AS Economics: The long tail & Efficiency

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  • Created on: 20-03-13 23:01
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The long tail consists of all tracks beyond the `hits' that conventional retailers sell more than anything
else. As word of availability spreads, and enthusiasts influence others, demand grows in many niche markets.
In virtually all markets there are far more niche markets than hits.
The costs of reaching niches are falling rapidly e.g. by the internet. It is growing easier to offer a massively expanded variety of
Once there is access to expanded variety, there are still hits but they become relatively less popular and niches more so.
Starting to challenge conventional wisdom, therefore the natural pattern of demand is extremely diverse.
Minimising the average cost of production by minimising resource use.
Occurs in a very competitive market, to accept market price and keep up with developments.
If costs are minimised, this suggests that resources have not been wasted.
Very attractive for consumers.
Must operate on its PPF
Perfectly competitive markets tend to be productively efficient.
Occurs when resources are allocated between competing uses in a way that matches the requirements of
consumers to the greatest possible extent.

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Without a very competitive market, it is unlikely to be achieved.
The logical outcome of this is that the business producing whatever consumers value most will be able to outbid other businesses for
any resource.
Where resources are allocated so an action makes at least 1 person better off and harms no one (pareto improvement)
Economic efficiency is a situation in which every Pareto improvement has occurred.…read more


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