Bus104 Economics : Demonstrate Oligopoly Assessment Answers
2. In the last 6 months of 2015 oil prices fell by 30% and oil demand has risen by 2%. Based on this data what type of price elasticity does oil demand have?
3. Do you agree with the opinion expressed in Source 1 on the price elasticity of demand? Why or
why not?
4. Would you advise an oil producer to increase oil prices or decrease oil prices based on your
analysis in previous questions? Explain and justify your answer with a diagram.
of shale oil production in 2008? Support your answer with economic theory.
Answer:
1. The supermarkets in Australia demonstrate oligopoly market structure. The oligopoly market is a type of imperfect competition. The market is characterized by few big sellers and too many buyers. The products are close but not perfect substitutes. In oligopoly, the firms behave like in a group. The decision or action of one firm affects the others. There exists price rigidity in the market. If one firm cuts its price, the others will cut their price too for retaining the market share. Hence, this leads to price war, which results in the loss of revenue for all firms. Thus, price is quite rigid in oligopoly (Iossa & Martimort, 2015). According to the diagram of market share in Source 2, it is seen that Woolworths and Coles are the two supermarket giants of Australia, with 80% total share of the market. Woolworths holds almost 43% in the market in 2015, while Coles holds almost 37% (Source 2). These two are followed by few other firms like, IGA (15%), Aldi (3%) and others (2%).Buy Bus104 Economics : Demonstrate Oligopoly Assessment Answers Online
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