Learn Economics by Dr. Swati Gupta

Measures of Central Tendency or Averages Measures of central tendency refers to all those methods of statistical analysis which are used to calculate the average of a set of data. According to Clark and Sekkade, “Average is an attempt to find one single figure to describes whole of figures”. Types of averages- 1-     Mathematical averages: The mathematical averages are Arithmetic mean, Geometric mean and Harmonic mean. 2-     Positional averages: The positional averages are Median and Mode. Arithmetic mean Arithmetic mean or arithmetic average is defined as the sum of all values divided by the number of values.   There are two types of Arithmetic mean: 1-Simple Arithmetic mean 2-Weighted Arithmetic mean Simple Arithmetic mean- Individual series Direct Method- The simple arithmetic mean of a series is equal to the sum of variables divided by their number. Question 1[a]- Calculate the arithmetic mean from the following data by us...

EDGEWORTH DUOPOLY MODEL F. Y. Edgeworth, a famous French economist criticized Cournot’s assumption that each duopolist believes that his rival will continue to produce the same output irrespective of what he himself might produce. Edgeworth’s model follows Bertrand’s assumption that  each duopolist believes that his rival will keep his price constant irrespective of what price he himself sets. With this assumption, and taking the example of Cournot’s “mineral wells”, Edgeworth showed that no determinate equilibrium would be reached in duopoly. Assumptions: 1-     It has two firms. 2-     It is not essential in this model that the product of duopolists should be perfectly homogenous. This model will be applicable for slightly differentiated product or we can say close substitute also. However, in our analysis below we assume that the products of the two duopolists are perfectly homogeneous. 3-     Both firms compete with price...

BERTRAND’S DUOPOLY MODEL Joseph Bertrand, a French mathematician, criticized Cournot’s duopoly solution and put forth a substitute model of duopoly. According to Bertrand, two firms produce a homogenous good and compete in prices. There is no limit to the fall in price since each producer can always lower the price by underbidding the other and increasing his supply of output until the price becomes equal to his unit cost of production [marginal cost]. Theoretically, this competition in prices, ends with the firms selling their goods at marginal costs and thus making zero profits.  In Bertrand’s model, the producers first set the price of the product and then produce the output which is demanded at that price. Thus, in Bertrand’s adjusting variable is price and not output. Assumptions: 1- Duopolists produce homogeneous goods and consumers have no preference for either of the firms and, therefore, buy from the firm offering the good at a lower price. 2-Both firms compete with ...

DUOPOLY Duopoly is a market situation where there are only two sellers. Both the sellers are completely independent and no agreement exits between them. In spite of being independent, each seller has to carefully consider the indirect effects of its own decision to change its price or output or both, as it will affect the other. Duopoly can be with or without product differentiation. Features of duopoly 1-There are only two companies that share the market. 2- Both sellers within a duopoly are interdependent. Even each seller may affect the other by his market policies. That’s why each seller attempts to make a correct guess of the rival’s motives and actions. 3- Seller makes different policies basically price reduction for increasing the demand for the product. If a seller reduces the price of the product, the other will also do the same and it won’t impact on demand, but if the seller will increase the price, other will not follow it and it will cause to decrease in demand...

  Price and Output Determination Under Monopolistic Competition The concept of monopolistic competition put forth by Chamberlin is a true revolutionary as well as more realistic than either perfect competition or pure monopoly. Monopolistic competition is characterized by a large number of firms making slightly different products, in contrast with perfect competition in which all firms make the same good and perfect monopoly in which the firm makes a unique good. As monopolistically competitive firms differentiate their products, some consumers like certain brands more than others, which in turn provides a firm a bit of consumer loyalty. If a firm increase the price of its product, it does not lose all of its consumers. This is called market power and implies that the demand for a monopolistically competitive firm is downward sloping (much like a monopolist’s but at a smaller scale). According to Chamberlin “With differentiation appears monopoly and as it proceeds further, ...