¶ … 1980, the demand for postage stamps was price inelastic. Elasticity reflects the affect that a change in price has on demand (Moffatt, 2015). There were few other options at the time -- only a phone call was a reasonable substitute. Not surprisingly, with multiple substitutes having emerged over the subsequent decades, demand for stamps is much more elastic than it once was. Substitutions, in particular email, come in at a much lower cost, so the postal service is simply not economical for people anymore (Hartung, 2011). That said, I am not sure that this means the elasticity has changed. If people are willing to change their habits over a penny or two either way, I'm not sure they'll do that now either, because a decline in the price of postage still won't make it cheaper than email. So people are either going to send something by post or they won't. If anything, the elasticity question is more when compared to parcel services like UPS or FedEx Ground.
The price of postage stamps should not be changed. When compared with email (free), there is no level at which the post office will be faster or more efficient. Consumers know this. They are either going to use the postal service or they are not. Among those who do, there is probably some elasticity, but...
So arguably, an increase will have them grumbling, but a decrease will not move the meter on getting people to switch back from email and text. Elasticity is important to pricing in most cases, because if elasticity is low, the price could be increased in order to increase total revenue. If elasticity is high, then a decrease in price will deliver an increase to total revenue. The first class stamp is actually a unique example, because it is competing against a product that consumers see as free. The incremental cost of an email is nothing. The normal rules of elasticity and substitution do not really apply when the substitute is free. People still mailing letters are going to do so because they need to. But they could change their mind if the cost of doing so is too high.
3. The USPS posts a report to Congress each year. In 2014, it actually formatted this as a 10-K, more familiar for publicly-traded corporations. Revenue has increased in the past three years, by a small amount. While the USPS has gotten its retiree health benefits under control -- they have declined by around $5 billion in the past couple of years, and the other total operating expenses are stable, the organization is still losing a lot of money every year, and that money must be…
Economics Discussions Production Costs Postal Service (USPS) operates at a loss but its closest competitors -- UPS and FedEx -- both operate at a profit. Suggest how fixed costs have contributed to the situation of the USPS. Provide support for your response. I would suspect that the fixed costs of contributing to employee's retirement funds (Risk Analysis Research Center, 2009, p. 4) and also their restriction from closing local offices (Slentz and McCann,
Some feel that this is a union backed bailout and that the union has no interest in protecting the American tax payer. These people feel that the USPS should be left to sink or swim and that if they fail this would be the beginning of government employee reduction. Other believe that it has been proven that things cannot go on the way they are ultimately, far-reaching changes are
Will the sponsors be able to finance the deal? The timing of this investment is important, and it is not covered in any depth in the case. That is because there is a significant increase in the number of countries where political risk is declining, but several countries (such as Argentina) provided negative surprises that made banks less willing to lend. The case deals primarily with banks, but does not cover strategic
The continuing economic recession that began in 2008 in the United States greatly exacerbated that revenue problem as people reduced their unnecessary use of postal services and increased their use of private-sector competitors such as United Parcel Service (UPS) and Federal Express (FedEx). To date, the USPS has been slow to respond to competition, particularly in relation to the adoption of the bar coding system that has long been
The office and administrative expenses would remain constant even to that point, as would the insurance expense. Exhibit B: Cash Flow Statement, Year Two At this point, the business is earning a healthy return and Mr. Ahn is receiving will be able to bring in a reasonable salary. The nature of the business may well change at this point. At the maximum revenue of $144,000 per year the pretax profit would
Human Resources Extrinsic: Clear expectations - 8:00 AM to 5:00 PM Rewards - $62, 131.00 - $107,190.00 Annually Intrinsic: Show why content or skill is important - Manages complex research Set goals for learning - Management This position requires a self-motivated individual who does not want or expect to be overly managed themselves. They want autonomy and that would be what I would use to sell this job as more rewarding. I would inform all potential candidates