In the beef processing industry, three firmsConagra, Excel, and IBPcomprise roughly 85 % of the

In the beef processing industry, three firmsConagra, Excel,...

Key Concepts

Oligopsony

An oligopsony is a market structure characterized by a small number of buyers who control a significant share of the market. In such situations, these buyers hold substantial market power, enabling them to influence prices and terms of trade, often at the expense of suppliers. This concept is analogous to an oligopoly on the selling side, where a few firms dominate the market, but in the case of an oligopsony, it is the buyers who are few in number.

Market Concentration

Market concentration refers to the degree to which a small number of firms or buyers control a large proportion of the market. When a market is highly concentrated, a few entities can dominate the trading conditions, potentially leading to issues like reduced competition and unfavorable terms for other market participants. This concept is crucial in understanding the dynamics and potential inefficiencies in markets dominated by a handful of powerful players.

Transcript

00:01 Alright, so here we have a meat market that is combining ground beef and ground pork to make a meatloaf.

00:07 This is just like a chemical mixture problem, except we're looking at percentage of beef, percentage of lean and fat.

00:22 So we want to know how much beef and how much pork should be used to minimize the cost.

00:31 So we're gonna let x be the number of pounds of beef and we're gonna let y be the number of pounds of pork.

00:39 If our beef has a lean percentage of 75%, it's 75 % lean, then the total amount of lean meat is 75 % times the number of pounds of beef we get.

00:51 Same with the pork, the y times the 60 % gives us 60 % y.

00:58 That should be y, not x, right here.

01:03 We know that the total amount of beef and pork together is just going to be x plus y and our goal is total percentage of 70 % lean.

01:19 So then the quantity over here is, i'm gonna write this in a little bit of a different format here, 70 % times x plus y.

01:31 So we know that that is our goal.

01:35 So we're going to have, we've got three functions here.

01:40 We know this is a constraint.

01:41 We don't want any more than 200 pounds of beef and we want to use at least 50 pounds of pork and then our third constraint is 75 x plus 60 y equals 70 % times x plus y.

02:01 So those are our three constraints right here.

02:04 So we're going to take to our graph and we're going to see what we get.

02:09 So we know x has to be less than or equal to 200.

02:13 We know y has to be greater than or equal to 50 because we want to use at least 50 pounds of pork and we also know that 75 times the pounds of beef that we use plus 60 times the pounds of pork that we use has to equal i don't know if it's gonna let me do this 70 times x plus y.

02:38 Yeah, it will.

02:42 So then we're looking at an overlap section that's right here.

02:52 One, two, three.

02:54 Those are our target points.

02:57 Our our profit function is 75 cents times the pound the number of pounds of beef plus 45 cents times the number of pounds of pork.

03:10 So we're going to take this and we're going to check all of these points...

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