NOTES AND LEARNINGS 03-04-11

Sue Gertrude G. Aguado
BSC –MA 3G TTh/11:00-12:30 pm

LECTURE 9
Competition between firms
Profit-seeking
3 types of ownership:
1. Proprietorship—is a type of business entity that is owned and run by one individual and in which there is no legal distinction between the owner and the business.
2. Partnership—is formed between one or more businesses in which partners (owners) co-labor to achieve and share profits or losses.
3. Corporation—is a legal entity that is created under the laws of a State designed to establish the entity as a separate legal entity having its own privileges and liabilities distinct from those of its members.

4 types of cempetition:
1.Perfect Competition—describes market with many buyers and sellers trading identical products so that each buyer and seller is a price taker.
2. Oligopoly—is a market form in which a market or industry is dominated by a small number of sellers (oligopolists)
3. Monopoly—exists when a specific individual or an enterprise has sufficient control over a particular product or service to determine significantly the terms on which other individuals shall have access to it.
4. Monopolistic Competition—is a form of imperfect competition where many competing producers sell products that are differentiated from one another

LECTURE 10
Antitrust and Competition Policy 
Antitrust—law that promotes or maintains market competition by regulating anti-competitive conduct.
Tools of competition:
• Four Firm Concentration Ratio
• Herfindahl-Hirschman Index

       Actually, it wasn’t that hard to understand the lecture. It was somehow a refresher to my knowledge for me not to forget those things. Most of the terms were very familiar. They were elaborated more for better understanding.
       The three types of ownership are discussed—proprietorship, partnership and corporation. Their definitions were written above on my notes. Aside from that, 4 types of competition were enumerated—perfect competition, monopolistic competition, oligopoly and monopoly. Their definitions were written above. Perfect competition with its characteristics has already been discussed in our previous lessons. For the oligopoly, because of few numbers of sellers, the action of one firm can influence the actions of other firms. In this type of competition, barriers to entry are high. In monopoly, it lacks economic competition to produce goods or services and there are no viable substitutes because there is only one firm here. While in monopolistic competition, there are many numbers of firms, they have also market power same with the monopoly although here is just low. Firms here are price setter s which is the same with the monopoly.           
       Lecture 10, antitrust and competition policy were discussed. Antitrust law was created as a protection against monopoly in the market. Aside from that, two standard tools were also introduced here: Four Firm Concentration Ratio and Herfindahl-Hirschman Index. These were known as the two traditional structural measures of market concentration based on firms’ market shares.
       Thus, the lecture was able to deepen my understanding regarding terms about economics which were introduced here.

Reaction Paper for February

Sue Gertrude G. Aguado
BSC-MA 3G MWF 1:30-2:30 pm

Philippines plans to buy 800,000T rice in 2011

LOS BANOS, LAGUNA - The Philippines plans to import around 800,000 tons rice this year even if a government council allowed purchases of up to 1.3 million tons, the agriculture secretary said on Monday.
Proceso Alcala told Reuters he prefers the private sector to bring in the bulk, or 600,000 tons, of this year's planned rice purchases starting May to June.
He said the government wants to cut its rice imports in 2012 by half, or about 400,000 tons, against this year before it achieves its goal of rice self-sufficiency by 2013. 
Source: http://www.abs-cbnnews.com/business/02/28/11/philippines-plans-buy-800000t-rice-2011

REACTION PAPER

      This article was all about the government's plan to import rice for this year. It was stated here that they were planning to buy around 800,000 tons rice even if the allowable purchases were up to 1.3 M tons. Well, I agree in that case since I believe that they--referring to their economists, were able to estimate the needs or the demands of the people. And even though, the government has an allowed purchases of up to 1.3M tons, they should not purchase the maximum without a proper study of our market equilibrium. Because when the government would have wrong decision, it would have a great effect in our economy. Like for example is when the government will purchase more tons of rice not considering the market equilibrium, that would probably lead into surplus of the production. In other case, when they will purchase few tons, which was opposite to the demands of the people, then that would probably lead to shortage of supply. In the end, the people will suffer because of the effects of every wrong decision by the government. 

      I remember the news about the surplus of sacks of rice production which were stored by the government somewhere in Luzon. The sacks of rice cannot be used because they are expired already. Hopefully, that would never happen again. I think it would be okay if the number of sacks were immaterial, but the big storeroom were still full, thus, they were very material. They would probably cost millions. To think, the money used to buy those were from the people. What a waste! Thus, I am hoping that the government would really study the situation very well before making a decision to avoid negative consequences.

reaction paper for January

Sue Gertrude G. Aguado

BSC-MA 3G  MWF 1:30-2:30pm

Sugar to Stay Costly

MANILA, Philippines—The government will not be imposing the suggested retail price (SRP) of sugar just yet as the supply is foreseen to remain tight, the chief of the Sugar Regulatory Administration (SRA) said. SRA Administrator Gina Martin, in a recent interview, said the SRP of sugar of P52 per kilo remained “suspended indefinitely.” She noted that the price of supermarket sugar was P68 per kilo while smaller retailers were charging P65 per kilo. The government in December suspended the SRP of sugar at the behest of retailers, who complained that P52 was way below the market price. According to the retailers, sugar should have been selling at P63-P65 per kilo. 

Source: http://business.inquirer.net/money/breakingnews/view/20110131-317612/Sugar-to-stay-costly

Reaction Paper

      The Suggested Retail Price (SRP) is a government program which controls the prices of goods in the market for the benefit of all. The decision of those charge with governance is a big deal in the prosperity of the economy. They must make decisions basing on our economy through the study of our market equilibrium. Thus, I agree with the decision of the SRA Administrator who suspended the SRP of sugar. Since the suggested retail price of P52 was way below the market price. 

       Let us say for example if the Equilibrium Price is P63, at this point there would be no Surplus or Shortage in the production. At a price lower than this like the SRP of P52, there would be shortage in the production. And at a price higher than the P63, there would be surplus. So if the government will impose SRP of P52 or a price ceiling of P52, then that would be a price ceiling that is binding. This is because the market equilibrium is above the SRP. The general result would be a shortage of a good arises and sellers must ration the scarce goods among the large number of potential buyers. 

      In terms of making decision, SRA seems to be independent on the will of the retailers only.Well, in that case, they should be independent. They must have their own study regarding the economy considering also both the sellers and buyers. Because every wrong move by the government, it would create negative result in our economy.