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All agency action can be classified in three categories: quasi-adjudication: order making, judicial quasi-legislation: rulemaking executive
Posted On: Nov. 9, 2017
Author: Shipra


Answer study question #4 "competition in quality and service may be just as effective as price competition in giving buyers more for thier money". Do you agree? Why? Explain why monopolistically competitive firms frequently prefer nonprice competition to price competition. I fully agree with this statement. In any business, there are several competitors. As per Michael Porter’s theory of 5 forces, there are basically five forces which act in any Industry viz. 1. Threat of buyers 2. Threat of suppliers 3. Threat of substitute products 4. Rivalry 5. Threat of new entrants As we can see, all these threats deal with competition , be it supplier, buyer, or competition in the strictest sense. The business is always worried about quality and service of the products. Buyers pay a lot of attention to the quality of the product they wish to purchase. Even though quality is a perception , as the saying goes , each one to himself, still the fact is that a person will buy a product ( or avail a service ) only if he is satisfied with its quality . i.e. If he is confident that the purpose for which he is buying it , is served . The question of quality would arrive only if the product is requiring service, which may not always be the case. However the fact remains that the customer would definitely look for quality and service aspect. The price definitely plays a big role in purchase, but the customer ‘s needs are different and any one who buys a product or service would like to make sure that it serves its purpose. Moreover, no one would pay a particular price for a product unless it meets his requirement and also in case of malfunctioning of the same , he would expect the same is attended to without any further delay. Take the case of an automobile, be it Ford or Chrysler or Toyota . Any customer would buy the care for meeting his needs ( prestige , convenience etc ) . He would also expect that in case the automobile is not working properly, the respective garage owner would repair it . Price is equally important but not at the cost of quality or service In the case of monopolistic companies , they prefer non price completion . The reason for this is that sooner or later, it is easy to copy the product or bring out substitute ( refer Michael Porters theory ) and in such a case the monopoly of the company would not remain so the only way a company can stay competitive in the market is by way of quality and service study questions 9 Demand supply and equilibrium Demand and supply of a product plays a very big role in its pricing in any market. Let us take an example of a farm product such as Milk. This is an essential item on any one’s diet and almost everyone has it, even though the quantity of consumption may be different --------------add a graph here =========== As can be seen in the graph shown above the price of the product ( milk ) would depend on the demand and the production capacity of the companies . Once the stage of equilibrium is reached, the price becomes static and would not change drastically unless there is some drastic action by either government agency or other suppliers . the stage of equilibrium means that the demand and supply are more or less equal . The equilibrium price floor ( price support ) would play a very big role in the price and demand of the product. It either cause a surplus or a shortage in the market. The government policy would drastically affect the price or demand of the product ( milk ). We will take all the actions of the government one by one and see how this affects the demand / price a. Changes in supply and changes in demand due to shortage The above can be affected by a government policy change. If the demand of the product is very high, and supply is limited, there could be increase in price due to shortage of milk. In such a case the suppliers would try to take advantage of the situation and increase the price or charge an exorbitant price for milk this would not only cause hardships to the consumer but may also lead to a law and order problem. The government can step in and help the industry and the consumers by relaxing import restrictions and allowing companies to import the milk from other countries. The government can also allow the companies to increase their production capacity. b. Changes in supply and demand due to excess / surplus This situation would result when there is excess supply of milk in the product either because the capacity of the companies is high or because people have stopped buying milk ( a situation which is quite unlikely but never the lees can exist. Here the government could step and provide support by way of • acreage allotments • food stamp program • Food for peace program • a government buyout of dairy herds • export promotion each of these actions would result in price support to the producers / farmers . the food stamp program would help people to buy more of the milk and thus sustain the consumption .similarly the food for peach program would also help in a big way in making sure that the consumption pattern is maintained. The government can also purchase the product and keep in its stock for distribution to people at a later date when the supply is reduced The government can also provide support for export by giving incentives so that the excess produce is exported and the companies can generate profit