Documents

Monopoly Case Study _ Indian Railways and Its Performance

Description
Description:
Categories
Published
of 2
All materials on our website are shared by users. If you have any questions about copyright issues, please report us to resolve them. We are always happy to assist you.
Related Documents
Share
Transcript
   Offers Fair Use Policy Help Centre Sign In /Essays/Economics  Print  Notifications   1 Disclaimer:  This work has been submitted by a student. This is not an example of the work produced by our Essay Writing Service. You canview samples of our professional work here.Any opinions, findings, conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect theviews of UK Essays.A monopoly is a market in which a single sellar sells a product which has no substitute.A monopoly (from the greek word ” mono” meaning single an“polo” meaning to sell). A monopoliest is a firm that is the only sellers of product ( good or services) that has no close substitute. Toothpaste coaland salt is under of monopoly . best example of reilways. There is two types of monopoly.1 PURE MONOPOLY- is that market situation in which thereis absolutely no substitute of the product and the entire market is under control of asingle firm.2 MONOPOLY EXISTS- when there is no close substitute to the product and also when there is a single producer and seller of the product.Single seller- the entire market control of a single firm. Production , distribution and selling of the product are all controlled by the same firm. Theris no competition.eg telephone, electricity, post and telegraph oil and gas were all government monopolies.Single product- a single seller sells a product which has no substitute or at least no close substitute in the market.No difference b/w firm and industry-very distinct feature of monopoly is that the firm and the industry are and the same.Independent decision making – entire market is undercontrol of a single firm can take decision about the price and output of its products whithoutany worry about decision of rival of firms.Restricted entry- a monopoly is charaterised by restricted entry of firm. PRICE SELLING FOR UNREGULATED MONOPOLIES Economists said that monopoly is power if it faces a downward sloping demand curve (see supply and demand). This is in contrast to a price takerthat faces a horizontal demand curve. A price taker cannot choose the price that they sell at, since if they set it above the equilibrium price, theywill sell none, and if they set it below the equilibrium price, they will have an infinite number of buyers (and be making less money than they could ifthey sold at the equilibrium price). In contrast, a business with monopoly power can choose the price they want to sell at. If they set it higher, theysell less. If they set it lower, they sell more.In most real markets with claims, falling demand associated with a price increase is due partly to losing customers to other sellers and partly tocustomers who are no longer willing or able to buy the product. In a pure monopoly market, only the latter effect is at work, and so, particularly forinflexible commodities such as medical care, the drop in units sold as prices rise may be much less dramatic than one might expect.If a monopoly can only set one price it will set it where marginal cost (MC) equals marginal revenue (MR) as seen on the diagram on the right. Thiscan be seen on a big supply and demand diagram for many criticism of monopoly. This will be at the quantity Qm; and at the price Pm. This is abovethe competitive price of Pc and with a smaller quantity than the competitive quantity of Qc. The offensive monopoly gains is the shaded in arealabeled profit (note that this diagram looks only at the case where there is no fixed cost. If there were a fixed cost, the average cost curve shouldbe used instead).As long as the price elasticity of demand (in absolute value) for most customers is less than one, it is very advantageous to increase the price: theseller gets more money for less goods. With an increase of the price, the price elasticity tends to rise, and in the optimum mentioned above it willbe above one for most customers. A formula gives the relation between price, marginal cost of production and demand elasticity which maximizesa monopoly profit: (known as Lerner index). The monopolist’s monopoly power is given by the vertical distance between the point where themarginal cost curve (MC) intersects with the marginal revenue curve (MR) and the demand curve. The longer the vertical distance, (the moreinelastic the demand curve) the bigger the monopoly power, and thus larger profits.The economy as a whole loses out when monopoly power is used in this way, since the extra profit earned by the firm will be smaller than the lossin consumer surplus. This difference is known as a deadweight loss. Introduction to Indian Railways Indian Railways (IR) is the state-owned railway company of India. Indian Railways had, until very recently, a monopoly on the country’s rail transport.It is one of the largest and busiest rail networks in the world, transporting just over six billion passengers and almost 750 million tonnes of freightannually. IR is the world’s largest commercial or utility employer, with more than 1.6 million employees.  /Essays/Economics The railways traverse through the length and width of the country; the routes cover a total length of 63,940 km (39,230 miles). As of 2005 IR owna total of 216,717 wagons, 39,936 coaches and 7,339 locomotives and runs a total of 14,244 trains daily, including about 8,002 passenger trains.Railways were first introduced to India in 1853. By 1947, the year of India’s independence, there were forty-two rail systems. In 1951 the systemswere nationalised as one unit, becoming one of the largest networks in the world. Indian Railways operates both long distance and suburban railsystems. Background The development of IR had its roots in the 1800s, when India was a British colony. The British East India Company and later, the British colonialgovernments were credited with starting a railway system in India.The British found it difficult to traverse great distances between different places in India. They felt the need to connect those places with trainsto speed up the journey as well as to make it more comfortable than travel by road in the great heat. They also sought a more efficient means totransfer raw materials like cotton and wheat from the hinterlands of the country to the ports located in Bombay, Madras and Calcutta, from wherethey would be transported to factories in England. Besides, the mid
Search
Similar documents
View more...
Tags
Related Search
We Need Your Support
Thank you for visiting our website and your interest in our free products and services. We are nonprofit website to share and download documents. To the running of this website, we need your help to support us.

Thanks to everyone for your continued support.

No, Thanks
SAVE OUR EARTH

We need your sign to support Project to invent "SMART AND CONTROLLABLE REFLECTIVE BALLOONS" to cover the Sun and Save Our Earth.

More details...

Sign Now!

We are very appreciated for your Prompt Action!

x