Applying
Economic Concepts With Reference To A Company
Sector: Oil
and Gas
Company:
INDIAN OIL
1St
concept
Economics of
Scale
It can be
defined as the cost advantage that company enjoys because it produces in huge
quantities.
Indian Oil
enjoys economics of scale because it produces in large quantities.
2nd
concept
Price
Determination
Price of any
goods/services is determined by interaction of demand and supply of that
good/supply.
Government
has deregulated the pricing of petrol and diesel so that oil companies can keep
price according to market condition.
3rd
Concept
Oligopoly
Oligopoly is
a type of market where few firms sells differentiated/undifferentiated goods/services.
Indian Oil
operates in a oligopoly market where it competes with Bharat Petroleum,
Hindustan Petroleum and others.
4th
Concept
Cross Price
Elasticity of demand
When price
of a commodity affects quality demanded of another commodity then concept of
cross price elasticity of demand applies.
As price of petrol
is more thereby price of petrol car is less. On the other hand price of diesel
car is more because price of diesel is more.
5th
Concept
Producer
Surplus
Producer
surplus can be termed as difference between selling price of seller and minimum
price at which a seller is willing to sell the product or service.
Due decrease
in value of Indian Rupee Indian Oil is enjoying is consumer surplus because
Selling price is more than their minimum price.
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