Monday, November 29, 2010
Painkiller can boost breast cancer survival rates»
Painkiller can boost breast cancer survival rates» London, Feb 18, Women with breast cancer who take aspirin at least twice a week can more than double their chance of survival, a media report said citing researchers.
The greatest protection comes from taking the drug two, three, four or five times a week, a study has found.
They cut the risk of dying by 71 percent and the risk of the cancer spreading by 60 percent, the Daily Mail reported on its website Wednesday.
Taking aspirin on six or seven days cut the death risk by 64 percent, but the risk of spreading fell only 43 percent.
The findings of the US study provide the most compelling evidence yet of the power of the cheap painkiller.
Previous research has suggested that aspirin can protect against bowel cancer, although results for other cancers, such as breast and prostate, were less clear-cut.
The latest dramatic results came from a 30-year project tracking the health of 238,000 nurses.
Lead researcher Michelle Holmes, of Harvard Medical School, said: “This is the first study to find that aspirin can significantly reduce the risk of cancer spread and death for women who have been treated for early-stage breast cancer.
“If these findings are confirmed in other clinical trials, taking aspirin may become another simple, low-cost and relatively safe tool to help women with breast cancer live longer, healthier lives.”
Drugs in the same class as aspirin, including ibuprofen and naproxen, also lowered the risks, but paracetamol did not.
Experts warned, however, that aspirin can have serious side effects, including stomach irritation that can lead to ulcers and even fatal bleeding.
For some people the risk of harm is greater than potential benefits.
Women newly diagnosed with breast cancer are advised not to take aspirin for the first 12 months as it can cause side effects while they undergo chemotherapy or radiation.
Researchers are uncertain exactly how aspirin affects tumours but it could be by lowering inflammation. The study found that there were no beneficial effects for people who took aspirin only once a week.
Holmes said: “Aspirin cannot be considered a substitute for conventional cancer treatments, and taking aspirin does have negative effects in some.
“More study is definitely needed to establish the cause and effect of aspirin on breast cancer. But for now, if a woman has breast cancer and is taking aspirin, she may take some comfort in knowing she might be doing something to help prevent her breast cancer from recurring.”
Millions of people in Britain already take low-dose aspirin every day on doctor’s advice to reduce the chance of a repeat heart attack or stroke.
Others take it of their own accord for “health insurance”.
Most of the women in the new study, published in the Journal of Clinical Oncology, were taking aspirin to prevent heart disease.
The Harvard team identified 4,000 breast cancer patients between 1976 and 2002 and followed them until their deaths or the end of the study in June 2006.
Altogether 341 women died from the cancer.
The greatest protection comes from taking the drug two, three, four or five times a week, a study has found.
They cut the risk of dying by 71 percent and the risk of the cancer spreading by 60 percent, the Daily Mail reported on its website Wednesday.
Taking aspirin on six or seven days cut the death risk by 64 percent, but the risk of spreading fell only 43 percent.
The findings of the US study provide the most compelling evidence yet of the power of the cheap painkiller.
Previous research has suggested that aspirin can protect against bowel cancer, although results for other cancers, such as breast and prostate, were less clear-cut.
The latest dramatic results came from a 30-year project tracking the health of 238,000 nurses.
Lead researcher Michelle Holmes, of Harvard Medical School, said: “This is the first study to find that aspirin can significantly reduce the risk of cancer spread and death for women who have been treated for early-stage breast cancer.
“If these findings are confirmed in other clinical trials, taking aspirin may become another simple, low-cost and relatively safe tool to help women with breast cancer live longer, healthier lives.”
Drugs in the same class as aspirin, including ibuprofen and naproxen, also lowered the risks, but paracetamol did not.
Experts warned, however, that aspirin can have serious side effects, including stomach irritation that can lead to ulcers and even fatal bleeding.
For some people the risk of harm is greater than potential benefits.
Women newly diagnosed with breast cancer are advised not to take aspirin for the first 12 months as it can cause side effects while they undergo chemotherapy or radiation.
Researchers are uncertain exactly how aspirin affects tumours but it could be by lowering inflammation. The study found that there were no beneficial effects for people who took aspirin only once a week.
Holmes said: “Aspirin cannot be considered a substitute for conventional cancer treatments, and taking aspirin does have negative effects in some.
“More study is definitely needed to establish the cause and effect of aspirin on breast cancer. But for now, if a woman has breast cancer and is taking aspirin, she may take some comfort in knowing she might be doing something to help prevent her breast cancer from recurring.”
Millions of people in Britain already take low-dose aspirin every day on doctor’s advice to reduce the chance of a repeat heart attack or stroke.
Others take it of their own accord for “health insurance”.
Most of the women in the new study, published in the Journal of Clinical Oncology, were taking aspirin to prevent heart disease.
The Harvard team identified 4,000 breast cancer patients between 1976 and 2002 and followed them until their deaths or the end of the study in June 2006.
Altogether 341 women died from the cancer.
Sunday, November 28, 2010
Guzaarish Movie review
Film: Guzaarish
Director: Sanjay Leela Bhansali
Starrting: Aishwarya Rai Bachchan, Hrithik Roshan, Aditya Roy Kapur, Monikangana Dutta, Shernaz Patel, Rajat Kapoor
Rating:
Guzaarish is yet another magical representation of stories by filmmaker Sanjay Leela Bhansali. The trailers of the movie have dismayed many Hrithik Roshan fans when they saw him sitting on a wheel chair as no one wants to see their superstar like that. But Bhansali has kept the mystery a secret till you catch a show of the flick which has released at a theater near you.Here, you will see the magician Ethan Mascarenhas (Hrithik Roshan) whipping his magical wand while utilizing his amazing dancing steps.
Bhansali has made use of both the acting as well as dancing talent of the lead actors of the film, Hrithik Roshan and Aishwarya Rai. Apart his signatory grand sets and music, Bhansali has presented the story with a deep emotional touch. You will cry with Ethan, who remains locked inside his grand palace in Goa for fourteen long years following the failure of one of his magic trick. Following the incident, Ethan turns quadriplegic and loses interest in life but at the same time he runs a radio show called ‘radio zindagi’.
With the years of experience, the magical chemistry between Hrithik and Aishwarya has strengthened and that will be reflected in the emotional as well as romantic and funny scenes of the movie. Unlike, the usual life nurses, the beauty queen, who plays nurse to Ethan, will be seen on a floor length skirt. The color combination of the costumes gives a different and unique touch along with the wonderful music given by the director himself.
Expected the unexpected from the Sawariyaa maker and have an out of the world feeling watching Guzaarish this weekend. Shernaz Patel as the lawyer friend of Hrithik’s character, justifies her part and Rajat Kapoor as the opposing advocate, gives the same kind of performance to match her. On behalf of her client, Patel’s character asks ‘euthanasia’ for her client Ethan.
You need to watch the movie to get the answer if he gets positive from the court or Sophia becomes able to grow his interest in life. It will be a nice break from the typical romantic or action genres at this weekend.
Director: Sanjay Leela Bhansali
Starrting: Aishwarya Rai Bachchan, Hrithik Roshan, Aditya Roy Kapur, Monikangana Dutta, Shernaz Patel, Rajat Kapoor
Rating:
Guzaarish is yet another magical representation of stories by filmmaker Sanjay Leela Bhansali. The trailers of the movie have dismayed many Hrithik Roshan fans when they saw him sitting on a wheel chair as no one wants to see their superstar like that. But Bhansali has kept the mystery a secret till you catch a show of the flick which has released at a theater near you.Here, you will see the magician Ethan Mascarenhas (Hrithik Roshan) whipping his magical wand while utilizing his amazing dancing steps.
Bhansali has made use of both the acting as well as dancing talent of the lead actors of the film, Hrithik Roshan and Aishwarya Rai. Apart his signatory grand sets and music, Bhansali has presented the story with a deep emotional touch. You will cry with Ethan, who remains locked inside his grand palace in Goa for fourteen long years following the failure of one of his magic trick. Following the incident, Ethan turns quadriplegic and loses interest in life but at the same time he runs a radio show called ‘radio zindagi’.
With the years of experience, the magical chemistry between Hrithik and Aishwarya has strengthened and that will be reflected in the emotional as well as romantic and funny scenes of the movie. Unlike, the usual life nurses, the beauty queen, who plays nurse to Ethan, will be seen on a floor length skirt. The color combination of the costumes gives a different and unique touch along with the wonderful music given by the director himself.
Expected the unexpected from the Sawariyaa maker and have an out of the world feeling watching Guzaarish this weekend. Shernaz Patel as the lawyer friend of Hrithik’s character, justifies her part and Rajat Kapoor as the opposing advocate, gives the same kind of performance to match her. On behalf of her client, Patel’s character asks ‘euthanasia’ for her client Ethan.
You need to watch the movie to get the answer if he gets positive from the court or Sophia becomes able to grow his interest in life. It will be a nice break from the typical romantic or action genres at this weekend.
Sylvester Stallone to follow Pamela Anderson in Bigg Boss 4
Hollywood action hero Sylvester Stallone is all set to be seen peeping inside the house of Bigg boss 4 soon. There are reports that actor Salman Khan has requested the special act of Sylvester Stallone from the production Endemol, which obliged him and arranged it for the sake of their celebrity host.
According to reliable sources, Sylvester Stallone will be seen inside the Bigg Boss house 4 for one week and will be interacting with the stars. But sources also leak out that the actor will be placed in five star hotels in Lonavla and will be escorted to the Bigg boss house daily morning and will be spending time till 10pm in the night. Then again he will be getting back to his room in the five star hotels.
The same thing was seen in the case of Pamela Anderson, as she was reluctant to stay with the inmates and choose to stay in a room in a five star hotel in the nights. The ‘Baywatch’ stars also included the rule that she will just be staying in the house for 12 hours only.
The inclusion of Sylvester Stallone is said to fetch more TRP’s for the Colors channel, top reality show.
According to reliable sources, Sylvester Stallone will be seen inside the Bigg Boss house 4 for one week and will be interacting with the stars. But sources also leak out that the actor will be placed in five star hotels in Lonavla and will be escorted to the Bigg boss house daily morning and will be spending time till 10pm in the night. Then again he will be getting back to his room in the five star hotels.
The same thing was seen in the case of Pamela Anderson, as she was reluctant to stay with the inmates and choose to stay in a room in a five star hotel in the nights. The ‘Baywatch’ stars also included the rule that she will just be staying in the house for 12 hours only.
The inclusion of Sylvester Stallone is said to fetch more TRP’s for the Colors channel, top reality show.
Top 10 Richest Women in the World-
Top 10 Richest Women in the World-
1. Chirsty Walton
Wealth: $22.5 billion
Country: United States of America
Wife of late John T.Walton – founder of Wal-Mart
2. Alice Walton
Wealth: $US20.6 billion
Source: Wal-Mart
Citizen: United States of America
Heiress to Wal-Mart fortune andsister in law of world’s richest women Christy Walton.
3. Liliane Bettencourt
Wealth: $US20.0 billion
Country: France
Daughter of L’OrĂ©al founder Eugene Scheueller.
4. Brigit Rausing
Wealth: $US13.0 billion
Country Sweden
Inherited packaging firm Tetra Laval on death of husband. An art historian by training.
5. Savitri Jindal
Wealth: $US12.2 billion
Country: India
Her wealth comes from Jindal Steel in India. Also mother of nine children.
6. Abigail Johnson
Wealth: $US11.5 billion
Country: USA
President of Fidelity Investments Personal and Workplace Investing.
7. Susanne Klatten
Wealth: $US11.1 billion
Country: Germany
Owns a 12% stake in BMW and a 50.1% stake in a pharmaceutical company in US.
8. Iris Fontbona
Wealth: $US11.0 billion
Country: Chile
From ownership of Chilean mines.
9. Jacqueline Mars
Wealth: $US11.0 billion
Country: United States of America
Owns the great confectionery conglomerate – Mars. Also very successful pet food company which includes Pedigree and Whiskas.
10. Anne Cox Chambers
Wealth: $US10.2 billion
Country: United States of America
Cox Communications which includes newspapers, television, radio, and cable.
Richest Self Made Women include
* Wu Yajun – $3.9 billion from property development in Hong Kong and China
* Oprah Winfrey ($2.4 billion)- tv presenter, chat show host
* J.K.Rowling – author of Harry Potter series
* Giuliana Benneton ($2.1bn)
1. Chirsty Walton
Wealth: $22.5 billion
Country: United States of America
Wife of late John T.Walton – founder of Wal-Mart
2. Alice Walton
Wealth: $US20.6 billion
Source: Wal-Mart
Citizen: United States of America
Heiress to Wal-Mart fortune andsister in law of world’s richest women Christy Walton.
3. Liliane Bettencourt
Wealth: $US20.0 billion
Country: France
Daughter of L’OrĂ©al founder Eugene Scheueller.
4. Brigit Rausing
Wealth: $US13.0 billion
Country Sweden
Inherited packaging firm Tetra Laval on death of husband. An art historian by training.
5. Savitri Jindal
Wealth: $US12.2 billion
Country: India
Her wealth comes from Jindal Steel in India. Also mother of nine children.
6. Abigail Johnson
Wealth: $US11.5 billion
Country: USA
President of Fidelity Investments Personal and Workplace Investing.
7. Susanne Klatten
Wealth: $US11.1 billion
Country: Germany
Owns a 12% stake in BMW and a 50.1% stake in a pharmaceutical company in US.
8. Iris Fontbona
Wealth: $US11.0 billion
Country: Chile
From ownership of Chilean mines.
9. Jacqueline Mars
Wealth: $US11.0 billion
Country: United States of America
Owns the great confectionery conglomerate – Mars. Also very successful pet food company which includes Pedigree and Whiskas.
10. Anne Cox Chambers
Wealth: $US10.2 billion
Country: United States of America
Cox Communications which includes newspapers, television, radio, and cable.
Richest Self Made Women include
* Wu Yajun – $3.9 billion from property development in Hong Kong and China
* Oprah Winfrey ($2.4 billion)- tv presenter, chat show host
* J.K.Rowling – author of Harry Potter series
* Giuliana Benneton ($2.1bn)
Top 10 Richest Men in the World
Top 10 Richest Men in the World
1. Carlo Slim Helu – Mexico $53.5 billion, up $18.5 billion in 12 months. Shares of America Movil (oil)
2. Bill Gates, US $53 billion who had held the title of world’s richest 14 of the past 15 years. (Microsoft)
3. Warren Buffett – US – $47billion- ( Berkshire Hathaway Warren Buffet) Warren Buffet invested wisely in Goldman Sachs during the worst parts of 2008
4. Mukesh Ambani India $29.0
5. Lakshmi Mittal India 59 $28.7
6. Lawrence Ellison United States $28.0
7. Bernard Arnault France $27.5
8. Eike Batista Brazil $27.0
9. Amancio Ortega Spain $74
10. Karl Albrecht Germany $23.5
1. Carlo Slim Helu – Mexico $53.5 billion, up $18.5 billion in 12 months. Shares of America Movil (oil)
2. Bill Gates, US $53 billion who had held the title of world’s richest 14 of the past 15 years. (Microsoft)
3. Warren Buffett – US – $47billion- ( Berkshire Hathaway Warren Buffet) Warren Buffet invested wisely in Goldman Sachs during the worst parts of 2008
4. Mukesh Ambani India $29.0
5. Lakshmi Mittal India 59 $28.7
6. Lawrence Ellison United States $28.0
7. Bernard Arnault France $27.5
8. Eike Batista Brazil $27.0
9. Amancio Ortega Spain $74
10. Karl Albrecht Germany $23.5
Why Printing Money Causes Inflation
Why Printing Money Causes Inflation
Readers Question: One way to finance government spending is to print money, but printing more money leads to inflation. How economic theory justify this?
Ceteris Paribus, if Money Supply increases faster than real output then inflation will occur. The Quantity Theory of Money seeks to establish this connection with the formula MV=PY. Where
* M= Money supply,
* V= Velocity of circulation (how many times money changes hands)
* P= Price level
* Y= National Income (T = number of transactions)
Rather than delving deep into the quantity theory of money. Let’s think about a simple example.
* Suppose the economy produces a 1,000 units of output.
* Suppose the money supply (number of notes and coins) = £10,000
* This means that the average price of the output produced will be £10 (10,000/1000)
Suppose then that the government print an extra £5,000 notes creating a total money supply of £15,000; but, the output of the economy stays at 1,000 units. Effectively, people have more cash, but, the number of goods is the same. Because people have more cash, they are willing to spend more to buy the goods in the economy.
The price of the 1,000 units will increase to £15 (15,000/1000). The price has increased, but, the quantity of output stays the same. People are not better off, and the value of money has decreased; e.g. A £10 note buys less goods than previously.
Therefore, if the money supply is increased, but, output stays the same, everything will just become more expensive. The increase in national income will be purely monetary (nominal)
If output increased by 5%. and the money supply increases by 7%. Then inflation will be roughly 2%.
This is a simplification. For example, in the real world it is hard to measure the money supply (there are many different measures from M0 narrow money to M4 wide money)
However, it provides a rough explanation why printing money reduces the value of money causing prices to increase.
Readers Question: One way to finance government spending is to print money, but printing more money leads to inflation. How economic theory justify this?
Ceteris Paribus, if Money Supply increases faster than real output then inflation will occur. The Quantity Theory of Money seeks to establish this connection with the formula MV=PY. Where
* M= Money supply,
* V= Velocity of circulation (how many times money changes hands)
* P= Price level
* Y= National Income (T = number of transactions)
Rather than delving deep into the quantity theory of money. Let’s think about a simple example.
* Suppose the economy produces a 1,000 units of output.
* Suppose the money supply (number of notes and coins) = £10,000
* This means that the average price of the output produced will be £10 (10,000/1000)
Suppose then that the government print an extra £5,000 notes creating a total money supply of £15,000; but, the output of the economy stays at 1,000 units. Effectively, people have more cash, but, the number of goods is the same. Because people have more cash, they are willing to spend more to buy the goods in the economy.
The price of the 1,000 units will increase to £15 (15,000/1000). The price has increased, but, the quantity of output stays the same. People are not better off, and the value of money has decreased; e.g. A £10 note buys less goods than previously.
Therefore, if the money supply is increased, but, output stays the same, everything will just become more expensive. The increase in national income will be purely monetary (nominal)
If output increased by 5%. and the money supply increases by 7%. Then inflation will be roughly 2%.
This is a simplification. For example, in the real world it is hard to measure the money supply (there are many different measures from M0 narrow money to M4 wide money)
However, it provides a rough explanation why printing money reduces the value of money causing prices to increase.
Factors Affecting Demand
Factors Affecting Demand
· The individual Demand Curve illustrates the price people are willing to pay for a particular quantity of a good.
· The market demand curve will be the sum of all individual demand curves.
It shows the quantity of a good consumers plan to buy at different prices
· A change in price causes a MOVEMENT ALONG the Demand Curve,
· E.g. if there is an increase in price from p2 to p1 then there will be a fall in demand from Q2 to Q1
d
Shifts in the Demand Curve
This occurs when, even at the same price, consumers are willing to buy a higher quantity of goods. This will occur if there is a shift in the conditions of demand.
Diagram: Shift in Demand
demand
A shift to the right in the demand curve can occur for a number of reasons:
1. An increase in disposable income, this can occur for a variety of reasons such as higher wages and lower taxes
2. An increase in the quality of the good e.g. computers are now more powerful
3. Advertising can increase brand loyalty to the goods and increase demand
4. An increase in the price of substitutes, e.g. if the price of Kodak films increase the demand for Fuji films will increase
5. A fall in the price of complements. E.g. a lower price of Play Station 2 will increase the demand for compatible games.
6. Weather: In cold weather there will be increased demand for fuel and warm weather.
7. Expectations of future price increases.
Evaluation:
· For some luxury goods income will be an important determinant of demand. e.g. if your income increased you would buy more CDs but probably not salt.
· Advertising is important for goods in which branding is important, e.g. coca cola but not for bananas
Extra on Demand
· Effective demand: This occurs when a consumers desire to buy a good can be backed up by his ability to afford it.
· Derived demand: This occurs when a good or factor of production such as labour is demanded for another reason
· A giffen good is a good where an increase in price of a basic item leads to an increase in demand, because very poor people cannot afford any other luxury goods.
· An ostentatious good, is a good where an increase in price leads to an increase in demand because people believe it is now better
· The individual Demand Curve illustrates the price people are willing to pay for a particular quantity of a good.
· The market demand curve will be the sum of all individual demand curves.
It shows the quantity of a good consumers plan to buy at different prices
· A change in price causes a MOVEMENT ALONG the Demand Curve,
· E.g. if there is an increase in price from p2 to p1 then there will be a fall in demand from Q2 to Q1
d
Shifts in the Demand Curve
This occurs when, even at the same price, consumers are willing to buy a higher quantity of goods. This will occur if there is a shift in the conditions of demand.
Diagram: Shift in Demand
demand
A shift to the right in the demand curve can occur for a number of reasons:
1. An increase in disposable income, this can occur for a variety of reasons such as higher wages and lower taxes
2. An increase in the quality of the good e.g. computers are now more powerful
3. Advertising can increase brand loyalty to the goods and increase demand
4. An increase in the price of substitutes, e.g. if the price of Kodak films increase the demand for Fuji films will increase
5. A fall in the price of complements. E.g. a lower price of Play Station 2 will increase the demand for compatible games.
6. Weather: In cold weather there will be increased demand for fuel and warm weather.
7. Expectations of future price increases.
Evaluation:
· For some luxury goods income will be an important determinant of demand. e.g. if your income increased you would buy more CDs but probably not salt.
· Advertising is important for goods in which branding is important, e.g. coca cola but not for bananas
Extra on Demand
· Effective demand: This occurs when a consumers desire to buy a good can be backed up by his ability to afford it.
· Derived demand: This occurs when a good or factor of production such as labour is demanded for another reason
· A giffen good is a good where an increase in price of a basic item leads to an increase in demand, because very poor people cannot afford any other luxury goods.
· An ostentatious good, is a good where an increase in price leads to an increase in demand because people believe it is now better
Monopoly
Monopoly
Definition of Monopoly:
* A pure Monopoly is defined as a single seller of a product. i.e. 100% of market share.
* In the UK a firm is said to have Monopoly power if it has more than 25% of Market share
* Measuring Market Power: The Concentration ratio measure the market share of the leading firms in a particular industry.
Monopoly Diagram
monopoly
How Monopolies can develop
1. Horizontal Integration. Where 2 firms join at the same stage of production, e.g. 2 banks such as TSB and Lloyds
2. Vertical Integration. Where a firm gains market power by controlling different stages of the production process. A good example is the oil industry. Where the leading firms produce, refine and sell oil
3. Legal Monopoly. E.g. Royal Mail or Patents
4. Internal Expansion of a firm. Firms can increase market share by increasing their sales and possibly benefiting from economies of scale
5. Being the First Firm e.g. Microsoft
Definition of Monopoly:
* A pure Monopoly is defined as a single seller of a product. i.e. 100% of market share.
* In the UK a firm is said to have Monopoly power if it has more than 25% of Market share
* Measuring Market Power: The Concentration ratio measure the market share of the leading firms in a particular industry.
Monopoly Diagram
monopoly
How Monopolies can develop
1. Horizontal Integration. Where 2 firms join at the same stage of production, e.g. 2 banks such as TSB and Lloyds
2. Vertical Integration. Where a firm gains market power by controlling different stages of the production process. A good example is the oil industry. Where the leading firms produce, refine and sell oil
3. Legal Monopoly. E.g. Royal Mail or Patents
4. Internal Expansion of a firm. Firms can increase market share by increasing their sales and possibly benefiting from economies of scale
5. Being the First Firm e.g. Microsoft
Disadvantages of Mergers:
UK Merger Policy
Any potential merger must give details to the OFT. If the OFT is concerned they can refer the merger to the competition commission which can examine whether the merger is in the public interest
The competition commission can either
o block the merger
o Allow the merger to occur
o Allow it to occur under certain condition such as divesting some parts of the business to keep market share low
Disadvantages of Mergers:
If a merger leads to a significant increase in market share, either in local or national markets, the new firm could exercise monopoly power. The legal definition of a monopoly is a firm with more than 25% of the market. If the firm has monopoly power there could be the following disadvantages:
+ Higher prices leading to allocative inefficiency)
+ Lower Quantity and reduction in consumer surplus
+ Monopolies are more likely to be productively inefficient and not produce on the lowest point on the average cost curve
+ Easier to collude
+ If there is less competition complacency amongst firms can lead to lower quality of products and less investment in new products
+ Fewer firms therefore less choice for consumers
+ With increased supernormal profits the firm can engage in cross subsidisation or predatory pricing increasing Barriers to Entry.
+ The new firm can pay lower prices to suppliers
+ Mergers can lead to job losses.
+ If the firm becomes too big it may suffer from diseconomies of scale
+ The motives for mergers is often poor. E.g. managers may prefer to work for a big company where they get higher salaries and more prestige.
Any potential merger must give details to the OFT. If the OFT is concerned they can refer the merger to the competition commission which can examine whether the merger is in the public interest
The competition commission can either
o block the merger
o Allow the merger to occur
o Allow it to occur under certain condition such as divesting some parts of the business to keep market share low
Disadvantages of Mergers:
If a merger leads to a significant increase in market share, either in local or national markets, the new firm could exercise monopoly power. The legal definition of a monopoly is a firm with more than 25% of the market. If the firm has monopoly power there could be the following disadvantages:
+ Higher prices leading to allocative inefficiency)
+ Lower Quantity and reduction in consumer surplus
+ Monopolies are more likely to be productively inefficient and not produce on the lowest point on the average cost curve
+ Easier to collude
+ If there is less competition complacency amongst firms can lead to lower quality of products and less investment in new products
+ Fewer firms therefore less choice for consumers
+ With increased supernormal profits the firm can engage in cross subsidisation or predatory pricing increasing Barriers to Entry.
+ The new firm can pay lower prices to suppliers
+ Mergers can lead to job losses.
+ If the firm becomes too big it may suffer from diseconomies of scale
+ The motives for mergers is often poor. E.g. managers may prefer to work for a big company where they get higher salaries and more prestige.
Benefits of Mergers:
Benefits of Mergers:
1. Economies of scale. This occurs when a larger firm with increased output can reduce average costs. Different economies of scale include:
* i) technical economies if the firm has significant fixed costs then the new larger firm would have lower average costs
* ii) bulk buying – discount for buying large quantities of raw materials
* iii) financial – better rate of interest for large company
* iv) Organisational – one head office rather than two is more efficient
· Note a vertical merger would have less potential economies of scale than a horizontal merger e.g. a vertical merger could not benefit form technical economies of scale
2. International Competition. Mergers can help firms deal with the threat of multinationals and compete on an international scale
3. Mergers may allow greater investment in R&D This is because the new firm will have more profit. This can lead to a better quality of goods for consumers
4. Greater Efficiency. Redundancies can be merited if they can be employed more efficiently
Evaluation:
The desirability of a merger will depend upon several factors such as:
1. Is there scope for economies of scale
2. Will there be an increase in monopoly power and significant reduction in competition
3. Is the market still contestable (freedom of entry and exit)
Because of this the Competition commission looks at each individual case and assess its relative merits and demerits.
1. Economies of scale. This occurs when a larger firm with increased output can reduce average costs. Different economies of scale include:
* i) technical economies if the firm has significant fixed costs then the new larger firm would have lower average costs
* ii) bulk buying – discount for buying large quantities of raw materials
* iii) financial – better rate of interest for large company
* iv) Organisational – one head office rather than two is more efficient
· Note a vertical merger would have less potential economies of scale than a horizontal merger e.g. a vertical merger could not benefit form technical economies of scale
2. International Competition. Mergers can help firms deal with the threat of multinationals and compete on an international scale
3. Mergers may allow greater investment in R&D This is because the new firm will have more profit. This can lead to a better quality of goods for consumers
4. Greater Efficiency. Redundancies can be merited if they can be employed more efficiently
Evaluation:
The desirability of a merger will depend upon several factors such as:
1. Is there scope for economies of scale
2. Will there be an increase in monopoly power and significant reduction in competition
3. Is the market still contestable (freedom of entry and exit)
Because of this the Competition commission looks at each individual case and assess its relative merits and demerits.
Competition Policy
Competition Policy
Definition of Competition Policy: Government policies to prevent and reduce the abuse of monopoly power
Abuse of monopoly power can lead to market failure and be against the public interest. Therefore Govt’s are concerned to intervene and protect the interests of the consumers
1998 Competition Act sought to bring the UK into line with EU competition policy
The OFT is responsible for investigating suspected abuses of monopoly power and engaging in prohibited practices. There are 2 main types of behaviour they investigate
Definition of Competition Policy: Government policies to prevent and reduce the abuse of monopoly power
Abuse of monopoly power can lead to market failure and be against the public interest. Therefore Govt’s are concerned to intervene and protect the interests of the consumers
1998 Competition Act sought to bring the UK into line with EU competition policy
The OFT is responsible for investigating suspected abuses of monopoly power and engaging in prohibited practices. There are 2 main types of behaviour they investigate
Price Elasticity of Demand (PED)
Price Elasticity of Demand (PED)
* PED measures the responsiveness of a change in demand, after a change in price.
*
PED = % change in Q.D.
% change in price
PED = change in Q * ___Price__
Q Change in P
* If price increase by 10% and demand for CDs fell by 20% then PED = -20/10 = -2
* If price increase from £50 to £55 and PED was 0.5 . How much did quantity demanded fall?
* 0.5 = % change in QD
* Therefore % QD = -5
Price Elastic Demand
Definition: Demand is elastic if a change in price leads to a bigger % change in demand; therefore the PED will therefore be greater than 1.
e
Goods which are elastic, tend to have some or all of the following characteristics.
1. They are luxury goods
2. They are expensive and a big % of income e.g. sports cars and holidays
3. Goods with many substitutes and a very competitive market. E.g. if Simsbury’s put up the price of its bread there are many alternatives, so people would be price sensitive
4. Bought frequently
Price Inelastic Demand
These are goods where a change in price leads to a smaller % change in demand; therefore PED <1 e.g. 0.5
inelastic
* Inelastic demand PED <1 - Perfectly inelastic PED =0
Goods which are inelastic tend to have some or all of the following features:
1. They have few or no close substitutes, e.g. petrol, cigarettes.
2. They are necessities
3. They are addictive
4. They cost a small % of income or are bought infrequently
* In the short term demand is usually more inelastic because it takes time to find alternatives
* If the price of chocolate increased demand would be inelastic because there are no alternatives, however if the price of mars increased there are close substitutes in the form of other chocolate therefore demand will be more elastic.
Using Knowledge of Elasticity
1. If demand is inelastic then increasing the price can lead to an increase in revenue. This is why OPEC try to increase the price of oil.
Graph showing increase in Revenue following increase in price
elasticity
2. If demand is elastic, firms would be unlikely to increase revenue as this could lead to a fall in revenue. Instead they could try advertising to increase brand loyalty and make demand more inelastic
3. Price Discrimination. Some people pay higher prices for tickets for trains because there demand is more inelastic.
* PED measures the responsiveness of a change in demand, after a change in price.
*
PED = % change in Q.D.
% change in price
PED = change in Q * ___Price__
Q Change in P
* If price increase by 10% and demand for CDs fell by 20% then PED = -20/10 = -2
* If price increase from £50 to £55 and PED was 0.5 . How much did quantity demanded fall?
* 0.5 = % change in QD
* Therefore % QD = -5
Price Elastic Demand
Definition: Demand is elastic if a change in price leads to a bigger % change in demand; therefore the PED will therefore be greater than 1.
e
Goods which are elastic, tend to have some or all of the following characteristics.
1. They are luxury goods
2. They are expensive and a big % of income e.g. sports cars and holidays
3. Goods with many substitutes and a very competitive market. E.g. if Simsbury’s put up the price of its bread there are many alternatives, so people would be price sensitive
4. Bought frequently
Price Inelastic Demand
These are goods where a change in price leads to a smaller % change in demand; therefore PED <1 e.g. 0.5
inelastic
* Inelastic demand PED <1 - Perfectly inelastic PED =0
Goods which are inelastic tend to have some or all of the following features:
1. They have few or no close substitutes, e.g. petrol, cigarettes.
2. They are necessities
3. They are addictive
4. They cost a small % of income or are bought infrequently
* In the short term demand is usually more inelastic because it takes time to find alternatives
* If the price of chocolate increased demand would be inelastic because there are no alternatives, however if the price of mars increased there are close substitutes in the form of other chocolate therefore demand will be more elastic.
Using Knowledge of Elasticity
1. If demand is inelastic then increasing the price can lead to an increase in revenue. This is why OPEC try to increase the price of oil.
Graph showing increase in Revenue following increase in price
elasticity
2. If demand is elastic, firms would be unlikely to increase revenue as this could lead to a fall in revenue. Instead they could try advertising to increase brand loyalty and make demand more inelastic
3. Price Discrimination. Some people pay higher prices for tickets for trains because there demand is more inelastic.
The government intervenes in the macro economy in various ways including demand and supply side policies.
Macro Economics Objectives of the government include:
1. Low Unemployment
2. High but sustainable economic growth.
3. Low Inflation (inflation target in UK CPI = 2%)
4. Equilibrium on Balance of Payments (e.g. minimising current account deficit)
Less important objectives
5. Reduce Government Deficit (in UK Chancellors Golden rule of Borrowing less than 3% of GDP)
6. Stable Exchange rates
Non Economic Objectives
7. Environment - increasingly important
8. Issues of Equality.
Types of Government Intervention
1.Supply Side Policies.
These are government policies which aim to increase productivity and efficiency in the economy. If they are successful, they will shift the LRAS to the right and potentially increase the long run trend rate of growth. An increase in productivity can also help to reduce inflation, especially cost push inflation. Improvements in productivity may make UK exports more competitive and, therefore, should help to improve the current account.
Types of Supply Side policies
1.Interventionist. Government intervention to overcome market failure. For example, spending on education and training to reduce occupational immobilities.
2.Market Oriented supply side polices : This occurs when the government reduces regulations and enables market to work more freely. For example, reducing the power of trades unions and minimum wages can reduce labour market inflexibility's.
Evaluation of Supply Side policies.
•They will take a long time, e.g. increasing education standards.
•May be subject to government failure. e.g. spending on education misplaced.
•Promoting free markets may increase inequality. E.g. removing trades unions may lead to worker exploitation.
•Supply side policies UK
Demand Side Policies
Demand side polices to influence the level of AD. It may be to reduce the growth of AD, to prevent inflation. Alternatively, it could be to increase AD in time of a recession.
Types of Demand Side Policies
1.Fiscal Policy - changing the level of government spending and taxation in the economy. It will effect the government's budget and fiscal position.
2.Monetary Policy - Influencing the supply and demand for money. In the UK monetary policy revolves around changing interest rates, which are set by the MPC (Bank of England).
If there is inflation:
•The government could pursue deflationary fiscal policy. This involves increasing tax rate and / or cutting spending.
•The MPC could increase interest rates. This is known as a tightening of monetary policy. Note, in the UK the government no longer sets monetary policy, the Bof E is independent.
In a recession.
•Government can introduce Expansionary Fiscal Policy. This involves cutting taxes and / or increasing spending, AD should increase.
•The MPC can cut interest rates.
Evaluation
•It is difficult to control predict future economic trends, therefore, it can be difficult to know how much to change tax rates / interest rates.
•Time Lags, Interest rates can take upto 18 months to have an effects.
•Crowding out. Expansionary fiscal policy may increase government spending, but, reduce private sector spending.
•Depends on Confidence. For example, a cut in income tax may not increase AD, if confidence is low.
The aim of Demand side policies is to ensure sustainable growth. The aim is to avoid Boom and Bust economic cycles. In practise, this means that growth will be close to the long run trend rate of growth. This enables economic growth, without inflationary pressures.
Macro Economics Objectives of the government include:
1. Low Unemployment
2. High but sustainable economic growth.
3. Low Inflation (inflation target in UK CPI = 2%)
4. Equilibrium on Balance of Payments (e.g. minimising current account deficit)
Less important objectives
5. Reduce Government Deficit (in UK Chancellors Golden rule of Borrowing less than 3% of GDP)
6. Stable Exchange rates
Non Economic Objectives
7. Environment - increasingly important
8. Issues of Equality.
Types of Government Intervention
1.Supply Side Policies.
These are government policies which aim to increase productivity and efficiency in the economy. If they are successful, they will shift the LRAS to the right and potentially increase the long run trend rate of growth. An increase in productivity can also help to reduce inflation, especially cost push inflation. Improvements in productivity may make UK exports more competitive and, therefore, should help to improve the current account.
Types of Supply Side policies
1.Interventionist. Government intervention to overcome market failure. For example, spending on education and training to reduce occupational immobilities.
2.Market Oriented supply side polices : This occurs when the government reduces regulations and enables market to work more freely. For example, reducing the power of trades unions and minimum wages can reduce labour market inflexibility's.
Evaluation of Supply Side policies.
•They will take a long time, e.g. increasing education standards.
•May be subject to government failure. e.g. spending on education misplaced.
•Promoting free markets may increase inequality. E.g. removing trades unions may lead to worker exploitation.
•Supply side policies UK
Demand Side Policies
Demand side polices to influence the level of AD. It may be to reduce the growth of AD, to prevent inflation. Alternatively, it could be to increase AD in time of a recession.
Types of Demand Side Policies
1.Fiscal Policy - changing the level of government spending and taxation in the economy. It will effect the government's budget and fiscal position.
2.Monetary Policy - Influencing the supply and demand for money. In the UK monetary policy revolves around changing interest rates, which are set by the MPC (Bank of England).
If there is inflation:
•The government could pursue deflationary fiscal policy. This involves increasing tax rate and / or cutting spending.
•The MPC could increase interest rates. This is known as a tightening of monetary policy. Note, in the UK the government no longer sets monetary policy, the Bof E is independent.
In a recession.
•Government can introduce Expansionary Fiscal Policy. This involves cutting taxes and / or increasing spending, AD should increase.
•The MPC can cut interest rates.
Evaluation
•It is difficult to control predict future economic trends, therefore, it can be difficult to know how much to change tax rates / interest rates.
•Time Lags, Interest rates can take upto 18 months to have an effects.
•Crowding out. Expansionary fiscal policy may increase government spending, but, reduce private sector spending.
•Depends on Confidence. For example, a cut in income tax may not increase AD, if confidence is low.
The aim of Demand side policies is to ensure sustainable growth. The aim is to avoid Boom and Bust economic cycles. In practise, this means that growth will be close to the long run trend rate of growth. This enables economic growth, without inflationary pressures.
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