Economics - Data Response January 2006

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Economics – Data Response – January 2006

Question 1

  1. The structure of the United States digital camera market over the period shown in 2003 in Extract A shows us that the market is an oligopoly. By looking at the extract it is visible that the market is highly concentrated. The top five firms (Sony, Kodak, Canon, Olympus and Nikon) account for 76.4% of the market – therefore there is monopolistic competition.

  1. There are many possible economic reasons as to why Kodak has continued to manufacture traditional film-based cameras, even though the company makes a loss on these cameras (due to the introduction of the superior digital cameras).  One reason that Kodak continue to manufacture traditional film-based cameras could be due making money with complimentary goods, such as the film to go into the cameras and photographic paper. Kodak could also make money on developing the photographs as consumers are not able to do that themselves at home as you can with digital cameras. Another reason for the Kodak continuing to produce film-based cameras is for it to retain it’s brand name and image. Even if they are making a loss, a world leading camera company to stop producing a type of camera is not good for its reputation.
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There is also the reason that Kodak are still making film-cameras is the possibility (though unlikely) that the film-based camera market will recover. Though there is a risk with this as the cameras are currently making a loss so all the costs are sunk costs, and if the market does not recover these costs will not be possible to get back. They are spent on intangible items.

  1. Barriers to entry are obstacles in the path of a  which wants to enter a given . Barriers to entry are the problems and barriers a firm attempting to ...

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