Economic Implications of the Internet in Australia - Assignment Example

Economic Implications of Internet in Australia Name of Student Institution Course Question 1 Impact of Labor market Price P0 P1 Q0 Q1 Quantity The labor market plays a very crucial role in the determination of the prices of goods in the services (Day, 1997). When it is adequately available it means that it is less costly to acquire it. The availability of labor affects the supply side of the economy. In the illustration above, the supply curve SS0 shifts towards left up to SS1. The quantity of the output that is being produced or demanded increases from Q0 to Q1. On the other hand, when the labor market is not efficient of at times is less than demand. The supply curve shifts towards left. This lowers the quantity that is being demanded and the prices of goods or services. Effects of increasing Shopping Hours Price SS0 P1 P0 DD0 Q0 Q1 Quantity The shopping hours affect the demand of the goods and services. When the shopping hours are increased, the demand for the commodity is also increased. The demand curve DD0 shift towards right to Dd 1. The prices of the commodity tends to increase from P0 to P1. This is due to the act that there is more time to market the product, so the retailer will be adamant to sell his product at price which is higher than the general price level. Zoning Regulation Price SS1 P1 SS0 P0 DDO Q1 Q0 Quantity When there is zoning regulation, the equilibrium market is disrupted at QO and P0. The Supply curve SSO shift towards left to a new equilibrium P1 and Q1. It is observes that the prices increase from P0 to P1 and the quantity decreases from Q0 to Q1. This is because of the zoning regulation which requires that a certain amount must be produced at some point inorderto protect the commodity prices in the market. Question 2 Before introduction of online retail. PRICE D0 $1000 S0 Q0 Quantity The interaction of supply and demand determined the equilibrium price and the quantity of goods to be introduced in the market system. The price of the equilibrium position of the company is $ 1000. Effect of Reducing LVT PRICE SS0 $1000 SS1 $500 DD0 Q0 Q1 Quantity LVT Stand for Low value threshold. It is assumed that the LVT is reduced up to $ 500. The supply curve shifts to the right making the price of the good to decrease from $ 1000 to $ 500. This has also made the quantity that was imported to increase from Q0 to Q1 as illustrated in the diagram above. The retailers can import at lower cost than when there is LVT. This makes the quantity that is supplied in the market system to increase (McAfee, 1990). This is a similar case to introduction of online retail that increases the market for the goods that are manufactured. Question 3 Regional Price Discrimination Price discrimination is where the prices of goods and commodities are changed for different customers from different regions in a country (Day, 1997). There are various reasons that make a country to resolve to regional price discrimination. One of the reasons for this is to ensure that economic resources are distributed fairly across all sectors of economy. Some of the areas of economies are charged higher prices than others; this ensures that people living in these areas demand more of certain goods (McEachern, 2012). There are three types of price discriminations; the first, second and third degree of price discrimination. Price SS0 P0 P1 QO Q1 Quantity Price discrimination when there is no online retailing occurs in the region above P0 and demand curve DD0. This is an area that is less elastic because the retailers depend on only one strategy which is using retailing only. Due to the introduction of online retail, the price of the product becomes more accessible to the retailers. They increase from Q0 to Q1 while the price decreased from P0 to P1. Question 4 Firm X Retailer Retailer and Online Shop 50,50 30,80 Shop and Online 80,30 60,60 Dominant Strategy Yes, Australian Company has a dominant strategy which is always sell in shops only. This is because when the retailer sells in shop only he will have a payoff of 50, the other competitor shops in retailers only due to the fact that he maximizes his payoffs more than any other point (McAfee, 1990). Nash equilibrium Nash equilibrium occurs when there are at least two players in a game. When they choose the strategy in which to apply, each player cannot have an added advantage over the other by changing strategy when the other player remains unchanged (McAfee, 1990). Yes there is Nash equilibrium at the point (50, 50). At this point the Australian retailer sells at the shop only. The international Firm X sells at the retailers only on the other hand at 50. If one of the participants in the game decides to change his strategy while the other remains unchanged the other party will not be affected (McEachern, 2012). The equilibrium position of that is established is at the retailer selling at shop only and the international Firm X sells at retailer only. There is no player who is risk loving that will take a big risk that will have huge returns on him because they know that the other party is watching the game. According to Nash equilibrium, the players are risk averse hence they watch the options that the competitors have before they act on the strategy underway. Question 5 The introduction of the online retail is a great mile stone that the country has achieved as a form of retail trade. This is because it opens up so many opportunities for trade both locally and internationally (Nicholson, 2002). The online retail reduces the bulk of trade. This is because the consumers of certain goods can be able to know where exactly they will get the commodity that they demand with a lot of ease. Online retail ensures that the quantity that is produced in the market place is adequate enough to satisfy the demand of the market (McEachern, 2012). This makes the prices of the commodity to decrease with time due to the adequacy of the commodity in the market that surpass demand. In respond to all this benefits that online retail companies bring, it is unfortunate that the players in Australia cannot use it because it is not a dominant strategy hence it will be partially be implemented by the players. They will keep on using the strategy in which is not risky (Nicholson, 2002). The government should come with various policies which are meant to improve the condition where the people use retail only instead of using a combination of retail and online which is beneficial in the long run (CiE, 2012). The government should establish a regulation body that would ensure that the new retail industry is fully implemented. This can be done through a body of professions would ensure that the new system is fully entrenched into the existing system (Van, 2004). They will ensure that there are efficient policies that will ensure a smooth transition from just retail trade but also online trade. This will ensure that there is efficiency in the production of goods and execution of the duties. The government should make that it promote the new system of retail trade. The government can do this through issuing tax holidays to the people who use this system. It can also ensure that there are subsidies for the new system. These will serve as motivating factors in which the new system can be established and attract new and existing investors. This will ensure that the profits in organizations are looked into and the new retail system will make the companies involved to make rational decisions in which their profitability will be enhanced. The government should use regional price discrimination to promote the new system. People from different localities have different ways of life and so is the purchasing power. The setting up of a new system may require heavy investment that some areas may find it stained by the economic power. The government should ensure that in these areas they are charged affordable decent life. This will also ensure equitable distribution of economic resources to ad from different places. The government should ensure that the online retail system is efficient and reliable. This will make the users of the new system develop trust in the system that they are using. In the event the system is not efficient and not reliable such as it is prone to hackers, people will not want to use it. The will continue using the old system which is manual and costly. The government should come up with a very secure system where the money of the investors and customers is safe. The Australia Government have established a commission called The Australian Consumer and Competition (ACCC) which is responsible with ensuring that the product is put online matches the real description of the product. It is against the la or a product to have different attributes as it is being advertised. The commission is mandated by the government to ensure that the new system of retail trade flow smoothly (McEachern, 2012). References . Conference on Computability in Europe, Cooper, S. B., Dawar, A., & Löwe, B. (2012). How the world computes: Turing Centenary Conference and 8th Conference on Computability in Europe, CiE 2012, Cambridge, UK, June 18-23, 2012. Proceedings. Berlin: Springer. Day, G. Reibstein, D. & Gunther, R. (1997). Wharton on dynamic competitive strategy. New York: John Wiley. McAfee, R. P., & California Institute of Technology. (1990). A dominant strategy double auction. Pasadena, Calif: California Institute of Technology, Division of the Humanities and Social Sciences McEachern, W. A. (2012). Microeconomic principles: A contemporary introduction. Australia: South-Western Cengage Learning. Nicholson, W., & Stapleton, D. C. (2002). Microeconomic theory: Basic principles and extensions. Cincinnata, Ohio: South-Western/Thomson Learning. Retail. (2001). Retail directory of Europe 2002. S.l.: Hemmings Information Services. United States. (1984). 1982 census of retail trade: Geographic area series. Michigan. Washington, D.C: U.S. Dept. of Commerce, Bureau of the Census. van Leeuwen, J., Goldberg, P.W., & Pastink, A.J. (n.d.). Aspects of communication complexity for approximating Nash equilibria. Read More