWhen a market or industry is dominated by a small number of sellers, we usually believe an oligopoly appears. And there are two ma

3、in features of oligopoly:Entry barriers: Its a great block for the new company to be a long-run part of an oligopoly market. Usually, many smaller firms operate on the periphery on such s market, which means these companies cannot reach the supernormal profits or affect much to market prices and out

4、put. Take Virgin Mobile (VM) as an example: Before VM engaged in the mobile phone market in the UK, there were some industrial giants conquered the market- Orange, Vodafone, BT Cellnet and One2One, which account for a large market share. Although VM is making profit, the money it earned is far less

5、than any one of these oligopolist.Non-price competition: As a few company be dominant to an industrial, pricing can be no longer an effective competitiveness for those oligopolistic firms. Compared with pricing, after-sales service, extension of new market and advertising seem to be more emphasized

6、by them. In this case, the VM is better to promote the competitiveness in such ways - improving the after-sales quality, expanding into new markets , building their own brand and so on.3.0Explanation for Diagram in OligopolyIn the oligopolistic market, the oligopolists may react diversely to the dif

7、ferent price variation trend of their rivals. If one oligopolist raises the price and other companies will not follow it to maintain the market share, however, if the company reduce the price and other companies must follow, which is to keep more market shares. It can be seen in the kinked demand cu

8、rve below. Before the price is higher than P1, the product demand is elastic that means the price raises and the total revenue will reduce. But when the price is lower than P1, the product demand is inelastic - the price reduces and the total revenue will also do. Thus, the company may able to reach

9、 a stable profit-maximizing equilibrium at the point G, so the companies in the oligopolistic market can not change the price optionally.4.0 Pure Competitive MarketIn the pure competitive market structure, the company can compete with each other perfectly. There are two common characteristics that a

10、re considered to be “competitive” are:Lower prices: Generally, a perfectly competitive market exists when every participant is a price takerwhich means the suppliers will have not able to raise price for facing elastic demand curves, and no participant influences the price of the product it buys or

11、sells. ( http:/en.wikipedia.org/wiki/Perfect_competition#Basic_structural_characteristics ) . So simply raising price will make a loss of demand and total revenue. The cross-price elasticity of demand can reflect the customers attitude towards some particular goods. The demand of substitute goods is

12、 holding pace with the price when it has any change. Conversely, the demand of complementary goods would decrease when the price increase. In this condition, customers will always find the most proper goods for themselves.Low barriers to entry: Compared with oligopoly, the new firms would be easier

13、to enter in the pure competitive market. And the entry of new participants will probably provide competition and ensure price is kept low in the long run. 5.0 Explanation for Diagram in Pure Competitive MarketIt is known to all that each individual firm is considered as a price taker. Customers may

14、not prefer to buy a product with a higher price. Because of the characteristic (perfect knowledge) of pure competitive market, neither buyers nor sellers can gain an advantage and firm may sell their goods at the point where they have the maximized profit. From the short run view of a firm in a pure

15、 competitive market structure, the explanation of the diagram is as follow:Theprice in a pure competitive market structure isdecidedbydemandandsupply, which canbeseenin panel on the right. When demand rises from D1 to D2, the equilibrium point goes from A to B andP2istheestablishedprice.Because of t

16、hepricewhichafirmusestaysatP2,marginalrevenueisequaltoP2atlastaveragerevenueisequaltoP2aswell.WhenMC=MR,profitmaximizationisachieved,sothepointwhichfirmswillstopproducingshouldbeCwhichordinateisP2andabscissaisQ2.Accordingtothediagramabove,whenquantityisQ2,ATCisequaltoP1.SoP2subtractP1isaverageprofit

17、andthenmultiplybyQ2canobtaintotalprofit. 6.0 Roles of Profit in Market EconomyDemand for factor resourcesScarce factor resources to flow where the expected rate of return or profit is highest. In the mobile phone market, when Richard Branson started to get profit in 2002, VM has 1,445,492 customers,

18、 which means stronger demands, more labour and capital are committed. With more scarce factor resources, VM may able to earn more profit. However, in a recession, the output, incomes and investment for VM must all fall, which may cause the profit loss. Thus the company should take action (for exampl

19、e cutting costs) to preserve its market position.Market EntryIf an individual company gets more profit than others, it must be a signal to other producers within a market that profitable entry may possible. After three-year efforts, Richard Branson made VM profiting. When it comes, many other firms

20、would be attracted to enter the industry. Thus, the competition would be increased and new products, technologies would be also updated in a higher speed.7.0 The other two alternatives to profit maximizationSatisficing behaviour Satisficing behaviour can be the substitute to profit maximization beha

21、viour. This behavioural method lays stress on how decisions are taken within the firm. When a decision is making, satisficing explains that individuals and groups should choose the first option that is good enough to address most needs rather all. Based on Herbert Simons work concerning behaviour -“

22、people possess limited cognitive ability and can exercise only bounded rationality when making decision in complex, uncertain situations”, satisficing behaviour encourages individuals and groups to attain a more realistic goal.If VM set a goal that expending their customers to 2 million in a year, f

23、inally it reaches 2.5 million. Thus wise we can take the goal for a receivable.Sales revenue maximizationThe goal of sales revenue maximization is to maximize the sales other than profits. The managers decision price and strategy of products. In this pattern of management, business can grow or susta

24、in market share, ensure survival, discourage competitors, achieve bonuses and build the prestige of the senior management.For the VM, when it initially entered the mobile phone market, it is a great approach that selling their products as many as possible with the lowest profit to enlarge their mark

25、et share.8.0 Influences on a Firm in the Short Run From the diagram above, which can be seen are total cost (TC) is the sum of fixed (TFC) and variable costs (TFC).In the beginning, when nothing is being produced ,the fixed costs will be equal to the total cost. The TC and TVC increase concurrently

26、with the quantity, but they are paralleled and the distance between them is TFC which is always invariable. And total cost is an upward trend. The diagram is about the short run cost curves. One time the fixed cost is excessively used, which will lead to the progressive decrease of marginal product,

27、 meanwhile the marginal product reduce will lead to the decrease of marginal revenue. Leading the reducing of the ATC when MCATC, on the opposite, it will lead to the ATCs increasing. Makingtheshort-runATCcurvelooklikeU-shaped,ontheotherside, thelawofdiminishingreturnswillleadtotheriseofmarginalcostofproductionasoutputincreases. WhenAVCincreasinghigherthanthefallinAFConetimetheoutputincreases,whichthemarginalcostisrisingwillleadtotheaveragetotalcostrising 9.0References( http:/en.wikipedia.org/wiki/Perfect_competition#Basic_structural_characteristics ) .