Monopoly

A theory suggests that a monopoly in its purest form has total control of a market. A firm itself becomes an industry in this case, this means that we can assume that average revenue curve is actually the market's demand curve.

The equillibrium of a monopoly is at the point where MC=MR. In this case the firm will be a price maker, which will enable it to make abnormal profits and, well, be the only one. As it is assumed, one of the main firms' target is profit maximisation. On the picture above, we can see that at the price P1 a pure monopoly generates the amount of revenue which exceeds the amount of costs, hence, making a supernormal profit (shaded in grey). In a competitive market everything would be different, but if we assume that a competitive market has the same costs as a monopolistic market, then the equillibrium would be at the point where AR=MC. it is obvious, that in this case a firm would have to supply more but at a lower price, which means much less profit than in a monopolistic market.
Of course, no firm likes competitors, so one of the main features of a monopolistic market are high barriers to entry, which prevent new firms from entering the market. There are several types of barriers to entry, such as:
Structural barriers (innocent entry barriers) – arising from differences in production costs
Strategic barriers (see the notes below on strategic entry deterrence)
Statutory barriers - entry barriers given force of law (e.g. patent protection of franchises such as the National Lottery or television and radio broadcasting licences)

However, we should remember that a pure monopoly does not exist in the real life, although some firms are using the same principles, because they, not completely, but dominate the market.
The UK recognises any firm that has more than 25% of market share is able to act like a monopoly, according to the Competition Act of 1998. A firm with more than 40% of market share is seen as dominant in the market.
The power of monopoly gives a firm an opportunity to make supernormal profits by setting a high price and having a resticred output at the same time. Although the Competition Act seeks to prevent such firms from setting unreasonable high prices by intervening in markets.

A2 Socio - Crime Stats

There are two main measures of crime in Britain:
1) Police recorded crime - those recorded by the police from which official stats on crime are drawn.
2) the British Crime Survey - a number of interviews with adults, in which people are asked whether they have been a victims of any crime during previous year. The sample group is very representative.

However, these statistics are not as representative and as valid as they should be. We can say that many of the crimes are not reported or are just not recorded by the police. These crimes are called 'dark-figure' or 'hidden-figure'. The existance of such numbers is due to the following reasons:
- the official stats does not record all known types of crime. Summary offences - those crime, which were dealt with by Magistrates' Courts as opposed to Crown Courts. they were not involved in official stats until 1998. For instance, the crimes involving driving after consuming alcohol over the legal limits. Or the cases when businesses did not included all the sales information in order to avoid paying high tax rates. also Summary offences - those crime, which were dealt with by Magistrates' Courts as opposed to Crown Courts. they were not involved in official stats until 1998.
- according to Simmons & Dodd (2003), over 30% of commited crime was not recorded in 2002\03 period. Even though that the police has an obligation to record crimes, some of the crimes are not recorded because they are seen as not worth the attention of a policeman. Because of this discretion, some areas may appear much more criminal than the others. An example would be a fact that Nottingamshire was named the most criminal area in the contry in 1981, simply because the police forces recorded all the crimes, even those which included 10 pounds or less (Holdaway, 1988). also, a crime might be committed several times but only the most serious offence is counted (Maguire, 2002). For instance, domestic violence.
- police might prioritise the crimes in order to have a better detection rate and not record some of the 'unsolved' crimes. as well as the police might have been forced to pay special attention to a particular type of crime, because local authoritites or mass media are expecially conserned about this type of crime.
- some cases might not be recorded. some types of crimes are more likely to be reported than others (Kershaw et al., 2008).
or, maybe, not realising that the crime has been committed - fraud, for instance.
the victim might also be too scared or powerless to actually report about the crime, it usually happens with child abuse and domestic violence.
the triviality of the crime might also be the issue - vandalism.
prostitution is obviously not reported much because there's no victim.
also people might not trust the police or think that nothing can be done - so what's the point in reporting anyway?
or the matter was dealt with privately, because some people don't want the police to be involved.

But a relative quantity of a particular crime committed doesn't mean that it shouldn't be dealt with or they are not significant. For instance, sexual offences make a small proportion of overall crimes, but they still have a very negative effect on the victim.

Crime statistics are a social construction - they are constructed during the process of social interaction and are based on a series of interpretations, definitions and decisions, which are influenced by a variety of factors and differ from situation to situation.

If we tax petrol, this does not efficiently internalise the externalities that are attributed to motor vehicle transport.

Internalising either positive or negative effect on the third party, also known as internalizing the externalities, is an attempt to deal with the externalities by bringing an external cost or benefit into the price system. The main problems with internalising is a relative difficulty of calculating an approximal ‘value’ of the externalities as well as taking into account all the possible externalities, which is quite difficult and requires a lot of analysis.
Transport industries create a market failure in considerable amounts. In particular, there are many externalities related to petrol, both positive and negative. The most obvious one is pollution, because cars run on petrol produce a lot of exhaust fumes, which harm the nature and people’s health. Closing our eyes on out coming global problems such as global warming, there are still many other related problems. Worsening health of people who live in big and medium size cities means that more money is needed to be spent on National Health Insurance. More money spent on the health of citizens means that something else on the list of government to spent money on would be sacrificed, for example, educational sphere, hence it is an opportunity cost. On the other hand, petrol runs most of the transport in the world, which enables to freely trade all over the world. Through transport petrol provides an opportunity to develop businesses, international relationships, increasing living standards over the world, not to mention moving towards higher levels of productivity every day, etc. The transport system itself provides an infinite number of positive externalities as well as negative externalities. If we consider only the externalities from motor vehicle transport, it would still have an enormous impact on people and the nature. The fact that there are 426 motor vehicles per 1000 people in the UK clearly shows - this is a quite serious issue for the United Kingdom. Traffic congestion is already a big problem in cities such as London, Manchester and Birmingham.
If a tax is put on petrol prices, first thing that should be considered is not whether it will be effective in dealing with externalities but the size of the tax. We should remember that the demand for transport is a derived demand, which means that it depends upon the final output produced. Therefore, many industries are highly dependent on transport, hence, on the petrol and its price, as well as just citizens of the country using private vehicles. If the tax is relatively high, many people would still buy petrol, as the demand for petrol is highly inelastic, though some people would switch to public transport, such as buses and trains. Those transport companies are likely to raise ticket prices as well, as the demand for public transport is likely to raise and also because of the increased cost of running the motor vehicles. Freight transport companies are likely to increase the price as well, which may lead to a reduction of supply in a number of industries. Sole traders and small transport companies even can go bankrupt because of the suddenly raised costs and fallen demand. Will the money collected from the taxation internalize the externalities? Not likely. Traffic congestion will still be an issue in the big cities, as the taxation is not likely to bring a huge reduction in the number of cars used – big transport companies may expand and more buses and freight transports will fill the roads, while the number of private cars will still be bigger that the maximum capacity of the roads. In addition to that, the money raised from taxation is not going to reduce the pollution. However, the people who would have to switch to public transport may become less productive because they would still have to spend time in traffic jams and also because of waiting for buses, possible stress from overcrowded public transport, so the growth of overall human productivity is likely to become slower or even negative. Obviously, a big tax on petrol will not be able to cover up all the costs and benefits. Even if that money would be spent on improving the infrastructure or environmental situation, the country may not be able to handle the consequences of an unnecessary big raise in petrol prices. Hypothecation, redirecting the tax revenue on particular purposes, would have simplified the process of internatianolising externalities, but still wouldn’t have given any impressive results.
On the other hand, a small raise in price is not likely to scare off the users of motor vehicle cars, as this is almost an essential good for a modern British person. Freight and passenger companies are likely to deal with the rise in costs by a small increase in the price for their services. Hence, demand patterns are not likely to be changed by a small tax imposed on the price of petrol. A small raise in price of petrol is not likely to have big affects on the numbers of motor vehicles cars used, even though that the revenue from this taxation is likely to be very high, but still not enough to even be close to covering up external costs and benefits.
However, there are other ways of internationalising externalities created by transport industries. For instance, road pricings or congestion charges, direct charges for the use of a road space, could be used. This would reduce the number of vehicles on the roads and also bring some revenue to the government, which could be spent on reducing the negative effects – preventing from all kinds of pollution like noise pollution, air pollution etc. Another example would be subsidizing in order to encourage greater use of public transport, which would also reduce the number of vehicles on the road and therefore reduce the amounts of pollution.
Overall, petrol tax, whenever it’s a high tax or a low tax, would bring the government much more revenue, which means increased government spending. This would lead to improvements in infrastructure and reducing the externalities, but not completely. The value of all the externalities brought by the transport industry just cannot be included in a petrol price simply because it cannot be calculated completely.

What is 'inflation adjusted' and is such an adjustment a valid way of comparing prices?

Inflation-adjustment of economic indicators and the prices of goods and services from different tie periods to the same price level. To adjust for inflation, an indicator is divided by the inflation index.
OK, so is this a valid way of comparing prices? Well, to answer that we should at other ways of comparing prices. We can look at nominal prices of the goods and services, which do not include inflation changes.

If we look at the graph above, we can see that the blue line stands for the nominal house prices in the US and the red line stands for inflation adjustmestment house prices. As we can see, comparison of these two prices give us an idea of the economic situation in particular years. For instance, in 1977 the inflation adjustment price for houses peaked a lot in comparison with the nominal price of that year which seems to be in a stable growth at that period.
If we are talking about the better way of comparing prices, either nominal or inflation adjusted, we should consider the purposes of this consideration. In this case, i mean the house prices, i think it's better to look at the nominal prices, because inflation doesn't give us a detailed picture of the situation as the inflation adjustment does. Though they both dramatically fall in 2008-09 period. In some other cases, such as oil prices, we should look at the nominal prices as well.
The nominal prices comparison does not, actually, give us an idea of the price in previous years if we are not supplied with the inforation like economic situation and inflation rates. We actually see two different prices which exist in two different economic situations.
The inflation adjustment actually enables us to see how the prices have changed over the period of time. For the graphic above we can clearly see that the house which value would be 150000$ in 1979 in the current economic situation is now approximately 175000$ worth, so we can easily conclude that the value of the house increased by 25000$.

this post is so crappy.

Firms and their objectives: Profit maximisation

Firm is a unit of decision making, aims of which are:
- profit maximisation
- avoidance of risk
- growth in the long-term

It could be a sole trader or a huge company like Microsoft. In the theory of firms it's an a priori that they are searching for the highest levels of profits possible. Profit maximasation is achieved when MC=MR. More profit can be made by increasing the output if MR>MC. IF MC is greater than MR, that means that the firm's profit is below its maximum.

Though firms cannot actually know the exact profit maximisation point, becaus they are unlikely to know their MR or MC.

Economies of scale

If over a period of time the short run average cost becomes lower due to a number of reasons, a firm gains benefits through this expansion. These benefits of producing on a larger scale are called economies of scale.

There are internal and external economies of scale. Internal EoS's happen due to decisions made within a firm, and External EoS's happen due to reasons which are not dependant on a firm's actions.

Technical EoS's are internal, they are achieved by improving the technology or increasing capacity. They usually result in LRAC.
Purchasing EoS's are achieved when a firm bulk buys something - a purchase of materials or capital in big quantitites usually gives an opportunity to have a discount, so average variable cost will fall.

Managerial EoS's are due to specialisation of the employees. It's easier to employ a multi-task manager, but it will be more efficient if there is at least one manager in different departments such as finance, human resources, marketing etc. Obviously, this type of EoS is also internal.

Now, about external economies of scale. They are available when the whole industry grows.

Transport and communication links improve, for instance, building of new roads and motorways, which make it easier to get from A to B. Maybe improvement of quality of roads will reduce sunk costs which arise from damages of vechicals on bad roads.

Training and education. For instance, more unis offer courses closely tighted with the transport industry, so more specialists join the industry, so labour supply increases and firms are able to employ specialists in exchange for lower wages, because there will be a competition among the potential job holders. Or the government might provide some support for people going to transport industry by offering special trainin courses etc.

Grow of other industries, which are connected with the industry. Maybe suppliers of the materials extend and have a branch near the firm hence lower material costs. It enables to find a high-quality supplier for a cheaper price.

Revenues

Revenues are the receipts from sales. As well as costs there are several types:
Total revenue is calculated simply - quantity sold multiplied by the given price.
Average revenue is a revenue per unit.
Marginal revenue is an addition to total revenue from one additional sale - one more passenger, for example.

MR will always be longer than AR because the firm can sell more by reducing the price of all units.
The total revenue curve has an upside-down U-shape, because it indicates how customers react to different prices due to variations in PED. The total revenue is maximised where the PED = 1.

Costs

Costs are values of inputs. There are several types of costs:
Fixed costs, those are independent of output produced. For transport it is usually rent or interest paid pn loans. With an increase of output, the fixed cost could be spread out across the business.
Variable costs vary with the output produced, for transport we could say that labour and fuel are variable costs.
Total costs are obviously = FC + VC

Average cost is the unit cost of production.
Marginal cost is the change in total cost which will occur when one more unit is produced. In transport it is usually an extra passenger or an extra cargo.

Ok, so in the diagram above:

1) A marginal cost curve (MC)

2) An average cost curve (AC)

3) An average variable cost curve (AVC)

4) An average fixed cost curve (AFC)

Ok, so now some explanations about why the curves are like this. If we look at the AFC, it falls down, because the fixed costs will stay the same when there's an increase in output. So, with more output the average fixed cost will be falling. This is also known as the economies of scale.
As output increases, AVC will initially decline before rising again, which explains the U-shape. With the rise of output, at some point average variable costs will exceed the falling average fixed costs, which will make the average cost curve rise.
A priori, the marginal cost curve will always cross the AVC and AC curves at their lowest points.

A2 Econs Transport

Transport is the movement of people and goods for personal and business reasons.
It takes an important part in economics, the demand for transport is growing every day, as it is responsible for delivering goods and services, resources and international trade is just impossible without highly developed transport system.

The important aspects if transport are:
- the mode of transport - means of transport such as road, rail, air and sea transport.
- infrastructure - anything needed for the effective functioning of transport.

The function of transport is to meet the needs of people and firms.

There are two types of transport: passenger transoprt is used by individuals and freight transport is used by businesses.

The demand for transport is a derived demand. Derived demand is a demand that depends upon the final output that is produced. In other words, the type or even a need of transport is determined by our needs to be somewhere or to carry something. Or the size of the products or the quantity of the products for businesses.

What are the determinants of a household's demand for transport by any given mode (eg do they have their own car or do they use a bus or a train or a bicycle)? Well,
- the cost of the transport (tickets price, the cost of running a car)
- relative prices of other types of transport
- household income
- availability of transport
- size of household
- journey time\ traffic jams levels\ convenience

So what are the determinants for choosing the right freight transport for a business?
- the costs of transport
- how easy it is to deliver and to collect products
- the type of a product
- the level of transport service provided

And now some small characteristics of transport types:

Passenger transport:
private car - flexible and convenient, widely used for all types of journey purpose, used for carrying shopping things and luggage. the only one which can give a door-to-door service, though is the least enviroment acceptable of main modes.
bus - users are limited by the service, though very effective on main corridors in large towns and cities, attractive by a cheap cost and short waiting times.
train is good for middle and long distances to carry a lot of passengers and products.
air - good for transporting products and passengers overseas and long distances fairly quickly.

Freight transport:
road - convenience, flexibility and connectvity - strong parts. can carry almost any type of a product.
rail - good for transporting bulk loads over many distances, very quick but the problems might occur in interchange.
air - appropriate for moving time-sensitive goods, but only for long distances.
sea - cheap but slow; used for bulk loads over long distances.

A2 Sociology - Crime and Deviance intro

While the further maths group was away on a maths trip, the first A2 Sociology lesson had a place to be. I'm catching up with the class now, as I missed it.

Deviance is consideres as actions, which deviate from the norms and values of society. In other words, those actions of an individual which are considered as unaproppriate for the society, actions which are against dominant values an norms of the society.
Crime is a form of deviance, which is against the law in a given society. This form of deviance is not only unsupported by a society, but is also punished for.

A crime is determined by relativity - it varies from culture to culture and from time to time. For instance, killing was not always seen as a crime 500 years ago.

There are different types of deviance:
- secret and private ones. the examples could include being a homosexualist but not revealing this to the society.
- open and public ones, the ones that the society is awared of.
- situational deviance, when an action is a deviance only in a given case but not in another.
- societal deviance - behaviour which is seen as unaproppriate by the majority of people in a society.

Philosophy AS, Reason and Expirience notes

'Tabula rasa' theory.

Tabula rasa means 'blank slate', which stand for an idea that every idea of an object or even that we have is built up on experience that we had with that object or event. This idea is supported by philosophers John Locke (1632-1704) and David Hume (1711-76).

Hume's reasons for saying 'every idea ... is copied from a similar impression'.
Hume was developing Locke's idea that everything that we have on our mind is based on our expirience. Without an experience we are unable to correspond to an idea. The following extract proves this Hume's view:
'If it happen, from a detect of the organ, that a man is not suspectible of any species of sensation, we always find that he is as little suspectible of the correspondent ideas. A blind man can form no notion of colours; a deaf man of sounds.'
In this extract it is proved that without a sence of sight or sound you are not able to have an idea of colours or sounds.

How Hume tells difference between 'impressions' and 'ideas'.
An impression is a far more strong feeling than an idea, as it is 'all strong and sensible' and 'admits not of ambiguity', also they may 'throw light on their correspondent ideas'. An idea is a 'lighter' version of what a person felt when having an experience, ideas are 'naturally faint and obscure'. Actually, an idea is based on an impression and to Hume's view it isn't 'easy to fall into any error or mistake with regard to them' (impressions). In other words, it is difficult not to see any difference between an impression and an idea, as only 'disordered by disease or madness' will not be able to do that.

Hume's account on how imagination works and why does Hume need to give an account of the imagination.
Sometimes an idea can appear without having an experience that it was based on. There was an example of 'a golden mountain' - everyone can surely imagine it at some point even though nobody have actually experienced it, simply because such thing does not exist. Yes, we could interpret this as a combination of two ideas of a mountain and a gold, though the idea of a golden mountain would be stringer if we had experienced it. However, we still may have an idea of a golden mountain through an experience happening in our minds and imagination is the key. Imagination 'escapes all human power and authority' and also 'is not restrained within the limits of nature and reality'. But still, if we look at the imagination process in depth, we would see that it's 'confined within narrow limits', because our imagination is still based on what we experienced and sensed.

The philosophical significance Hume draws from his analysis of the origin of ideas.
The perception of the world around us comes from our ideas and experiences. Our mind is a blank page, we fill it with ideas, which we get from our experiences. Experiences provide 'strong and vivid' impressions which clarify an idea, which itself is 'naturally faint and obscure ... apt to be confounded with other resembling ideas; and when we have often employed any term, though without any distinct meaning, we are apt to imagine it has a determined idea annexed to it'. 'Words in their primary or immediate signification, stand for nothing but the ideas in the mind of him that uses them', which simply means that words are created just to indicate an idea. However, the perception is also based on our imagination, which helps us to have an idea of some things that we have not experienced. Though Hume argues that imagination itself is 'no more than the faculty of compounding, transposing, augmenting, or diminishing the materials afforded us by the senses and experience'.

a pair of spectacles

the monthly DAILY blog is back!!!

today i'm going to summarise an article on a philosophy topic on our perception of "right" and "wrong" things.

The article is started with a weird story about a girl called Virtue, who was taken for a town trip by some random aliens. They observe the city, being invisible to everyone else. The spot a man trying to steal a purse from some random lady and Virtue says that it is wrong. The aliens and Virtue start to talk about how earth beings sort 'right' and 'wrong' things. They came to a conclusion that the five senses have nothing to do with spotting the 'wrongness'. In the end of the story they found out that 'wrongness' neither can be legitialy inferred or seen/heard.

Then there is more hard stuff - the author gives us some solutions.

David Hume (1711 - 1776) has suggested that we detect 'wrong' and 'right' basing on our moral properties, which are created by our emotions. So, we have like a pair of spectacles, where the linses are our moral values. This is called 'the spectacles theory'. But there is a problem - where do we get our moral values and properties then?

G. E. Moore (1873 - 1958) gives a solution - people have the sixth sense called 'intuition'. We accept our values because we feel that way and we think that it should be right for us. But then another problem appears - where does the intuition comes from? And sadly there is no proper answer and it cannot be explained yet.

So, coming back to Hume's spectacles model. The main three versions of how we get these spectacles.

- the first version is Subjectvism. We claim that something is wrong because it seems wrong to us as individuals. the problem with this model is that different people have different views on 'right' and 'wrong' things. So, for one person drinking Red Bull is right cuz she feels like it. She is right, because she bases on her feeling and says the truth which she approves. Yet another person thinks that drinking red bull is wrong cuz it's his opinion. And again, he cannot be wrong: for him things are this way. So two people with different views are both right.

- the second version is Intersubjectivism. It is similar to Subjectivism, but the 'spectacles' were created not by a person, but by a community where he or she exists. Once again, different communities have different views. But the point is.. if a community thinks that something is wrong, surely that doesn't 100% mean that the things are really wrong! There is no proof that it is wrong, so how can people and communities decide?

- the third version is called Emotivism. The principle of Emotivism is that we do not state whether a thing is 'right' or 'wrong'. We don't claim, we express. There is nothing behind what we say. We just say it, there is no fact behind our saying. It's like saying 'Happy Halloween', i'm not saying whether it's true or false, right or wrong, I just express myself. So, if we view the phrase 'drinking red bull is right' in the emotivism way it is the same is 'yaaaay for red bull!'.

All these three versions state that moral value is not a feature of objective reality though.

In the end of the article the 'objective property' is discussed. If we say that our school has 20 floors that doesn't change the fact that it has just 2 floors. But from a view from a plane it could seem that it does have 20 floors. The point is - we can be mistaken anyway, without knowing it, and things are either right or wrong. And it doesnt matter what we think about it - it will still be right or wrong because it's an objective property.

There is also a possibility of an error considered. It could turn out that actually nothing is right or wrong, and even this 'error' point of view is right and wrong.

So, on what do we base our right-wrong feelings? If on moral values, then which ones? How do we decide which values are good enough to base an opinion on?

Or are there any moral values that created all those right-wrong feeling? Maybe it was installed in us by the nature? Where do moral values come from anyway???

All those questions were left by the author to think of by ourselves.