Lerner index
Hey kiddo! Have you heard of the Lerner Index? It's a way of figuring out how much power a company has over the price of something.
Imagine you're at the store with your mom and you really want a candy bar. You ask your mom if you can have one and she says yes, but only if it's under $1. Now, the store has a lot of candy bars, but there's only one kind that's under $1. The store has all the power because they're the only ones who can sell you a candy bar for under $1.
The Lerner Index is like a math problem that figures out how much power a company has like the store in our candy bar example. If a company can raise prices really high and people will still buy their product, they have a lot of power. But if they can't raise prices without losing customers, they don't have as much power.
The Lerner Index just takes the difference between the price the company charges for something and the cost to make it. Then, it divides that number by the price the company charges. The bigger the number, the more power the company has over the price.
So, remember that candy bar you wanted? If it only cost the store 25 cents to buy, but they sell it for 75 cents, the Lerner Index would be .5 (that's the math part). That means the store has some power to raise the price of the candy bar because people still want to buy it.
I hope that helps you understand the Lerner Index! It's just a big math equation that tells us how much power a company has over what they're selling.
Imagine you're at the store with your mom and you really want a candy bar. You ask your mom if you can have one and she says yes, but only if it's under $1. Now, the store has a lot of candy bars, but there's only one kind that's under $1. The store has all the power because they're the only ones who can sell you a candy bar for under $1.
The Lerner Index is like a math problem that figures out how much power a company has like the store in our candy bar example. If a company can raise prices really high and people will still buy their product, they have a lot of power. But if they can't raise prices without losing customers, they don't have as much power.
The Lerner Index just takes the difference between the price the company charges for something and the cost to make it. Then, it divides that number by the price the company charges. The bigger the number, the more power the company has over the price.
So, remember that candy bar you wanted? If it only cost the store 25 cents to buy, but they sell it for 75 cents, the Lerner Index would be .5 (that's the math part). That means the store has some power to raise the price of the candy bar because people still want to buy it.
I hope that helps you understand the Lerner Index! It's just a big math equation that tells us how much power a company has over what they're selling.
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