Economic Principle M 2011 Media Watch presentation Steven

Economic Principle (M) 2011 Media Watch presentation Steven Barrett

Introduction (task 1) • The title of the article: Why we pay more locally for the same fashion. • The source of the article: The Australian. • The author: Georgina Safe, Fashion editor. • The date the article was published: 24 December 2010. • Why you chose the article for your presentation: This article directly relates to costs and price discrimination.

Introduction • A brief summary of the article: The article is arguing that fashion clothing costs more in Australia than identical products in America because Australian retailers have higher costs, such as wages and transport and smaller volumes so they can not buy get bulk discounts from producers. • This argument is total nonsense,

Review of theory (task 2) TC Total Costs TVC Costs (dollars) Fixed Cost Total Cost Variable Cost TFC Quantity 4

Short-run average costs (dollars) Review of theory (task 2) Average Costs MC AVC ATC AFC Quantity The distance between ATC and AVC is AFC so these two curves should converge. 5

(Task 3) The argument in the article Unit Costs Australian retailers American retailers Output 6

( Task 4)An alternative view Third order Price Discrimination Increased economic profit from price discrimination Price and cost (dollars per trip) 2100 Figure 11. 9 MC 1800 ATC 1600 1400 1200 900 600 300 0 D 2 4 6 8 10 15 20 Passengers (thousands per year)

The Yacht diagram D 1 P 2 D 2 8 MR 1 MR 2

The Yacht diagram D 1 America Australia P 1 P 2 D 2 MR 2 9 MR 1

Conclusion: Broader social or economic implications(task 5) • This order price discrimination is an increasingly common device used by retailers to push up prices in some market segments. • It increases profits by converting consumer surplus to producer surplus • Australian consumers are beginning to realise this and are shopping online to stop being ripped off. • This may cause unemployment in the retail sector unless retailers get thier act together.