Economics Assignment: Market Analysis, Mergers, and Supply

This economics assignment delves into various market structures and economic concepts, analyzing scenarios such as the merger of CSR and Boral and its impact on market dynamics. It explores the principles of economies of scale, the formation of monopolies, and the effects of supply and demand shifts. The assignment examines the decline of independent booksellers, highlighting the role of costs and market competition. It also analyzes the impact of a cyclone on the banana market, considering price elasticity and supply changes. The solution provides graphical representations and explanations of these economic phenomena, offering a comprehensive understanding of market analysis, business strategies, and consumer behavior. The assignment concludes by addressing the nature of bananas as luxuries in the context of the short-run market changes. The assignment covers topics such as market structures, mergers, monopolies, supply and demand, and their effects on business and consumer behavior, offering a comprehensive understanding of economic principles.

Economic Assignment 1
ECONOMIC ASSIGNMENT
By (Student’s Name)
Professor’s Name
College
Course
Date

Economic Assignment 2
1. Question 1
CSR and Boral were able to operate as distinct companies before the fall in demand
because there was a high demand hence each was able to make sales before the diseconomies of
scale set in due to the falling productivity. Economies of scale (EoS) describes cost-advantages
which emerges following the enlarged product output. The EoS emerges since the reciprocal
association between produced output and the per unit fixed cost (FC); i.e. the greater the product
quantity produced, the lower per unit FC since such a cost remain spread out across the bigger
product numbers. The EoS could further reduce variables costs a unit because of synergies and
efficiencies of operations. The economies of scale is categorized in to two main types, internal as
well as external. Internal EoS emerges from within the firm whereas the external EoS arise from
extraneous variables like size of the industry.
A merger is feasible in this case between CSR and Boral joining together to establish an
oligopoly. The novel oligopoly organization shall have a bigger share of market that assist them
gain economies of scale and hence become more profitable even in the face of the declining
demand. The merger shall further decrease competition and might culminate in higher prices for
the consumers of brick products because they are the only firms in the market. The merger has
the benefit of the EoS. This occurs where a bigger company with larger output is capable of
reducing average-costs (AC). The lower AC can reduce the consumers’ price.

Economic Assignment 3
The EoS will be technical, bulky buying, financial and organizational. Technical
economies is achieved when the entity has substantial FC hence novel superior organization
would have reduced AC (David Myers CEcD 2015). Bulk buying will result where the huger
firm will receive discount when it buys bulky quantities of the raw-materials. Financial EoS will
result where better rate of interest will be available for the large company. Organizational
economies of scale will arise the merger will have one efficient head office rather than two
offices. The firm will increase in size due to the merger and hence gain from the many of such
factors. The merger will be more efficient, realize profit which enable more R&D and struggling
firm will benefit from the new management (Polkinghorn 2016).
Question 2:
In case the new joint proceeds, the new market will turn into monopoly. This will lead to
a rise in price with a reduction in quantity and a subsequent increase in profitability. Since these

Economic Assignment 4
are only two markets, when they merger they will be similar to monopoly because the only
distinguishing feature shall have vanished.
The merged firm shall be seeking the maximization of profit by having its output set at a point at
which MR equals MC at output QM; price Pm. Price will be increased while the output reduced.
The red region denotes supernormal profit (AR-AC)*Q.
Question3
Cost played a major role in explaining the huge decline in independent booksellers. This
is because there was high cost in marketing the products of independent booksellers than the
online booksellers. The independent bookstores are inefficient economically because utilities,
rent, and a brigade if workers who read books are never affordable hence the solely means for
bookstores to remain inundated is selling products at an enormous markup.

Economic Assignment 5
In the above, D2 represents demand independent booksellers while D1 is for online
Question 7:
The cyclone would increase the price and reduce the quantity of bananas in near short run
as the price highly elastic. The supply of banana will fall but the demand will be unchanged
thereby shifting the supply curve leftwards leading to a rise in the equilibrium price. The demand
will remain unchanged but there could be a slight decline in demand in the long run due to rise in
prices but in short run, demand will be unchanged. A sharp fall in supply implies less quantity
supplied than quantity demanded hence an increase in price as shown:
P2
P1
Q2 Q1
D1
S1
S2
D1
D2
S1

Economic Assignment 6
The supply curve shifts from S1 to S2 leftwards leading to a reduction of quantity
suppled from Q1 to Q2 and the price increases from P1 to P2 as shown above.
Question 8:
It is not strictly true in economic terms that bananas were called luxuries since both
demand and supply curve would shift in opposite direction when the quantity decrease which
was not the cases here in the short run as the demand remained unchained. No large increase in
price would be realized in this case as people could have easily chose to avoid banana.

Economic Assignment 7
References
David Myers CEcD, M.A., 2015. economies of scale. Economic Development Journal, 14(3),
p.11.
Polkinghorn, A., 2016. Economies of scale. Br J Gen Pract, 66(648), pp.351-351.