Learn Economics by Dr. Swati Gupta

COLLUSIVE OLIGOPOLY: CARTEL AS A COOPERATIVE MODEL The term collusion means to ‘play together’ in Economics. In collusive oligopoly, the firms cooperate with each other in taking joint actions to keep their bargaining position stronger against the consumer. When government action is responsible for bringing the firms together, then it is explicit collusion and when restrictions are introduced, firms may form themselves into secret societies, resulting in implicit collusion. Since formal or open agreements to form monopolies are illegal in most countries, agreements reached between oligopolists are generally tacit or secret. When the firms enter into such collusive agreements formally or secretly, collusive oligopoly prevails. Collusion may be based on either oral or written agreements. Collusion based on oral agreement leads to the creation of what is called as “Gentlemen’s agreement”. It does not consist of any records. Collusion based on written agreement creates what is known as...

Combined Arithmetic Mean Combined arithmetic mean can be computed if we know the means and the numbers of items in two or more related groups. If there are two groups, then following formula will be applied to compute the combined mean: Question 1: If average wage of 30 workers of one group is Rs158 and average wage of 40 workers of another group is Rs 162, then find the average wage of both groups. Question 2: If average salary of 100 employees of one company is Rs275 and average salary of 80 employees of another company is Rs 225, then find the average salary of the employees of both companies. Question 3: Average height of females in a company is 63 and that of males is 67. The average height for all the employees in the company is 64.5. Find the percentage of males and females in the company. Question 4: The monthly salary average paid to all 150 employees in a company was Rs. 300. The number of male employees was twice the number of female employees.   Mean salary paid to ...

Non-collusive  oligopoly and the kinked demand curve Independent pricing [Non-collusive oligopoly] : Independent pricing refers to independent action of each seller within an oligopoly industry. When different firms produce differentiated product, each firm follows an independent pricing policy. Every firm may estimate the reaction and calculation of its rivals and then fix its own price and output. Cournot’s duopoly model, Bertrand’s duopoly model, Edgeworth’s duopoly model, Chamberlin’s duopoly model and Sweezy’s kinked demand curve analysis explain non- collusive oligopoly. Independent action of sellers often leads to price wars when a price cut by one seller leads to retaliatory price cutting by other sellers. Independent action may also lead to stability in the long run when the firms become mature and learn by experience and try to avoid price wars unnecessarily. This leads to price stability or price rigidity in the oligopolistic market Price War : Price war may start when o...

Arithmetic Mean [Continuous Series] In continuous series, the value of each individual frequency distribution is unknown, therefore an assumption is made to make them precise and the assumption is that the frequency of the class intervals is concentrated at the center and on this basis, the midpoint of each class interval has to be found out. In continuous series, the mean can be calculated by any of the following methods: 1-     Direct Method 2-     Short cut Method 3-     Step Deviation Method Direct Method: The following steps are given below for calculating arithmetic mean in continuous series- Steps: 1.  Find out the mid value of each group or class. The mid value is obtained by adding the lower limit and upper limit of the class and dividing the total by 2. For example, in a class interval [10-20] the mid value is 2.  Multiply the mid value of each class by the frequency of the class [f]. 3.  Add up all...