MONOPOLY...

There is a brand in Malaysia we are very familiar with. We need it badly for our daily life which is Tenaga Nasional Berhad (TNB). It is also can know as Monopoly. TNB is the only firm in Malaysia that produces product or services that have no close substitutes. The service provided by TNB is electricity. Therefore, Tenaga Nasional Berhad has the ability to control over the price in the market without losing all demand for its product, because price of TNB is inelastic. 

Why is no firm allowed entry to this industry to produce electricity?? The reason is because of different type barriers to entry. For example, a type of barriers of entry is patents. Patents is the license that is given by the government to the TNB for exclusive rights to a process, design or new invention for a designated period of time. This prevents other firms from entering the market to produce the same product. 

TNB and other monopoly firms are pretty safe :3

An extra example for barrier to entry is TNB has ownership of raw materials. For example, TNB owned the raw materials of coal in certain places in Malaysian. This has help TNB easily to produce more electric supply.

In June 2011 TNB has increased the price by 7.12%. But what can a Malaysian do? Complain about the increase in price? There is no way!! We have no choice; we still have to pay for the electricity because it’s a need for our daily life be it at home or anywhere we go. Beside that, we now live in the advancement and technology development of the society, electricity is very important for us. For example, Hypermarket cannot operate as usual and everything in our house it all requires electricity. 

Omg bloody tears, do you see how important electricity is?

Lady Gaga is crying because her house has no electricity T__T

References

http://www.tnb.com.my/announcement/2011/05/increase-in-electricity-tariff.html

http://www.tnb.com.my/tnbf/intro.php

     

ELASTICITY...

If you know who she is, then you would know that she loves elasticity ;)

Price elasticity is the measure of response of the people to changes in economic variables. For example price elastic in demand means that if there is a price increase, then the demand for that particular good decreases. This is due to the fact that there are substitutes present.

An excellent example would be buying different brands of toothpaste.

Toothpaste. =)

 If price of Colgate increases, then people would start buying other brands like Darlie.

BAD COLGATE, BADDD!!!

This man bought Darlie instead of Colgate. =(

Price inelastic of demand on the other hand means that if prices increase, there would be very little change in demand. For price inelastic products, substitutes are very limited or there are no substitutes at all. Another reason would be because it is a necessity good. Reasons would be like the increase in the price of petrol. If Shell and Petronas decides to increase their price of petrol, we would still purchase it because there are no other substitutes unless you buy a hybrid car, which also needs some amount of petrol. 

OMG T__T

Consumers are disappointed :(

HAHAHAHA HYBRID CARSS.

There are also unit elastic , perfectly elastic and perfectly inelastic of demand. Basically, what unit elastic means is that a change in the price would have the same change in demand, for example if the price increases one ringgit, then the good will decrease one unit, causing revenues to be unchanged. Perfectly elastic of demand just means that if prices increase, the demand of the product would be zero because the buyers are sensitive to the change in price. Lastly, the perfectly inelastic of demand means that the increase in price would have a zero effect in the change in demand. 

Perfectly elastic graph

Perfectly inelastic graph.

http://www.extension.iastate.edu/agdm/wholefarm/pdf/c5-207.pdf

PERFECT COMPETITION

Perfect competition exists when there is a very large number of small companies trading in the same or very similar commodities or services, and none of whom can affect the price by increasing output or restricting it.Also, the entrepreneurs have perfect knowledge about costs and prices across the market. Everyone knows the state of everyone else's costing and has perfect information on the likes and dislikes of buyers. There are no barriers to entry into the market. Anyone can join if they believe there is money to be made.

But as soon as one trader begins to advertise or use a brand name to attract trade, the market perfection will be lost. 

When each trader tries to create a niche in the market, by claiming higher quality or a long-established family tradition for service, the competition will become less than perfect.

The petrol industry would be the perfect example for this topic

The many petrol companies. ( I am a shell user by the way.)

. 

Petrol companies like Petronas, Shell, Esso, Petron and etc sell petroleum and diesel at a fixed price because it is under the government influence. Government needs to set the prices of petroleum and diesel at a fixed price so that it will be equal . The market share will also be automatically adjusted to constant because there are too many companies selling petroleum and diesel nowadays.

Example of what will happen if the price of petrol is not controlled by the government.

I AM IN TEARS T__T

THIS PUMP TREATS MONEY AS FOOD....

Brief diagram about the structure of perfect competition.

http://www.bmwclubmalaysia.com/forums/showthread.php?52425-Shell-vs-Petronas

OLIGOPOLY

Oligopoly is a type of market structures, where there are few large of sellers competing in the market. The product of producer can be divided into two areas, which are homogenous and differentiated products.

Cinema is a square place that produces movie film, normally it is call movie theater.

GSC cinema is promoting a birthday voucher to GSC members. On the member's birthday month they will receive a free movie ticket and 20% discount on their meal at Glitters Café. Glitters Café is a personal café that is run by GSC, they serve a variety of delicious food there.  Apply for a member card to get a promotion or voucher in GSC cinema.

On the other hand, TGV cinema is promoting “Monster University Combo”. “Monster University Combo” is a limited edition set which includes a tumbler of soft drink and a regular pop-corn. TGV also promote cheaper ticket price on standard seat for students and seniors on weekdays and shows before 6pm. Moreover, during weekends and holidays before 12pm, TGV discounts over 30% per ticket, and  it is open for public.

=)

REALLY?!!!

     

For MBO cinema, it is promotional giveaways such as free screening for specific movies but its is only open for members and only at certain MBO branch only. MBO is giving out poster of the famous movie “Despicable Me 2” for everyone who purchases two movie tickets.

Firms cannot control over price in the market, because each firms plan their own promotion to survive. All the product related firms must have mutual interdependence to the price. Each producer plan to defeat others in the market, so as to promote themselves.

There is a high entry barrier in the market because of the difficulties to enter the market. Compete or cooperate is the only dilemma that oligopoly faced. We cannot merge cinemas to a cinema. Imagine if we merge all the cinema, the cinema owner will rise or fall their price casual. But, cinemas can form a cartel. A cartel is an illegal group of firms acting together to limit output, raise price, and increase profit. Those firms which are in oligopoly market can face the temptation to form a cartel, however cartels often break down.

 Thus, non-price competition is the other way that the firms fighting for. About non-price competition it involved brand loyalty, advertisement, marketing, special offer, packaging and after sales service.

In my opinion, oligopoly is a stable competing in the market, it doesn’t look like monopoly the only firm control the market, and perfect competition many firms competing in the market. We can only focus on those firms competing in the market and their strategies to survive. Because of lack of cooperative, there are many ways of competing in the firms. People can live in an interesting world and no more boring life due to firms competing.   

List Of Reference

1) http://www.gsc.com.my/Promotions/Current-Promotinns/Birthday Vouchers/PromoDetails/

2) http://www.gsc.com.my/GSC/Features/About-Glitters/

3) http://tgv.com.my/promotions/fnb/monsters-university-combo

4) http://www.mbocinemas.com/promotions.aspx

MONOPOLISTIC COMPETITION...!!!!

Monopolistic competition is a situation where the product can be differentiated to allow the providers that opportunity to charge premium pricing for their product, which has imperfect substitutes. Firms compete by selling differentiated products that are highly substitute-able for one another but not perfect substitues. In other words, the cross-price elasticities of demand are large but not infinite. There is a free entry and exit. It is relatively easy for new firms to enter the market with their own brands and for existing firms to leave if their products become unprofitable.
The perfect example is the monopolistic competition in the markets for Colas.

A brief frame of how the monopolistic competition model is.

Note that among colas, Royal Crown is much less price than Coke.

Royal Crown Cola

Although Royal Crown Cola has a small share  of the cola market, its taste is more distinctive than those of Coke, Pepsi and other brands, so consumers who buy it have stronger brand loyalty. But even though Royal Crown Cola has more monopoly power than Coke, it is not necessary more profitable. Profits depend on fixed costs and volume, as well as price. Even if its average profit is smaller, Coke will generate more profit because it has much larger share of the market.

http://www.bladeforums.com/forums/showthread.php/344045-Coke-vs-RC-Cola