Okay - here are a couple of questions I missed in the last few blogs (I tend to only look at the last one after awhile...my bad...) :)
Question: i was looking over the Unit 4 packet and i still dont quite grasph the difference between and factor/product and the nsupply/demand. The factor involves work (hiring for example), while the product involes the selling and buying. correct? How do you determine then whether its the supply or demand role? (Activity 43, lesson one, Part A-second column in that chart)Thanks much!
8:56 PM, April 24, 2007
Factor markets are looking only at things that make product - the factors of production (land, labor, capital, entrepreneurship). Most of what we do with factor markets is in labor. Anything having to do with purchasing a product from a store is a product market. Anything to do with hiring people or making things is a factor market (so therefore, supply really is a factor market, but we see it in the product market with what is produced).
In looking at the S or D of factor markets, you have to think about what is really being bought or sold. If the answer is labor - then it is a factor market. If it's capital, factor market. If it's...peanuts, it's the product market. So with the S & D questions that were in the packet (since I'm sitting in the ALC right now, I don't have the questions right in front of me), they dealt with both kinds and you had to figure out which market it applied to first, and then whether it was S or D, right?
So - if something says that the demand for computers goes up (product market), how does that affect the number of computer salespeople (factor market)? You would have to look at which is affected first (product market), and which part (demand) versus the secondary e/affect (factor market) on demand.
Am I just talking gibberish? Does this make any sense?
Okay, so what is the difference between a 1st, 2nd, and 3rd degree monopoly? (From the powerpoint).
11:21 PM, April 26, 2007
The "degrees" in monopoly are talking about price discrimination. I really didn't hit it because it hasn't been on the FRQ in at least 7 years - but you never know. :)
First degree will charge the highest price possible at each quantity. They are getting the highest possible CS shifted to profit because they are charging the highest possible amount. On the graph, they would be able to discriminate at every point from equilibrium to the demand curve, all the way over - that's why it's all colored in on that graph. This is the "perfect" discrimination because it allows the most profit for the monopolist.
Second degree is very similar to First degree - but falls into "block pricing" and offers the chance for different prices being charged to different people/groups depending on how much they purchase. So - if you buy a lot (like Sam's Club or something), your price will decrease with 2nd degree.
Third degree is the most common. The monopolist can discriminate against buyers on very noticable characteristics, like age (senior citizens discounts) or gender ("girls have no cover charge!"), or location (ever wonder why gas prices are always higher in Johnson Creek than here? It's right off the Interstate).