Monopoly of Indian Railway
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Transcript of Monopoly of Indian Railway
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MONOPOLY OF INDIAN RAILWAY
Presented ByNAWNIT KUMAR
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CONTENTSWhat is monopoly?Characteristic of monopolyWhy barriers to entry? Monopoly Equilibrium Break even pointProfit in monopolyLoss in monopolyMeasuring monopoly powerIndian RailwayPrice maker
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What is monopoly? Monopoly is a form of market structure in
which a single seller or firm has control over the entire market supply, as there are no close substitutes for his product.
For example:- Indian Railway is a public monopoly industries
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Characteristic of monopolyOnly one seller and many buyers
No substitute
Price maker
Entry barriers:- There are legal, technological, economical or natural obstacles, which may block the entry of new firm.
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Why barriers to entry?(1)Legal Barriers:- patent - grant of an exclusive right to use a
specific process or produce a specific product for a period of time.
licenses and franchises - permission, granted by a government, to enter an industry or occupation.
(2)Control of an essential resource:- It is essential because to protect country or social welfare. For example- arm and ammunition industries, uranium refining company….
DeBeers controls the world’s diamond trade.
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(3) Economies of Scale:-Costs per unit in an industry may be low only when a firm produces a lot of output.
Consequently, small firms will be unable to enter the industry because costs are too high.
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Monopoly Equilibrium
Equilibrium point MR=MC
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Break even point
BP
Q
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Profit in monopoly
AR=DemandAR=Demand
Profit areaA
B
E
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Loss in monopoly
AR=Demand
Q
P1
P2
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Measuring monopoly power Lerner’s measure:- difference between price
and marginal cost measures the degree of monopoly.
A/c to him, “degree of monopoly power is
the reciprocal of the price elasticity of demand”.
Degree of monopoly power = (P – MC) = 1 P
e
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Indian RailwayIndian Railways (IR) is largest railway system
in Asia and the second largest in the World.
The railways cover a total length of 63,940 km. IR operates more than 14,244 trains daily, including about 8,002 passenger trains.
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(Rupees in crore)
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PROFIT
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Price makerEvery year, Indian railway minister give
railway budget.According to 2011 railway budget-Concession for male senior citizens has been
increased by 10% to 40%no increase in freight rate.Reduction in AC1 - 7% and AC2 - 4% 5% discount across board for passenger fare
beyond Rs50 for all suburban second class.
Its motive not only profit maximization but also social welfare .
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