Economics Assignment - Market Structure, Price War, Unemployment and Inflation

Running head: ECONOMICS ASSIGNMENT
Economics Assignment
Name of the Student
Name of the University
Author Note

1ECONOMICS ASSIGNMENT
Table of Contents
Part A.........................................................................................................................................2
Answer 1................................................................................................................................2
Answer 2................................................................................................................................3
Answer 3................................................................................................................................4
Answer 4................................................................................................................................4
Part B..........................................................................................................................................5
Economy of Spain..................................................................................................................5
Answer 1............................................................................................................................5
Answer 2............................................................................................................................6
Question 3..........................................................................................................................7
Economy of India...................................................................................................................8
Answer 1............................................................................................................................8
Answer 2............................................................................................................................8
Answer 3............................................................................................................................9
References................................................................................................................................11

2ECONOMICS ASSIGNMENT
Part A
Answer 1
Coles and Woolworths, being two of the primary supermarkets in Australia, operate in
an oligopolistic type of market structure. In general, an oligopoly market is characterised by
the presence of many buyers and few sellers, which in turn gives each producer considerable
market power and share of the market (Fudenberg and Tirole 2013). The sellers are also price
makers and depend on the decisions and strategies of their rivals. In this context, the market
share of supermarket industry can be seen to be as follows:
Figure 1: Market shares of companies in supermarket industry in Australia (2017)
(Source: Businessinsider.com.au, 2018)
Coles and Woolworths also compete in the aspects of price, thereby creating a
situation of price war in the oligopolistic market, which can be seen to be as follows:

3ECONOMICS ASSIGNMENT
Figure 2: Price war in Oligopolistic Market
(Source: As created by the author)
Answer 2
As the market in which the supermarket giants Coles and Woolworths is that of an
oligopoly, there exist two forms in which the firms in this industry can compete with one
another- price war or non-price competition. In this market, pricing plays a significant role.
When one of the competitors decrease the price levels, it attracts significant customers from
other companies, which in turn is expected to increase the revenue of the former and vice-
versa (Dunne et al. 2013).
Thus, it can be seen that it is of interest on part of Coles and Woolworths to engage in
price war, in the short run as that can lead to increase in the clients and revenues of the
company providing products at more affordable prices. However, in the long run, continuous
price wars and discounts can lead both the companies to a sub-optimal situation, in terms of
lower profitability and inefficiencies (Keith 2012).