Aim of the essay (Word Limit: 750 words) The essay aims to help you develop your research, analytical, and professional writing skills. Good writing skills are one of the most important graduate...

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Aim of the essay (Word Limit: 750 words)
The essay aims to help you develop your research, analytical, and
professional writing skills. Good writing skills are one of the most important
graduate attributes sought after by leading employers. You will need to
become adept at finding relevant resources. You are expected to apply or
make use of economic concepts/theories/models that you have
learned in class to the problem you are writing the essay on, and
write an essay in a succinct and professional manner as would
professional economists, columnists, or advisors.
Question
The price of software
In a recent article in a major Sydney newspaper (‘Parliament probes technology price gouge’) it was suggested that technology companies (such as Apple and Microsoft) were to be called before a Parliamentary Committee to explain the price of software and related products in Australia. A copy of the article can be found below:
Give an economic explanation for the behaviours described in the article.
Why might the government wish to investigate these behaviours? What
might happen in these markets over time?
‘Parliament probes technology price gouge’
Abstract (summary)
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Apple and Microsoft will be among technology companies asked to explain to Parliament why Australians pay much more for music and game downloads from iTunes, for example, than overseas customers....
Apple and Microsoft will be among technology companies asked to explain to Parliament why Australians pay much more for music and game downloads from iTunes, for example, than overseas customers....
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Apple and Microsoft will be among technology companies asked to explain to Parliament why Australians pay much more for music and game downloads from iTunes, for example, than overseas customers.
Federal Labor politicians are hoping the publicity generated by calling the companies to account for their pricing policies will result in prices dropping.
The Minister for Communications, Stephen Conroy, has signed off on the parliamentary inquiry, which will also consider pricing of software and other IT-related material and could have big implications for businesses.
"There is evidence to suggest that the innovative use of technology is not always matched with innovative new business models in the case of products and services distributed online," Mr Conroy said in a letter to Sydney MP Ed Husic.
"I agree that Australian businesses and households should have access to IT software and hardware that is fairly priced relative to other jurisdictions ... the global digital economy is likely to make it increasingly difficult to sustain business models that are based on a geographic carve-up of markets."
The terms of reference for the inquiry are being finalised by Mr Conroy but it will begin later this year and be conducted by the House of Representatives standing committee on infrastructure and communications.
Consumer advocate Choice, which had been lobbying for an investigation of the price differential, welcomed the inquiry.
The excuses overseas technology companies used to justify the higher prices, such as the small size of the market, the cost of setting up support centres and the imposition of local taxes and duties, were not acceptable, Choice spokeswoman Ingrid Just said.
Mr Husic, a member of the committee who has been raising the issue of price differences for more than a year, said he believed it would be the first time the top software and computer companies had been called before a parliamentary inquiry to explain their pricing policies.
It will also look at e-books if price differences in that market are raised.
Invitations to appear will be sent to all the big computer and software companies including Apple and Microsoft.
Neither company responded to calls from The Sun-Herald.
The debate over pricing surfaced again last week when global software company Adobe revealed Australians would pay up to $1400 more for the same software compared with US residents.
"People here scratch their heads trying to work out why they get fleeced on software downloads," Mr Husic said.
Mr Husic said young people and small-to-medium businesses had been particularly vocal in raising the issue with him. "Small to medium-sized businesses might pay over $10,000 more on software compared to overseas counterparts," he said.
Web developer Daniel Myles, who has been tracking price differences, said he referred to it as "the Australia tax, the tax we pay just by being in Australia".
A Productivity Commission report into retailing, released last year, said company excuses for this, such as Australia being a small market, "in most cases are not persuasive, especially in the case of downloaded music, software and videos, for example, where the costs of delivery to the customer are practically zero and uniform around the world".
Technology commentator Trevor Long said: "People are already setting up, in droves, addresses in America just so they are able to download a piece of American software at American prices."
Australians out of pocket
Microsoft
Offi
ce 2010
Professional
Price in the US $478*
Price here $849
Mad Men season one
on iTunes
US $19.10 AUS $24.99
Lenovo
ThinkServer
TS130
US $735
AUS $949
Adobe Creative Suite 6
(Master Collection)
US $2483 AUS $3949
Autodesk
AutoCAD
Design Suite
US $4103
AUS $6350
*All prices in Australian dollars
(Copyright (c) 2012 Fairfax Media Publications Pty Limited. www.smh.com.au. Not available for re-distribution.)
Word count: 607
Structure
The structure should be:
Executive Summary (not exceeding 150 words) on a separate front page;
Introduction;
Body (Analysis);
Conclusion;
Bibliography and a clear listing of data or other sources and definitions (Harvard referencing)
at the end (N.B. Bibliography and executive summary are not included in the 750 word limit).
Footnotes should be avoided. If any figures and/or tables are used,
they should be placed in the body of the essay, and be numbered
sequentially. Any illustrations used must be very clear and easy to
understand.

Answered Same DayDec 20, 2021

Solution

David answered on Dec 20 2021
3 Votes
This article refers to the policy of rice gouging as a pricing strategy followed by US companies vis-a-vis Australian consumers.
Price gouging is a form of price discrimination, where the produce
seller is able to discriminate between different consumers on the basis of his selling power or some feature of the consumer itself. Price gouging is negative in its implication as it involves charging higher prices from consumers in times of emergency, as the consumer has no choice. It is even treated as illegal in some economies. For example, the rise in essential items prices when there is a curfew in riot affected areas. For the producer this makes sense as demand becomes inelastic in times of emergencies and he can charge a higher price and increase his profits.
A necessary condition for price gouging to succeed is that the market is serviced by a single seller (monopolist) so that there is no substitute available to the consumer in terms of an alternate selle
good. This is part of the two conditions required for any form of price discrimination to be successful. The second condition is that there must be no scope of reselling between consumers. This means that a consumer who buys at lower price must not be able to sell at higher price to the other consumer. This is possible when reselling is not possible due to nature of the good ( doctor’s services cant be resold) or geographical boundaries between consumers that make reselling cost ineffective. The costs of transport are high and more than the price differential, making reselling a loss making effort.
.
Price discrimination reduces the surplus available...
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