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ion and/or distribution of a product or service are controlled by a single company or entity, in order to increase that company's or entity's power in the marketplace [8] . Which Woolworths has; Woolworths doesn’t just sell or produce its own products, it also has tertiary level stores, for example Woolworths has its own Liquor stores and Petrol stations. [9] With this advantage Woolworths can prevent multiple competitors from different markets from entering, thus prices for the goods and services will remain high. There are many other forms of Barriers to Entry e.g. control of resources: If one firm has control of a particular resource that is required for a certain industry, then other firms cannot compete in the same industry. Cost advantages independent of scale: Patented technology, know-how, favorable access to raw materials, favorable geographic locations, and learning curve cost advantages.

 

The Price Inelastic of demand graph on the left shows the prices of goods or services changing. As you can see if the current price was to decrease by a lot from P1 to P3, the decrease would be loss in profit margins and the quantity would only increase by a little bit, shown by the shaded blue area. If the prices were to increase from P1 to P2 then there would be a massive gain in profits but little drop in quantity Q1 to Q2 shown by the shaded green area.

 

Short run effects of this, product efficiency is at a high in the industry of producing food, the PPF diagram is showing the product efficiency between food and computers, Woolworths and Coles will be producing at point A for maximum food production because they specialise in this area not in computers.

 

The long run effect on this will cost the consumers a lot; with the duopoly in effect market prices aren’t able to reduce thus causing price inelastic of demand on certain goods and services because consumers have no other choice to shop at cheaper retailers because there is no competition in the market. Using a Price inelastic of demand graph as a model to show what could happen if the Duopolies Woolworths and/or Coles were to increase or decrease prices in their controlled market

 

So overall it is more effective for the Supermarkets to increase their prices to gain the large amount of profit possible.

 

Conclusion

 

With the investigation of the title to have proven correct that Supermarkets in Australia are price discriminating due to geographical location. With further in-depth investigation it has also come about that the geographical location of the store is tied with the consumer’s income level in the general area of the store location. The consumer’s income which contributes to the determination of the prices of the goods and services that the consumer can afford and what the store provides.

 

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