Economics

Question 1

Bait advertising

Answer 1

Bait advertising : where a shop advertises a good for sale to lure customers to the store, but they have insufficient quantities of the good to sell. They will then re-direct customers to other goods at the store.
Eg. If Harvey Norman advertises a tv for 1000 dollar discount but when you go to the store find out it is out of stock and that it was limited before redirecting to you to a more expensive product

Question 2

Exclusive dealing

Answer 2

Exclusive dealing occurs when one person trading with another imposes some restrictions on the other’s freedom to choose with whom, in what, or where they deal.
This commonlyoccurs when a business will only supply goods or services, or give a particular price or discount on the condition that the purchaser buys goods or services from a particular third party. If the buyer refuses to comply with this condition, the business will refuse to supply them with goods or services.
If a pear supplier says that they will not give fruit to the green grocer unless they buy their apples from another party

Question 3

Predatory pricing

Answer 3

3) Predatory pricing
Predatory pricing is one way in which a business may misuse its market power. Predatory pricing occurs when a company with substantial market power or share of a market sets is prices at a sufficiently low level with the purpose of damaging or forcing a competitor to withdraw from the market. This conduct is illegal.
If Coles sets it meat a little price to drive out the local butcher

Question 4

Price fixing

Answer 4

It is illegal for competitors to work together to fix prices rather than compete against each other. This conduct restricts competition, and can force prices up and reduce choices for consumers and other businesses.
If all airline companies priced their flights at the same price in order to keep prices high

Question 5

Misuse of market power

Answer 5

Abusiness with a substantial degree of power in a market is not allowed to use this power for the purpose of eliminating or substantially damaging a competitor or to prevent a business from entering into a market. This behaviour is referred to as ‘misuse of market power’.
If a business has market power they can effectively set price. For example, if McDonald’s went to Tasmania to buy potatoes for their french fries, and used their power to set the price of the potatoes below the farmer’s price.
If Bunnings bought drills from an up and coming new supplier overseas and set the price at a low level in order to stop them from entering the business in Australia

Question 6

Resale price maintenance

Answer 6

It is illegal for suppliers to:
put pressure on businesses to charge their recommended retail price or any other set price, for example by threatening to stop supplying to the reseller
stop resellers from advertising, displaying or selling goods from the supplier below a specified price.
If Ralph Lauren refused to sell their clothes to myer if they did not sell it a high price in order to keep their image high.