Oligopoly sweezy’s demand curve in relation to drug cartels
-
Upload
james-jeffery -
Category
Education
-
view
724 -
download
0
description
Transcript of Oligopoly sweezy’s demand curve in relation to drug cartels
Application of sweezy’s demand curve in relation to Drug Cartels
By Callum Martin
What are Drug Cartels?
• Criminal Organisations developed primarily to promote and control drug trafficking.
• The term was applied when the largest trafficking organisations reached an agreement to coordinate production and distribution.
• Actually no longer exist due to demerger.
How are Drug Cartels Structured?
• Falcons “eyes and ears”, lowest rank.
• Hitmen; armed groups carrying out assassinations and defence of territory.
• Lieutenants; Second highest rank.. Management of Hitmen.
• Drug lords (Capos); Highest position available, supervises everything.
Mexican Drug War
Know any of these faces? $$$
Facts and Figures of Mexican Drug War
• 50,000 troops actively fighting drug war
• 3,000 soldiers killed in 6 years.
• The Zeta cartel; largest, commands 10,000 gunmen stretching from the Texas border to Central America.
• The United Nations estimates that the U.S. narcotics market is worth about $60 billion annually.
• Of which Colombian and Mexican cartels take in $18 billion to $39 billion from drug sales in the US each year.
• In 2007 Mexican authorities made the largest cash seizure in history when they discovered $205 million in the home of a suspected cartel supplier of meth-precursor chemicals. The money weighed more than 4,500 pounds.
Extent Of US Drug Problem
Sweezy and this Demand Curve of his..
• Created by Paul Sweezy, a Marxist Economist in 1939.
• The kinked demand curve theory is an economic theory regarding oligopoly and monopolistic competition.
• Classical economic theory assumes that a profit-maximizing producer with some market power (Oligopoly) will set marginal costs equal to marginal revenue.
• This result does not occur if a "kink" exists. Because of this jump discontinuity in the marginal revenue curve, marginal costs could change without necessarily changing the price or quantity
So Here it is..
• p*, is profit maximizing for any marginal cost curve (MC) that cuts the vertical section of the marginal revenue curve (MR)
• The kinked demand theory of oligopoly behaviour predicts that prices are likely to remain unchanged for small changes in costs.
• Unfortunately, this theory is silent on how price is initially set and, hence, does not explain price levels.
So how does this all relate to Drugs then?
• Well if Cartels don’t need to Compete on Price, then they will find non-pricing strategies to try and gain market share.
• This is the root of Mexico’s problems as Cartels have realised what Sweezy was on about.
• They turn to murder to eliminate rivals.
Thanks for listening
Now For A Quiz!
How many trucks leave from Zetas' stronghold in north-eastern Mexico to
cross into Texas on a daily basis?
A) 85
B) 850
C) 8500
How much does a Kilogram of Mexican Black Tar Heroin Cost?
A) $12,890
B) $78,000
C) $33,000
And Finally, How Often is there a Drug related murder in Mexio?
A) 98 minutes
B) 11 minutes
C) 3 hours