Here is a picture to show how an incumbent firm can take advantage of economies of scale in order to drive out competition. If it sets a price below CNE (the cost to new entrants) and above CI (the cost to the incumbent) then it can continue to make a supernormal profit whilst the new Read more about Limit Pricing[…]
1. PED = %Change in QD / %Change in Price 2. The price elasticity of demand is the responsiveness (how they change their demand) of consumers to a change in the price of a good. 3. The good is inelastic 4. Perfectly Elastic = -Infinite; Perfectly Inelastic = 0; Unit Elastic = 1; A value Read more about Quiz Answers[…]
I have created a quiz for the Edexcel Unit 1 Exam; you won’t be asked these questions in the exam, but you need to know the answers. The answers are in a separate blog post (see here). 1. How do you calculate PED? 2. Define PED 3. If the value produced by a PED calculation Read more about Unit 1 Quiz: Microeconomics (Basics)[…]
http://www.economist.com/news/finance-and-economics/21568364-how-antitrust-economists-are-getting-better-spotting-cartels-scam-busters The article above shows some different methods that anti-trust economists are now adopting in order to identify cartels. The main bulk of the article is based on the Benford Law which states that in a large number of populations the leading number is not uniformly correlated as one may expect. Instead the number 1 Read more about Methods to spot Collusion[…]
6 television firms were recently fined £1.2 Billion for colluding to fix prices of cathode rays in televisions. The result of this collusion was higher prices for consumers and thus larger profits for the television firms. The article can be read here. This shows the EU Competition Commission using its powers to prevent consumers losing Read more about Television Collusion[…]
Whilst doing some preparation for my Cambridge interview I came across this very good video explaining the global financial crisis. Its worth a watch!