Economic Principle (M)2011 Media Watch presentation Steven Barrett
Introduction (task 1) • The title of the article: Why we pay more locally for the same fashion. • The source of the article: The Australian. • The author: Georgina Safe, Fashion editor. • The date the article was published: 24 December 2010. • Why you chose the article for your presentation: This article directly relates to costs and price discrimination.
Introduction • A brief summary of the article: The article is arguing that fashion clothing costs more in Australia than identical products in America because Australian retailers have higher costs, such as wages and transport and smaller volumes so they can not buy get bulk discounts from producers. • This argument is total nonsense,
TC TVC Fixed Cost Variable Cost Total Cost TFC Review of the theory (task 2)Total Costs Costs (dollars) Quantity
MC ATC AVC AFC Review of the theory (task 2)Average Costs Short-run average costs (dollars) Quantity The distance between ATC and AVC is AFC so these two curves should converge.
(Task 3) The argument in the article Australian retailers American retailers Unit Costs Output
Increased economic profit from price discrimination ( Task 4)An alternative viewThird order Price Discrimination Figure 11.9 MC 2100 1800 ATC 1600 1400 1200 Price and cost (dollars per trip) 900 600 300 D 0 2 4 6 8 10 15 20 Passengers (thousands per year)
The Yacht diagram D1 P1 P2 D2 MR2 MR1
The Yacht diagram Australia D1 America P1 P2 D2 MR2 MR1
Conclusion: Broader social or economic implications(task 5) • This order price discrimination is an increasingly common device used by retailers to push up prices in some market segments. • It increases profits by converting consumer surplus to producer surplus • Australian consumers are beginning to realise this and are shopping online to stop being ripped off. • This may cause unemployment in the retail sector unless retailers get thier act together.