Market Efficiency Please Help! (1 Viewer)

[gnrlies]

Hi everyone, i have a question that we got given before the exam and im not sure how to do one part of it.

The question reads:

explain in detail whether markets will operate efficiently if:

1 - property rights have not been established
2 - buyers cannot be excluded from markets
3 - buyers and sellers do not have the same information
4 - monopoly elements exist

Im pretty ok with all the others but I have no idea what number 2 means. Can anyone help me?

Just a small explanation would be great

 

[jpr333]

Number 2 refers to price/product discrimination where a company will not sell to some buyers or only sell at higher prices. It's inefficient basically

 

[xiao1985]

if anything i would say price discrimination acheives efficiency...

 

[jpr333]

In terms of a monoply yeah, but it is illegal under TPA (manufacturer's act as well) wasn't sure what context this refers to.

 

[xiao1985]

efficiency interms of not creating DWL...

 

[mr_shittles]

explain in detail whether markets will operate efficiently if:

2 - buyers cannot be excluded from markets

Markets will operate efficiently if buyers cannot be excluded from them.

If a buyer is excluded from a market, then the level of demand will be lower than the true level of market demand. In such circumstances as the market demand is artificially lowered, the number buyers left in the market that are prepared to pay market prices will decrease. This will flow on to sellers in the form of lower prices for their goods or services. (This situation could best be explained by supply/demand curves).

So, when buyers are exculded, sellers receive artificially lower prices than they would otherwise receive and those buyers that are not excluded pay artificially lower prices to acquire the goods or services.

- Sellers lose (lower sale price)
- Excluded buyers lose (unable to satisfy their needs)
- Non-excluded buyers win (lower purchase price)

 

[kow_dude]

Is this economics? I thought it's already been done...

 

[xiao1985]

other uni maybe, even other states... or better, other country =p
oh wait, myabe just high school =S