Consumer - mikroekonomia.net

Instytut Ekonomii
Competition from the market
actors’ point of view of
Prof. Tomasz Bernat
Microeconomics Department
Institut of Economics
[email protected]
Instytut Ekonomii
Basic questions:
• Is competition strictly define in theory
and practice?
• What consumers need from the market?
• Is competition good for companies?
• What is better for society: competition or
regulation?
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Paradoxes of competition
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Paradox 1
• Competition is the chase of
happiness through individual
competition, selfishness leads to
the achievement of universal
happiness.
– Basic case: A. Smith about
invisible hand of market
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Paradox 2
• Competition at the same
time creates wealth and
poverty
– Basic case: free market
economy vs. steering
economy (socialism)
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Paradox 3
• Competition means that we as
individuals (people, firms) can
have more, but get finally less
– Basic case: more firms on a
single market means less place
for single company
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Paradox 4
• Companies compete to
reduce competition
– Basic case: the history of
Standard Oil and others big
companies
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Paradox 5
• In the political sphere, both the
right and the left say a lot about the
fight against monopolies, but
practically nobody does anything in
order to prevent concentration
• Basic case: political discussion
before any election
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Paradox 6
• Nobody would deny that a
degree of competition is positive
– Basic case: huge taxes paid
every year by global companies
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Paradox 7
• The intense of today’s
competition in global era is a far
cry from this old ideal
– Basic case: compertition from A.
Smith ideas and global
competition
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Paradox 8
• Competition in short-run has
come to be seen as an answer to
almost all economic ills
– Basic case: Is there a worsening
unemployment problem? Then
what is needed is to become more
competitive.
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Competition, groups and objectives
Consumers
Companies
State (government)
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Consumer
• Who is consumer?
– It is the natural person who takes
legal action not directly related to
its business or professional activity.
– The consumer is the one who pays
to consume goods and services
produced
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The role of the consumer
• Consumers play a vital role in the economic
system of a nation.
• Without consumer demand, producers would
lack one of the key motivations to produce: to
sell to consumers.
• The consumer are part of the
chain of distribution.
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Consumer
• The objectives of the consumers, referred
to consumer theory (choice theory) is:
– To maximize the desirability of their
consumption by maximizing utility subject to
a consumer budget constraint.
• How to understand this?
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Should be consumer protected?
• Legal rationale for protecting the
consumer is based on the
notion of policing market
failures and inefficiencies,
such as inequalities of
bargaining power between
a consumer and a business
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Economic point of view
• The answer is
perfect
competition!
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Perfect competition
• Gives to consumer
– The lowest price
– The biggest amount of good
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What is a firm?
• A business, also known as an enterprise or
a firm, is an organization involved in the
provision of goods, services, or both to
consumers.
• Businesses may also be not-for-profit or stateowned.
• A business owned by multiple individuals
may be referred to as a company.
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The role of producers
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Basic objectives
•
•
•
•
Maximalisation of the production
Maximalisation of the profit
Maximalisation of the company value
Others…
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Should be company protected?
• To protect or not to protect? this is a
question!
• Ansewer:
– No, the competion
shell be only the
one right!
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Economic point of view
• Bigger power – bigger market!
• The lowest level of competition!
• Monopoly is the best!
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Perfect monopoly as a roadsign
• Gives to companies
– The biggest possible price
– The lowest amount of good
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OK, but where is the state?
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What is state?
• State (polity), an
organized political
community living
under a single
system of
government
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The state – basic systems
• Capitalism and market economy
• Socialism and driven
economy
• Something between:
social market
economy
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Basic objectives of state
• The most important question:
– How strong a role the government
should have in both guiding the
market economy and addressing
the inequalities the market
produces
• To guide or not to guide the
market?
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Should be state protected or should state protect?
• Who should protect the state?
• Is it possible? How?
• What state should protect?
– Consumers?
– Companies?
– Others?
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The quest: what concern the text below?
• Detailed objectives are:
– an area of freedom, security and justice without
internal frontiers;
– an internal market where competition is free and
undistorted;
– sustainable development, based on balanced economic
growth and price stability;
– a highly competitive social market economy, aiming at
full employment and social progress, and a high level
of protection and improvement of the quality of the
environment;
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Economic point of view
• market where competition is free and
undistorted (better position of consumers)
• highly competitive social market economy
(strong companies)
• full employment
• free and fair trade
• other
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Conclusion’s question
•What level of competition
is good?
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Thank you for your attention!
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