Table of Contents
Q.1. What are basic problems of an economy ? Which problems of an economy constitute the subject matter of microeconomics ? (20)
An economic problem generally means the problem of making choices that occurs because of the scarcity of resources. It arises because people have unlimited desires but the means to satisfy that desire is limited. Therefore, satisfying all human needs is difficult with limited means.
Causes of Economic Problem
• Scarcity of resources
Resources like labour, land, and capital are insufficient as compared to the demand. Therefore, the economy cannot provide everything that people want.
• Unlimited Human Wants
Human beings’ demands and wants are unlimited which means they will never be satisfied. If a person’s one want is satisfied, they will start having new desires. People’s wants are unlimited and keep multiplying, therefore, cannot be satisfied because of limited resources.
• Alternative Uses
Resources being scarce, the same resources are used for different purposes. and it is therefore essential to make a choice among resources. For instance, petrol is used in vehicles and is also used for generators, running machines, etc. Therefore, the economy should now make a choice within the alternative uses.
Basic Economic Problems
1. What to produce?
• A country cannot produce all goods because it has limited resources.
• It has to make a choice between different goods and services.
• Every economy has to decide what goods and services should be produced.
Example: If a farmer has a single piece of agricultural land, then he has to make a choice between two goods, i.e., whether to grow rice or wheat.
Similarly, our government has to decide where to allocate funds, for the production of defence goods or consumer goods, and if both, then in what proportion.
2. How to produce?
• This problem refers to the choice of technique of production. It arises when there is an availability of more than one way to produce goods and services.
There are mainly two techniques of production. These are:
• Labour intensive technique(greater use of labour)
• Capital intensive technique(greater use of machines)
Labour intensive technique promotes employment whereas capital intensive technique promotes efficiency and growth
3. For whom to produce?
The society cannot satisfy satisfy all the wants of all the people. Therefore, it has to decide who should get how much of the total output of goods and services.
Society has to make choice of whether luxury goods or normal goods have to be produced. This distribution or proportion directly relates to the purchasing power of the economy.
The subject matter of Micro economics basically deals with the following theories:
1. Theory of Product Pricing
2. Theory of Factor Pricing or Micro Theory of Distribution
3. Theory of Economic Welfare
Thus, the subject matter of micro economics is mainly concerned with the price theory and allocation of resources. It seeks to examine the basic economic questions regarding production, distribution and consumption of goods and services.
Q.2. What do you mean by “Barometric Forecasting” ? Also discuss different demand forecasting techniques. (20)
Barometric Forecasting
Barometric forecasting is based on the observed relationships between different economic indicators. It is used to give the decision maker an insight into the direction of likely future demand changes, although it cannot usually be used to quantify them.
- Five different types of indicators may be used.
- Firstly, there are leading indicators which run in advance of changes in demand for a particular product. An example of these might be an increase in the number of building permits granted which would lead to an increase in demand for building-related products such as wood, concrete and so on.
- Secondly, there are coincident indicators which occur alongside changes in demand. Retail sales would fall into this category, as an increase in sales would generate an increase in demand for the manufacturers of the goods concerned.
- Thirdly, there are lagging indicators which run behind changes in demand. New industrial investment by firms is often said to fall into this category. In this case it is argued that firms will only invest in new production facilities when demand is already firmly established. Thus increased investment is a sign, or confirmation, that an initial increase in demand has already taken place. This may well indicate that the economy is improving, for example, so that further changes in the level of demand can be expected in the near future.
- The fourth and fifth types of indicator fall into this category. These are composite indices and diffusion indices respectively. Composite indices are made up of weighted averages of several leading indicators which demonstrate an overall trend. Diffusion indices are groups of leading indicators whose directional shifts are analysed separately.
Different Demand Forecasting Techniques
1. Time Series Analysis
When changes in a variable show discernible patterns over time, time-series analysis is an alternative method for forecasting future values.
The focus of time-series analysis is to identify the components of change in the data. Traditionally, these components are divided into four categories:
• Trend
• Seasonality
• Cyclical patterns
• Random fluctuations
2. Trend Projection
One of the most commonly used forecasting techniques is trend projection. As the name suggests, this approach is based on the assumption that there is an identifiable trend in a time series of data. Trend projection can also be used as the starting point for identifying seasonal and cyclical variations.
3. Statistical Curve Fitting
Basically, this involves using the ordinary least-squares concept developed above to estimate the parameters of the equation. Suppose that an analyst determines that a forecast will be made assuming that there will be a constant rate of change in sales from one period to the next. That is, the firm’s sales will change by the same amount between two periods.
Statistically, this involves estimating the parameters of the equation
St = So + bt
where S denotes sales and t indicates the time period
4. Exponential Smoothing
Exponential smoothing is a technique of time-series forecasting that gives greater weight to more recent observations. The first step is to choose a smoothing constant, a, where 0 < a < 1.0. If there are n observations in a time series, the forecast for the next period (i.e., n + 1) is calculated as a weighted average of the observed value of the series at period n and the forecasted value for that same period.
Q.3. Discuss different cost concepts that are frequently Used in the managerial decision making process. What is the difference between economic costs and accounting costs ? (20)
Cost Concepts
Some of the cost concepts that are frequently used in the Managerial decision making process, may be classified as follows :
1. Actual Cost and Opportunity Cost
Actual costs are those cost which a firm incurs while producing or acquiring a good or service like payment for labor, rent etc. It is otherwise known as Accounting Cost or Acquisition Cost or Outlays Cost.
Opportunity cost is the value of a resource in its next best use. It‘s the cost for the next best alternative use. The opportunity cost is really meaningful in the decision making process. Sometimes this opportunity cost, are called as alternative cost.
2. Explicit Cost and Implicit Cost
Explicit costs are those cost that involve an actual payment to other Parties. Therefore, an explicit cost is the monetary payment made by a firm for use of an input owned and controlled by others .Explicit costs are also referred to by accounting costs.
Implicit cost represents the values of foregone opportunities but do not involve an actual cost payment. Implicit cost are just as important as explicit costs but are sometimes neglected because they are not as obvious.
3. Accounting Cost and Economic Cost
Accounting costs are the actual or outlay costs. These costs point out how much expenditure has already been incurred on a particular process or on production as such.
Economic cost are concerned with what cost is expected to be in the future and how the firm might be able to rearrange its resources to lower its cost and improve its profitability. They must therefore be concerned with opportunity cost along with explicit cost. Since the only cost that matter for business decision are future costs. It is the economic costs that are used for decision making.
4. Controllable and Non- Controllable Costs
Controllable costs are those costs which are capable of being controlled or regulated by executive vigilance and therefore can be used for assessing executive efficiency.
Non-controllable costs are those which cannot be subjected to administrative control and supervision. Most of the costs are controllable, except, of course, those due to obsolescence and depreciation.
6. Out-of-Pocket Costs and Book Costs
Out-of-Pocket Costs are those costs that improve current cash payments to outsiders.
Book Costs are those business costs which do not involve any cash payments but for them a provision is made in the book of account to include them in profit and loss accounts and take tax advantages.
7. Private Costs & Social Cost
Private Costs are those that accrue directly to the individuals or firm engaged in relevant activity.
Social Costs, on the other hand are passed on to persons not involved in the activity in any direct way (i.e. they are passed on to society at large).
8. Relevant costs and Irrelevant costs :-
The relevant costs for decision making purposes are those costs which are incurred as a result of decision under consideration. The relevant costs are also referred to as the incremental costs. They are there main categories of relevant or incremental costs.
Difference between Accounting Cost & Economic Cost
Accounting cost means the expenses incurred by the firm on production and sale of goods or service. These are paid by the firm to the outsiders. For example, payment made for wages, raw materials, fuel, power, building etc. are the accounting costs. Accounting cost is the money paid for contractual payments. It includes payments and charges made by the enterprise to the suppliers of resources. It is the explicit cost.
But economic cost includes not only explicit cost but also implicit or imputed cost. Implicit cost includes rent charged on owned premises, interest charged on owned capital, wages paid to entrepreneur etc. Implicit cost is not included in accounting cost.
Accounting cost includes only explicit costs which are recorded in the books of account. Implicit cost will not be recorded in the books of account. Thus the economist’s concept of cost is more comprehensive as compared to accountant’s concept of cost.
Accounting cost are generally used for financial reporting and control. Economic costs are used for decision-making.
In short, accounting costs involve only cash payments made by the entrepreneur. On the other hand, economic costs include all these accounting costs plus the implicit cost.
Q.4. Write short notes on : (10×2 =20)
a. Economies and Diseconomies of scale
Economies of scale are when the cost per unit of production (Average cost) decreases because the output (sales) increases.
Diseconomies of scale are when the cost per unit of production (Average cost) increases because the output (sales) increases.
Growth brings both advantages and disadvantages to a business. These interact, and depending on the nature of the business and the way it is managed, decide the optimum or most efficient size for the business.
This is the area of economies and diseconomies of scale.
Average cost falls as output increases, with the result that large firms may enjoy lower costs that smaller competitors. This competitive cost advantage allows large firms to have larger profit margins and have more options in pricing policy.
Reasons for economies of scale
The most common reason for Economies of scale is that some production costs are fixed (as production increases these costs stay constant). Therefore since costs per unit (Average Costs) are calculated by dividing the cost by the number of units of output
AC=Costs/quantity
Then any average involving Fixed Costs (Numerator) must decrease as quantity produced (Denominator) increases.
AFC=FC/Quantity
Fixed Cost economies of scale:
1. Managerial – managers are on a fixed salary
2. Marketing – advertising, endorsements promotional events do not directly depend on quantity produced
3. Technical – machinery, buildings etc are paid for as a fixed amount
Purchasing economies of scale:
Large firms are able to negotiate more favourable terms when buying raw materials etc.
1. Bulk buying – remember it is the cost per unit of buying in bulk not the total cost (Great example is supermarkets and local shop)
2. Financial – similar in principle to buying in bulk but this time interest rates a more favourable.
Reasons for diseconomies of scale
1. Communication – becomes more complex
2. Coordination – between departments
3. X- Inefficiency – management costs increase (non-productive costs)
4. Principle agent problem – delegating to employees who are not as committed as the owner.
b. Application of Cost Analysis
1. Determining Optimum Output Level
The optimum output level is the point where average cost is minimum. In other words, the optimum output level is the point where average cost equals marginal cost.
2. Breakeven Output Level
An analytical tool frequently employed by managerial economists is the breakeven chart, an important application of cost functions. The breakeven chart illustrates at what level of output in the short run, the total revenue just covers total costs. Generally, a breakeven chart assumes that the firm’s average variable costs are constant in the relevant output range; hence, the firm’s total cost function is assumed to be a straight line. Since variable cost is constant, the marginal cost is also constant and equals to average variable cost.
Breakeven charts are used extensively for managerial decision process. Under right conditions, breakeven charts can produce useful projections of the effect of the output rate on costs, revenue and profits. For example, a firm may use breakeven chart to determine the effect of projected decline in sales or profits.
On the other hand, the firm may use it to determine how many units of a particular product it must sell in order to breakeven or to make a particular level of profit.
3. Profit Contribution Analysis
In making short run decisions, firms often find it useful to carry out profit contribution analysis. The profit contribution is the difference between price and average variable cost (P – AVC). That is, revenue on the sale of a unit of output after variable costs are covered represents a contribution towards profit. In our example since price is Rs.5 and average variable cost is Rs.4, the profit contribution per unit of output will be Rs.1 (Rs.5 – Rs.4). At low rates of output the firm may be losing money because fixed costs have not yet been covered by the profit contribution. Thus, at these low rates of output, profit contribution is used to cover fixed costs. After fixed costs are covered, the firm will be earning a profit.
4. Operating Leverage
Managers must make comparisons among alternative systems of production. Should one type of plant be replaced by another? Breakeven analysis can be extended to help make such comparisons more effective. Consider the degree of operating leverage (Ep), which is defined as the percentage change in profit resulting from a 1% change in the number of units of product sold.
Q.5. Discuss the managerial uses of production function ? What care should be taken while collecting the data for estimation of a production function ? (20)
Managerial Use of Production Functions
There are several managerial uses of the production function. It can be used to compute the least-cost combination of inputs for a given output or to choose the input combination that yields the maximum level of output with a given level of cost. There are several feasible combinations of input factors and it is highly useful for decision-makers to find out the most appropriate among them.
The production function is useful in deciding on the additional value of employing a variable input in the production process. So long as the marginal revenue productivity of a variable factor exceeds it price, it may be worthwhile to increase its use. The additional use of an input factor should be stopped when its marginal revenue productivity just equals its price.
Production functions also aid long-run decision-making. If returns to scale are increasing, it will be worthwhile to increase production through a proportionate increase in all factors of production, provided, there is enough demand for the product. On the other hand, if returns to scale are decreasing, it may not be worthwhile to increase the production through a proportionate increase in all factors of production, even if there is enough demand for the product.
However, it may in the discretion of the producer to increase or decrease production in the presence of constant returns to scale, if there is enough demand for the product.
Care that should be taken while collecting the data for estimation of a production function
1. Both time-series and cross-section analysis are restricted to a relatively narrow range of observed values. Extrapolation of the production function outside that range may be seriously misleading.
2. Another limitation of time series analysis is the assumption that all observed values of the variables pertains to one and the same production function. In other words, a constant technology is assumed. In reality, most firms or industries, however, find better, faster, and/or cheaper ways of producing their output.
3. Theoretically, the production function includes only efficient (least-cost) combinations of inputs. If measurements were to conform to this concept, any year in which the production was less than nominal would have to be excluded from the data. It is very difficult to find a time-series data, which satisfy technical efficiency criteria as a normal case.
4. Engineering data may overcome the limitations of time series data but mostly they concentrate on manufacturing activities. Engineering data do not tell us anything about the firm’s marketing or financial activities, even though these activities may directly affect production.
5. In addition, there are both conceptual and statistical problems in measuring data on inputs and outputs.
Q.6. Write short notes on the following : (10×2 =20)
a. Effect of Buyers
Where there is only one buyer. Such a situation has been referred to as monopsony. For example, there are just six firms in India manufacturing railway wagons all of which supply to just one buyer, the Railways. Such a situation can also exist in a local labour market where a single large firm is the only provider of jobs for the people in the vicinity. More frequently encountered in the Indian markets is a case of a few large buyers, defined as oligopoly.
The explosive industry which makes detonators and commercial explosives, has three major customers: Coal India Ltd. (CIL), Department of Irrigation and various governmental agencies working on road building activities. Of these, just one customer, CIL takes nearly 60% of the industry’s output. There are about 10 firms in the industry, which negotiate prices and quantities with CIL to finalise their short-term plans.
Most industries manufacturing heavy equipment in India are typically dominated by a few manufacturers and few buyers with the Government being the major buyer.
Price and volume determination in such products often takes the form of ‘negotiation across the table’ rather than the operation of any market forces. Since the members in the whole market inclusive of buyers and sellers are not many, very often they know each other. In other situations, like the consumer goods, firms have no direct contact with their customers.
b. Product Characteristics
Product differentiation is an important market characteristic because it indicates a firm’s ability to affect price. If a firms product is perceived as having unique features, it can command a premium price and the firm is said to possess market power. For example, the Rolls Royce has come to be regarded as the ultimate in automobile luxury and therefore commands a high price.
Consumers are willing to pay that premium for the product. The degree of competition faced by Rolls Royce or Mercedes Benz is thus very low. One could also consider the market for Cable TV service. Most households in India are serviced by a local cable TV monopoly and are thus dependent upon their local cable provider for service. Thus the market for provision of cable TV service is not competitive in the sense that only one operator provides the facility. Are there any close substitutes for cable TV service?
At present not many channels besides Doordarshan are available that are free to air (FTA). Thus, the FTA service could at best be considered an imperfect substitute for cable TV, since the latter offers a larger bouquet of services. On the other hand, for a product like soap or detergents, there are many firms producing a large variety of substitutable products. Therefore, one notices more violent competition, in the detergent market than in the cable TV market. The physical characteristics of a product can also influence the competitive structure of its market. If the distribution cost is a major element in the cost of a product, competition would tend to get localised.
Why do you see so many Fiat taxis in Mumbai, while Kolkata is dominated by the ageless Ambassador? Similarly, for perishable products, the competition is invariably local.
Q.7. Describe the characteristics of pure/ perfect competition and pure monopoly. (20)
Characteristics of Pure/Perfect Competition
Perfect competition is a form of market in which there are a large number of buyers and sellers competing with each other in the purchase and sale of goods, respectively and no individual buyer or seller has any influence over the price. Thus perfect competition is an ideal form of market structure in which there is the greatest degree of competition.
A perfectly competitive market has the following characteristics:
1. There are a large number of independent, relatively small sellers and buyers as compared to the market as a whole. That is why none of them is capable of influencing the market price. Further, buyers/sellers should not have any kind of association or union to arrive at an understanding with regard to market demand/price or sales.
2. The products sold by different sellers are homogenous and identical. There should not be any differentiation of products by sellers by way of quality, variety, colour, design, packaging or other selling conditions of the product. That is, from the point of view of buyers, the products of competing sellers are completely substitutable.
3. There is absolutely no restriction on entry of new firms into the industry and the existing firms are free to leave the industry. This ensures that even in the long run the number of firms would continue to remain large and the relative share of each firm would continue to remain insignificant.
4. Both buyers and sellers in the market have perfect knowledge about the conditions in which they are operating. Buyers know the prices being charged by different competing sellers and sellers know the prices that different buyers are offering.
5. The distance between the location of competing sellers is not significant and therefore the price of the product is not affected by the cost of transportation of goods. Buyers do not have to incur noticeable transport costs if they want to switch over from one seller to another.
Characteristics of Pure Monopoly
Monopoly can be described as a market situation where a single firm controls the entire supply of a product which has no close substitutes.
The market structure characteristics of monopoly are listed below:
• Number and size of distribution of sellers – Single seller
• Number and size of distribution of buyers – Unspecified
• Product differentiation – No close substitutes
• Conditions of entry and exit – Prohibited or difficult entry
Though perfect competition and monopoly are the two extreme cases of market structure, they both have one thing in common – they do not have to compete with other individual participants in the market. Sellers in perfect competition are so small that they can ignore each other. At the other extreme, the monopolist is the only seller in the market and has no competitors. The market or industry demand curve and that of the individual firm are the same under monopoly since the industry consists of only one firm.
Q.8. What do you understand by barriers to entry ? Discuss its various types. (20)
Barriers to Entry
Barriers to Entry means Restrictions on entry of new firms into an industry. Barriers to entry is an economics and business term describing factors that can prevent or impede newcomers into a market or industry sector, and so limit competition. These can include high start-up costs, regulatory hurdles, or other obstacles that prevent new competitors from easily entering a business sector. Barriers to entry benefit existing firms because they protect their market share and ability to generate revenues and profits
Common barriers to entry include special tax benefits to existing firms, patent protections, strong brand identity, customer loyalty, and high customer switching costs. Other barriers include the need for new companies to obtain licenses or regulatory clearance before operation.
• Barriers to entry describes the high start-up costs or other obstacles that prevent new competitors from easily entering an industry or area of business.
• Barriers to entry benefit incumbent firms because they protect their revenues and profits and prevent others from stealing market share.
• Barriers to entry may be caused naturally, by government intervention, or through pressure from existing firms.
• Each industry has its own specific set of barriers to entry that start-ups must contend with.
Types of Barriers to Entry
A barrier to entry exists when new firms cannot enter a market. There are many types of barriers, which become sources of market power for firms. Entry barriers can be broadly classified as: Natural barriers, Legal Barriers and Strategic Barriers.
1. Natural barriers
Economies of scale create a natural barrier to the entry of new firms and it occurs when the long run average cost curve of a firm decreases over a large range of output, in relation to the demand for the product. Due to the existence of substantial economies of scale, the average cost at smaller rates is so high that the entry is not profitable for small-scale firms. This results in existence of natural monopoly. Power generation, Aircraft manufacturers, Railways, etc. are examples of natural monopolies. You should keep in mind that technological progress often undermines the natural monopoly character of certain industries.
This has happened in telecommunications, which not very long ago used to be considered a natural monopoly.
2. Legal barriers
Patents, as discussed above, are an example of a legal entry barrier. Industrial licensing that used to be common in India in the 1970s and 80s is another example of such a barrier. By giving a license to a firm the government provided exclusive rights to that firm or a few firms to produce. This restricted the number of players in the market through industrial licensing, thus creating a legal entry barrier.
3. Strategic barriers
Such barriers exist exclusively due to the strategic behaviour of existing firms. Managers undertake investments to deter entry by raising the rivals entry costs. To bar or restrict the entry of a new entrant, an established firm may change price lower than the short-run profit-maximizing price. This strategy is known as entry limit pricing. The entry limit pricing depends on established firm taking a cost advantage over potential entrants. The established firm must have a long run average cost curve below that of the other firm in order to lower its price and continue to make an economic profit.
Q.9. Discuss the nature and scope of managerial Economics. How managerial economics help in Preparing managers ? (20)
Management is the guidance, leadership and control of the efforts of a group of people towards some common objective. It is coordination, an activity or an ongoing process, a purposive process and an art of getting thing, done by other people. Economics, on the other hand, is a social science, chiefly concerned. With the way of society chooses its limited resources, which have alternative uses, to produce goods and services for present and future consumption, and to provide for economic growth. It is obvious from his definition that economics engaged in analyzing and providing answers to manifestation us the most fundamental problem of scarcity. Scarcity of resources results from two fundamental facts of life.
a. Human wants are virtually unlimited and insatiable.
b. Economic resources to satisfy the human wants are limited.
Thus, we can‘t have everything we want; we must make choices broadly in regard to the following.
a. What to produce?
b. How to produce?
c. For whom to produce?
The three choice problems have become the three central issues of an economy.
Managerial Economics can be viewed as an application of that part of economics that focuses on topics such as risk, demand production, cost, pricing, Market structure etc. Understanding these principles will help to develop a rational decision making perspective and will also sharpen the analytical frame work that the executive must bring to bear on managerial decisions. The primary role of economics in management is making optimizing decisions where constraints apply. The application of principle of Managerial Economics will help manager ensure that resources are allocated efficiently within the firm and that the firm makes appropriate reactions to changes in the economic environment. Thus Managerial Economics is concerned with application of economic concepts and analysis the problem of formulating rational managerial decision.
Role of Managerial Economics in preparing Managers
- Study of Managerial Economics essentially involves the analysis of certain major subject like. The business firm and its objective, Demand analysis estimation and for casting, production and cost analysis, pricing theory and policies, profit analysis, with special reference to breakeven point; capital Budgeting for investment decisions; completion etc.
- Demand Analysis and Forecasting help a manager in the earliest stage in choosing the product and in planning output levels. A study of demand elasticity goes a long way in helping the firm to fix prices for its products. The theory of cost also forms an essential part of this subject.
- Estimation is necessary for making output variations with fixed plants or for the purpose of new investment in the same line of production or in a different venture. The firm works for profits and optional or near maximum profits depend upon accurate price decisions.
- Decision making by management is purely economic in nature, because it involves choices among a set of alternatives alternative course of action. The optimal decision making is an act of optimal economic choice, considering objectives and constraints. This justifies an evaluation of management decisions through concepts, precepts, tools and techniques of economic analysis.
Q.10. What is Pure Bundling, mixed Bundling and Tying ? Give suitable examples from service Industry.
Pure bundling
In it products are sold only as bundles. This is not an exhaustive list but covers the most frequently encountered cases. Pure bundling involves selling two products only as a package and not separately.
For example, Reliance WLL -cellphone instrument (handset) and connection are only available together and not available separately. Microsoft’s bundle of Windows and Internet Explorer could be considered a pure bundle. Also Cable TV Channels are an example of pure bundling. In North America it is not possible to get only Disney Channel has it is always bundled with other premium channels. In India, the prospective CAS(Conditional Access System) also has similar channel packages where some of the channels can’t be purchased separately like Zee TV, would only be available with other, Zee Channels.
Mixed-bundling
In it products are sold both separately and as a bundle.
Mixed Bundling involves selling products separately as well as a bundle.
For eg – McDonald’s Value Meals and Microsoft Office are examples of Mixed Bundling. In a recently introduced offer, The Times of India and The Economic Times can be purchased together for weekdays for a price much less than if purchased separately. This is also an example of mixed bundling. In most cases mixed bundling provides price savings for consumers.
Tying
The purchase of the main product (tying product) requires the purchase of another product (tied product) which is generally an additional complementary product.
Eg – A well known example is that used by IBM in 1930s wherein if you purchased IBM tabulating machines agreed to purchase IBM punch cards. As a result, IBM was trying to extend its monopoly from one market to another. But it had to abandon this practice of it in 1936 due to antitrust cases. In 1950’s customers who leased a Xerox Copying Machine had to buy Xerox Paper. Another case of tying was that by Kodak in which Kodak held a monopoly in the market for Kodak Copier Parts. Kodak engaged in tying when it refused to sell it’s parts to consumers or independent service providers except in connection with a Kodak Service Contract. Today when you buy a Mach3 razor, you must buy the tied product i.e. the cartridge that fits into the Mach3 razor.