Collusion – meaning and examples

Collusion occurs when rival firms agree to work together – e.g. setting higher prices in order to make greater profits. Collusion is a way for firms to make higher profits at the expense of consumers and reduces the competitiveness of the market. In the above example, a competitive industry will have price P1 and Q …

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Advantages and disadvantages of monopolies


What are the advantages and disadvantages of monopolies? Monopolies are firms who dominate the market. Either a pure monopoly with 100% market share or a firm with monopoly power (more than 25%) A monopoly tends to set higher prices than a competitive market leading to lower consumer surplus. However, on the other hand, monopolies can …

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Who Benefits from a Recession?


Readers Question: Identify and explain economic variables that may be affected positively by the economic slowdown. A recession is a period of negative economic growth. It is a period of higher unemployment, falling wages and higher government borrowing. It generally causes economic costs But does anyone benefit from a recession? Some people who may do …

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Prices and incomes policy


Prices and incomes policy is an attempt by the government to set the rate of increase in prices and the rate of wage increases in the economy. The government do not seek to control individual prices but control the general rate of increase in prices and incomes. Price and incomes policy may involve ‘voluntary’ agreements …

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Purchase vs subscription models

In recent years, many markets have shifted from a model of one-off purchases to subscription models. One-off purchases involve a single transaction and the consumer gets a product permanently Subscription models involve monthly transactions and the consumer gets the product for only as long as they keep paying. For example, we used to buy records …

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Government policies to reduce collusion


Collusion involves firms coming to an agreement to artificially raise prices and increase profitability at the expense of consumers. Collusion can lead to significant welfare loss and governments have sought to prevent it through a variety of policies, including: Fines for firms found guilty of collusion Fines and jail sentences for company executives who are …

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Sustainable growth


Sustainable economic growth implies that the growth rate can be maintained over the long term. Sustainable growth involves both Environmentally sustainable growth – e.g. not exploiting scarce resources. Sustainable growth in terms of low inflation and a balanced economy. Sustainable economic growth The long-run trend rate of economic growth is the rate of economic growth …

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