Case Study
Chapter 4. Ethics in the Market Place
Summary of the Chapter :
The chapter actually summarizes the economics in a market place. Discusses the intricacies of a Perfect Competition, Monopoly Competition and Oligopolistic competition. The details about equilibrium in such markets have been discussed. Economic details of the nature of behavior of Demand, Supply, cost have been covered in a view to understand the situation under which decisions are being taken in a company.
The nature of such framework has been explained in detail. This is very very essential as based on the characteristics of such market the ground rules or ethics is under laid. For argument let’s take the case of a perfectly competitive market. * Very large number of buyers and sellers * Market power of each firm is zero (LI = 0) * Firms are equal in size * Sellers selling homogenous products * Firms use same technology and hence their cost structure is same * Price is determined by the market forces and the agents act as price takers * Free entry and exit
Ethical practices that can be inferred from such a market: * Motivates firms to invest resources where the demand is high and move away where demand is low. * Encourages firms to minimize the amount of resources consumed in producing a commodity and use most efficient technology available. * Distributes commodity purchase evenly. * Establishes capital justice respecting buyers and sellers negative rights.
Similarly, the ethical standpoint in a Monopolistic Market : * Monopolistic markets and their high prices and profits violate capitalist justice because the seller charges more than the goods are worth. Thus, the prices the buyer must pay are unjust. * In addition, the monopoly market results in a decline in the efficiency of the system. Shortages of things that consumers want will result, and with these shortages come higher than normal prices. * Since no other seller can enter the
Summary of the Chapter :
The chapter actually summarizes the economics in a market place. Discusses the intricacies of a Perfect Competition, Monopoly Competition and Oligopolistic competition. The details about equilibrium in such markets have been discussed. Economic details of the nature of behavior of Demand, Supply, cost have been covered in a view to understand the situation under which decisions are being taken in a company.
The nature of such framework has been explained in detail. This is very very essential as based on the characteristics of such market the ground rules or ethics is under laid. For argument let’s take the case of a perfectly competitive market. * Very large number of buyers and sellers * Market power of each firm is zero (LI = 0) * Firms are equal in size * Sellers selling homogenous products * Firms use same technology and hence their cost structure is same * Price is determined by the market forces and the agents act as price takers * Free entry and exit
Ethical practices that can be inferred from such a market: * Motivates firms to invest resources where the demand is high and move away where demand is low. * Encourages firms to minimize the amount of resources consumed in producing a commodity and use most efficient technology available. * Distributes commodity purchase evenly. * Establishes capital justice respecting buyers and sellers negative rights.
Similarly, the ethical standpoint in a Monopolistic Market : * Monopolistic markets and their high prices and profits violate capitalist justice because the seller charges more than the goods are worth. Thus, the prices the buyer must pay are unjust. * In addition, the monopoly market results in a decline in the efficiency of the system. Shortages of things that consumers want will result, and with these shortages come higher than normal prices. * Since no other seller can enter the