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 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,

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

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

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

( Task 4)An alternative view Third order Price Discrimination 600 Passengers (thousands per year) Price and cost (dollars per trip) D ATC MC Increased economic profit from price discrimination Figure 11.9

The Yacht diagram 8 D1 D2 MR2 MR1 P1 P2

The Yacht diagram 9 D1 D2 MR2 MR1 P1 P2 Australia America

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.