Product has no close substitutes economics essay

First, it is difficult to estimate the net income accruing to a firm.

products with few substitutes

It's acceptable to most people to ride the bus when they can't afford a car. Again, the consumer will choose how much to buy of X and Y by minimizing expenditure [ 2 ].

They actively analyse, judge, and compare the material and immaterial properties of goods so to establish whether they can satisfy their needs, how well this can happen, and with what side-effects positive and negative.

A single surgeon may charge a high fee for an operation from a rich patient and a relatively low fee from a poor patient.

Close substitute example

He will view his demand curve as elastic, and sell more at a low price. When rise in income of a consumer leads to rise in his demand for a good, that good is called a normal good. The phenomenon is notable because it violates the law of demand, where by demand should increase as price falls and decrease as price rises. But on the other hand if the product is of sub-standard quality and the society is accepting that simply because it has no other alternative, then monopoly situation is not likely to last for long. Mal-Allocation of Resources: Price discrimination is, however, harmful to society when it leads to mal-distribution of resources as between different uses with the result that output, employment and income are not maximised. Similarly, holiday destinations compete with housework in week-ends, although most of people prefer the former to the latter. However, if the need is broad enough, the choice can be made across very different categories of products e. Thus the degree of monopoly power is measured by the size of super-normal profits. Lawyers charge from their clients in proportion to the degree of risk or amount of money involved in a law suit.

Second, the difference between monopoly super-normal profits and competitive super-normal profits is also considered as the measure of monopoly power.

Product differentiation is here fundamental. It has some excess capacity.

no close substitute feature of monopoly

A commercial catalogue of products can contain several sets of substitute goods, with the consumer induced to make comparison according to the information inside. These two newspapers are weak substitutes.

But when these combinations are based on unfair means, not only that the progress will be slow, but these will not grow.

substitute goods examples

Figure 13 illustrates this case.

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Substitute Goods