Economic Analysis of the Market Structure and Price Fluctuations of Spun Silk and Waste Silk

Abstract

Spun silk is made from waste silk which is a byproduct of the silk-raising and the silk-reeling industry. The object of this paper is to make clear the behavioral principle and market structure of spun silk industry by the theoretical analysis in modern economics.
Although price fluctuations between the spun silk and the waste silk have a certain common tendency, the rate of price fluctuation of the waste silk in larger than that of the spun silk. Thus, in this paper it is analyzed the actual conditions of these price fluctuations and the factors affectings the fluctuations through the above mentioned theoretical study.
The big gap between the rate of price fluctuations of the spun silk and the waste silk is related to the characteristic of market structure. The fators affecting the gap can be grouped into the following three cases:
(1) In the case when market is perfectly competitive and the demand curve of spun silk shifts unstably, the price fluctuation is strongly related to the existance of the costs other than waste silk.
(2) In the case when market is perfectly competitive and the supply curve of waste silk shifts by the external factors such as cocoon and silk market, the price fluctuation is largely influenced by increase in the marginal cost other than waste silk.
(3) In the case when a firm takes a monopolistic behavior, the gap of price fluctuations apperaring in the perfectly competitive market is enlarged and amplified by elastic demand for spun silk and inelastic supply for waste silk.