will be above one for most customers. A formula gives the relation between price, marginal costof production and demand elasticity which maximizes a monopoly profit: (known as Lerner
index). The monopolist‟s monopoly power is given by the vertical distance between the point
where the marginal cost curve (MC) intersects with the marginal revenue curve (MR) and thedemand curve. The longer the vertical distance, (the more inelastic the demand curve) the biggerthe monopoly power, and thus larger profits.The economy as a whole loses out when monopoly power is used in this way, since the extraprofit earned by the firm will be smaller than the loss in consumer surplus. This difference isknown as a deadweight loss.
Introduction to Indian Railways
Indian Railways (IR) is the state-owned railway company of India. Indian Railways had, until
very recently, a monopoly on the country‟s rail transport. It is one of the largest and busiest rail
networks in the world, transporting just over six billion passengers and almost 750 milliontonne
s of freight annually. IR is the world‟s largest commercial or utility employer, with more
than 1.6 million employees.The railways traverse through the length and width of the country; the routes cover a total lengthof 63,940 km (39,230 miles). As of 2005 IR owns a total of 216,717 wagons, 39,936 coaches and7,339 locomotives and runs a total of 14,244 trains daily, including about 8,002 passenger trains.
Railways were first introduced to India in 1853. By 1947, the year of India‟s independence, there
were forty-two rail systems. In 1951 the systems were nationalised as one unit, becoming one of the largest networks in the world. Indian Railways operates both long distance and suburban railsystems.
The development of IR had its roots in the 1800s, when India was a British colony. The BritishEast India Company and later, the British colonial governments were credited with starting arailway system in India.The British found it difficult to traverse great distances between different places in India. Theyfelt the need to connect those places with trains to speed up the journey as well as to make itmore comfortable than travel by road in the great heat. They also sought a more efficient meansto transfer raw materials like cotton and wheat from the hinterlands of the country to the portslocated in Bombay, Madras and Calcutta, from where they would be transported to factories inEngland. Besides, the mid-1800s were a period of mutiny and struggle for independence in India,with uprisings in several parts of the country.The British leaders wanted to be able to transfer soldiers quickly to places of unrest. Railwaysseemed to be the ideal solution to all these problems.