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The most common way of deciding between these two options is through capital budgeting. If the two decisions are mutually exclusive, a net present value analysis will determine which of these options is better for the store in the long run. This type of analysis involves calculating the incremental cash flows that derive from the decision, and then discounting them back to the present day. The up front cash flows should also be included in the calculation. Between two mutually exclusive options, the one with the higher NPV -- as long as it is positive -- is the option that should be selected.
However, in the course of conducting such a calculation, it will become apparent that these two tactics solve different problems. The confusion probably lies in the fact that the root issue is the same. If increasing capacity is the solution (and both of these options increase…… [Read More]
The class Principles Microeconomics. text book Principles Microeconomics N. Gregory Mankiw. paper answer questions. Final Project Following a description final project ECO-112. The project parts, answered complete project.
Principles of microeconomics: Products used in daily life
Product 1: A Starbucks latte
Product description and usage
The Starbucks latte is a coffee beverage made with espresso and steamed milk. On the company website it is described as "the original coffeehouse classic. And like most classics, part of its appeal comes from its simplicity. A caffe latte is simply a shot or two of bold, tasty espresso with fresh, sweet steamed milk over it. Some prefer to add syrup or extra espresso to the recipe. Some maintain that it is entirely perfect as is" (Caffe latte, 2012, Starbucks). Starbucks lattes can be consumed 'to go' or drank in Starbucks stores, which often have the advantage for students and commuters of having…… [Read More]
The ServiceMaster Company is concerned with the provision of a wide range of services to not only residential but commercial customers as well. Mainly, its services include but are not limited to facility management services, commercial cleaning as well as restoration services. In this text, I describe the type of market ServiceMaster operates in as well as the competition the company faces; if any. I also make submissions on how I think the company can increase its market power.
The Type of Market in Which ServiceMaster Operates
ServiceMaster operates in a monopolistically competitive marketplace based on a careful examination of the specific characteristics of the company as well as the marketplace it operates in. ittenberg & Tregarthen (2009) define monopolistic competition as a situation where we have a large number of firms producing products which are similar but which are in one way or the other differentiated. Further, they…… [Read More]
Service Master Pro-is a Company that concerns itself with the provision of a wide variety of services to both firms and residences. The company's flagship brands include but are not limited to TruGreen, AmeriSpec as well as Terminix.
Currently, Service Master has operations in 14 countries through its vast network of more than 4000 locations. Through its convenient franchise arrangements, the company has continued to expand throughout the world within a relatively short period of time. Though the company's headquarters remain in the U.S.A., ServiceMaster is present (through franchise and company-owned locations) in countries including but not limited to Malaysia, Lebanon, Saudi Arabia, Japan, Spain etc.
The possibilities for further expansion in regard to ServiceMaster seem endless. This assertion is essentially based on the Company's strategy for expansion where it seeks to develop through the issuance of master licenses. This arrangement allows the license owners to not…… [Read More]
Internet service providers in the country are faced with some serious challenges when it comes to microeconomic distribution of resources. They have to consistently provide value-added services in order to be able to gain more customers and retain the existing ones. There are some trade-offs involved when it comes to how big an area the service should cover, who the service should be given to and how to expand or produce their service. "Microeconomics emphasizes the trade-offs inherent in solving allocation problems. The act of allocating resources of necessity involves all people who act as producers or as consumers, who benefit by trading with other people, and whose actions affect, for good or for ill, the quality of life."  In our areas, it is Cox Communication that is very popular with residents for Internet service. Along with Internet, they also provide television cable and telephone services. Most people…… [Read More]
Microeconomics: Differentiating Between Market Structures in an Organization
The electronics industry has become one of the largest and fastest growing industries which generate billions of dollars every year. The major products of this industry include personal computers, laptops, mobile phones, televisions, digital cameras, music players, telephones, speakers, recording media, and all types of accessories for these products. The operations, performance, and profitability of the participants of electronics industry is affected by a large number of market forces like technological advancements, competitive pressures, consumer behavior, governmental policies, and economic situations of the target countries.
Sony Electronics Corporation
Sony is one of the top market leaders in the electronics industry of the world. It manufactures, promotes, and sells a large variety of electronics and technological products at very competitive prices. The Sony products are recognized all over the world for their quality, reliability, and a real value for the…… [Read More]
Microeconomics Final Project: Product Analysis
This text will largely concern itself with two products most of us use in our daily lives. Amongst other things, the text will in addition to describing the products also highlight the various factors that influence the demand and supply of the said products. Further, the products' available substitutes as well as complements will be identified. Later on, the long-term prospects of both products will be analyzed.
The products I chose to use for this analysis are GlaxoSmithKline's Aquafresh toothpaste and Hewlett Packard's personal computers. Aquafresh is a toothpaste brand manufactured by GlaxoSmithKline. The same is available in several varieties including but not limited to Aquafresh Ultimate and Aquafresh Triple Protection. Apart form the toothpaste, GlaxoSmithKline manufactures a wide range of other products (mostly pharmaceutical). On the other hand, HP's personal computers include general-purpose computers of varying capabilities, sizes as well as prices.…… [Read More]
There are four types, or causes, of market failure. Monopolies exist where a single buyer or seller is able to exert significant influence over prices or output. To minimize such market failures, antitrust regulations are implemented. In recent years, Microsoft has been accused of violating antitrust regulations and thus being a monopoly. The accusation is that Microsoft, as a seller, is able to control the market place, thus reducing competition and creating a market failure.
pecifically, the decision of United tates v. Microsoft, issued on April 3, 2000, called the company an "abusive monopoly." The suit arose out of the merging of Microsoft and Internet Explorer (created when the company bought out Netscape). The decision further required that the company split into two separate units, one for its windows-based features and one for its Internet-based features. However, part of this ruling was subsequently overturned by a federal appeals court and…… [Read More]
Microeconomics is one of those subjects that I knew little about before I started. In the course of studying it, I came to appreciate the value it has, not only for describing elements of how the world works, but for the way I could apply it to my daily life. By the end of the course, I could see the decisions that I was making in microeconomic terms; this actually helped me to make better decisions. I am glad that I was able to take this course and gain this knowledge about decision-making processes.
The economics of how we make our micro-level decisions is a fascinating study. Normally we think of GDP and other macroeconomic subjects as economics, so it is interesting to see the link between microeconomics, macro and the real world decisions we always make. This unique element of economic study takes the familiar economic concept of opportunity…… [Read More]
Microeconomics Across the orld
Comparing the Economies of Two Countries with Regard to Pricing Structures
ith notable exceptions, such as Cuba and North Korea, most of the major global economic powers have within their national microeconomic or internal frameworks, some forms or a semblance of a competitive, capitalist economies. In other words, individual economic actors such as firms compete for the monetary confidence of consumers within particular industries, rather than having such behavior regulated by the government. As such, the pricing of capitalist-style micro economies are also competitively structured. Pricing within a capitalist system is based upon consumer demand and the desire of suppliers to meet that demand at a state of equilibrium determined by the market. But although this may be the ideal Adam Smith formulation of capitalism in terms of pricing, no nation and no series of markets operates according to such principles in a pure fashion.
The…… [Read More]
In the modern world access to resources is affected by, for example, credit ratings (access to capital), unequal access to higher education (access to knowledge), legal considerations (unequal access to legal services) and unequal access to many other key inputs. This is in part caused by increases in complexity of both the inputs themselves and of the systems by which we derive access to those inputs.
The sixth characteristic of perfect competition is the lack of externalities in production or consumption. Any externality can upset the competitive balance. Perfect competition represents a situation where buyers and sellers bargain directly; externalities are influencers on this process and therefore by definition interfere with the condition of perfect competition. Changes in communication, education, transportation and political structures have resulted in significant influence of externalities in most market situations in the world today.
Perfect competition is rare in this world. Modern corporations are built…… [Read More]
This case does not directly illustrate this, because productivity increased 5%. If in the next quarter that productivity gain shrinks, that would demonstrate more clearly the law of diminishing marginal productivity. This is because, for example, if the worker is already working 49 hours in a week, if another hour is added the worker will be less productive in that 50th hour than he/she was in the 49th hour.
Labor and productivity are not related to marginal utility. Marginal utility reflects the additional benefit of an additional unit of spending, where spending refers to consumption. The concept is similar to productivity, because that is spending by business on labor, but productivity is related to dollar value output, whereas utility is related to happiness and other personal benefits. The concepts are similar, but they are not the same and increased labor spending is therefore not related to marginal utility.
The case…… [Read More]
Over the last several years, real estate prices have been going through periods of tremendous volatility. This is because the marketplace has shifted and there is a change in the underlying levels of demand. To fully understand what is taking place requires carefully examining an article from the New York Times. During this process, there will be a focus on: the utility derived from a specific product, the changes that occurred with demand, shifts in supply and if it is elastic / inelastic. These variables will provide specific insights which are showing the underlying strengths, weaknesses and potential causes impacting the markets. It is at this point, when greater amounts of clarity will be provided highlighting the long-term effects of these transformations.
Consider the utility derived from a product or service mentioned in the article.
The main utility derived from the product is the need for…… [Read More]
Supply has an undeniable impact upon price. When supply goes down, price goes up. In this instance, a rapid decrease in supply has led to an increase in the price of lettuce. Unlike producers of other goods and services, farmers cannot always fine-tune their supply according to market demand, because of the impact of the weather upon their ability to produce. Farmers had already planted less lettuce, presumably based upon demand patterns from the year before. Yet demand levels for agricultural products from year-to-year are difficult to predict. For example, when the weather is warmer, people tend to eat more lettuce, even in the winter. Conversely, a scare about the safety of a particular type of produce, like spinach, can cause a rapid downturn in demand.
To make up for the decrease in supply due to a harsh cold snap and still ensure that their input costs are covered,…… [Read More]
Microeconomics Before Referencing
hat market structure exists for countries that are suppliers of oil in the global economy and how this is helping to cause high oil prices?
The supply of oil is largely regulated by OPEC, a cartel or oligopoly of suppliers. "The producers' cartel OPEC accounts for about half of the world's crude oil exports and attempts to keep prices roughly where it wants them by trimming or lifting supplies to the market" ("hy are oil prices so high," 2004, BBC News). The OPEC cartel is characterized by almost all of the major economic elements of an oligopoly, including interdependence of the member countries, in which each oligopolistic nation carefully monitors the activities of other nations, to keep costs down. There is rigid control over prices, to keep prices up, as in a perfectly competitive market that is not advantageous to sellers, more independent competitors are…… [Read More]
Please view attached docs included works cited page end paper. Title paper Microeconomics Case
Microeconomics case assignment 3: Why are athletes' salaries so high?
Perhaps the most obvious reason for the stratospheric nature of athletes' salaries is the unique talents that athletes possess. A doctor, nurse, or teacher may perform far more vital functions for society. But even in such competitive white-collar professions, few doctors and teachers are irreplaceable. Professional elite athletes possess very specialized skills and talents so they can command absurdly high salaries. Wages in any labor market are determined by the laws of supply and demand, not social justice. In a command economy, the state could determine that a firefighter should earn more than an athlete, but not in a capitalist system. The benefits a teacher provides a student, while considerable, are often only manifest in economic terms after many years. In contrast, a baseball…… [Read More]
Suppose that two people, Michelle and James each live alone in an isolated region. They each have the same resources available, and they grow potatoes and raise chickens. If Michelle devotes all her resources to growing potatoes, she can raise 200 pounds of potatoes per year. If she devotes all her resources to raising chickens, she can raise 50 chickens per year. (If she apportions some resources to each, then she can produce any linear combination of chickens and potatoes that lies between those extreme points. If James devotes all his resources to growing potatoes, he can raise 80 pounds of potatoes per year. If he devotes all his resources to raising chickens, he can raise 40 chickens per year. (If he apportions some resources to each, then he can produce any linear combination of chickens and potatoes that lies between those extreme points.)
The opportunity cost…… [Read More]
The type of configuration that would create such an industry is: having a large number of competitors in the market (with a variety of brands). ("Woolies denies existence of beer price," 2011)
Hypothetically, if both firms go through with this strategy and succeeded (i.e. they drive out the remaining competition in retail), what would be a long run concern for at least one of the two firms? (Note, this is not a question about collusion).
The possibility that their other competitor; may engage in tactics that could undercut their market share. This is problematic, because it means that the other company could: dramatically cut prices or try to create shifts in consumer demand (through substitute products). ("Woolies denies existence of beer price," 2011)
Finally, Fosters is not exactly a small fish itself. Positive PR aside, what is Fosters strategic motivation to boycott their retailers' attempts to reduce retail prices of…… [Read More]
A most relevant example of a monopolistic competitive industry is given by the fast food industry. There is a great supply and demand for fast food products; numerous companies make the products, from international conglomerates such as McDonalds, to small local stores. And everybody consumes one time or another fast food products, from children to adults and senior citizens. Furthermore, the industry provides a wide array of products, including cheeseburgers or hamburgers, fries or beverages, to lately include diet products as well, such as chicken salads. In addition, the prices implemented are rather similar in all sales points. The industry poses no major barriers to entry and there is sufficient information available online and offline about both products as well as those who produce them.
The oligopolistic competitive industry differs from the monopolistic competitive industry in the meaning that there are reduced numbers of producers and sellers. This offers them…… [Read More]
The modern day economic climate is extremely dynamic and challenging, revealing a context in which the economic agents are presented with both opportunities as well as challenges. One specific means in which they choose to respond to the challenges and seize the opportunities is represented by them joining forces through mergers and acquisitions. A particular merger of specific interest in 2011 is represented by the merger between Irving Oil Limited and Exxon Mobil.
Irving Oil Limited is the largest refinery in Canada and it focuses on refining and distributing oil and natural gas. It providers a wide array of products and 80 per cent of its output is exported to the United States.
"The company serves customers in eastern Canada and New England, marketing and distributing energy products such as gasoline, diesel, home heating fuel, jet fuel, and lubricants. It also provides natural gas to residential and…… [Read More]
Telecom industry is a vast growing sector which deals with the transmission of information to far distances. During the older days, telecommunications was via visual signals such as smoke, flags and telegraphs. Audio communication was transmitted through drumbeats, whistles and horns. Globalization has seen this sector upgrade and today they use electrical devices which include telephones, fiber optic, and the latest internet technology among others. Several companies have come despite the government's intervention in issuing of licenses. The influx is alarming because controlling production of sub-standard goods become hard (Seybold, 2008).
Products offered by telecom
There are many services offered by this industry. They can be broken in to five major categories for clarity. First is the business network and IT services. This includes data centers, mobility services, and network access and voice communications among others. Secondly, there is Business and Technology software. This is an important product because…… [Read More]
Elastic demand is where the elasticity is over 1.0, inelastic is where it is less than 1.0. What this means is that elastic demand sees demand change to a greater degree than the price change, while inelastic demand sees demand change to a lesser degree than the price change.
Substitution is a key factor in the demand curve, because the more likely consumers are to substitute, the more likely demand is going to change strongly with a change in price, because consumers just start buying a different product instead. Demand will be elastic when there is high propensity to substitute, or when the product is an unnecessary item.
Income elasticity helps to determine if a good is normal or inferior, because demand for normal goods increases as income increases, while demand for inferior goods should decrease when income increases because consumers substitute superior products.
If a good is a…… [Read More]
Enron Corporation is an example of one of the largest corporate scandals in the history of the United States. Given a series of corporate mismanagement, Enron is regarded as a shocking example of corporate corruption in the modern business world. The company took 16 years to increase its assets from 10 billion to 65 billion, which was significantly reduced in 24 days (Gibney, 00:00:38-00:00:47). Enron’s corporate scandal has been the subject of numerous studies within the business sector as it offers significant lessons on economics and corporate management. Alex Gibney’s film Enron: The Smartest Guys in the Room provides insights on various topics that are relevant to microeconomics in relation to Enron corporate scandal.
One of the topics discussed in the video relating to microeconomics is market regulation, which is a board term used to refer to government policies that regulate the market. Market regulation is evident in the…… [Read More]
In addition to this, the company must continue to develop new products. This is because consumers' needs and requirements are in a continuous change process and the company's products will have to adapt to the requirements issued by customers.
1. History (2008). CSC Brands. etrieved March 19, 2010 from http://careers.campbellsoupcompany.com/History.aspx.
2. Strategies (2008). CSC Brands. etrieved March 19, 2010 from http://careers.campbellsoupcompany.com/Strategies.aspx.
3. Annual eport (2009). CSC Brands. etrieved March 19, 2010 from http://files.shareholder.com/downloads/CPB/871395724x0x320834/0a34b982-31c3-4cb4-bebb-96301d23a4bd/CPB_2009_Annual_eport.pdf.
4. Shea, M.E. & Mathis, M. (2002). Campbell Soup Company. Arcadia Publishing, Charleston. etrieved March 19, 2010 from http://books.google.ro/books?id=wqekiCpw4qcC&printsec=frontcover&dq=campbell+soup+company&source=bl&ots=rwkPu0hPI&sig=ErN5zHrIZhchnuxNP7TanqWBJ8s&hl=ro&ei=qWKjS7__M5L4mgOLxZ3wCQ&sa=X&oi=book_result&ct=result&resnum=5&ved=0CCQQ6AEwBA#v=onepage&q=&f=false.
5. Campbell Soup Company (2010). Wikinvest. etrieved March 19, 2010 from http://www.wikinvest.com/stock/Campbell_Soup_Company_(CPB)#Campbell_Soup_Company_and_the_Competition.
6. Industry Statistics and Projected Growth (2010). Organic Trade Association. etrieved March 19, 2010 from http://www.ota.com/organic/mt/business.html.… [Read More]
The concept of marginal utility reflects the additional utility that a buyer receives for an additional unit of a good. In this example, Amy is spending an extra dollar if she buys either a bracelet or a soda. If she has an extra dollar, however, she is likely to purchase a soda. This is because the marginal utility of a soda at this point is 40, whereas an extra bracelet has a marginal utility of 30. The rational consumer is going to put their extra financial unit to whatever purchase will maximize utility.
If these utility figures hold, Amy is not maximizing utility. To maximize utility, Amy would only purchase soda since soda has a higher marginal utility than a bracelet.
Amy should consume only sodas if the marginal utility of these goods never changes.
Diminishing marginal utility implies that over time the marginal utility of something will diminish.…… [Read More]
When the Fed sells bonds, this should:
increase the Federal funds rate.
reduce the reserve requirement.
increase the discount rate.
decrease the discount rate.
Suppose excess reserves in the banking system change from $100 to $110. Other things equal, we might expect this change to:
reduce the discount rate.
reduce the Federal funds rate.
raise the reserve requirement d. reduce the prime rate.
If the Fed funds rate is 6% and Fed's target for the Fed funds rate is 4%, then the Fed is most likely to:
reduce the reserve requirement.
sell government bonds.
raise the discount rate.
raise the reserve requirement.
Suppose that investment is not very responsive to interest rates, so that a sizable increase in interest rates has only a minor effect on investment. In this case, contractionary monetary policy would:
a. have no effect on output.
b. reduce output slightly.
c. reduce output significantly.
d.…… [Read More]
Microeconomics study economic behavior individual household firm. In Session Long Project, follow firm choice entire session. You analyze firm makes economic decisions events economy affect firm.
Wal-Mart is the leading retailer within the United States of America, being also one of the largest global companies. On the Fortune 500 list of companies, Wal-Mart is located on the eighth position by its market value.
The selection of this company for further analysis is based on the complexity of the firm, often revealed through conflicting elements. For instance, Wal-Mart is the undisputable leading retailer in the U.S., but has been unable to consolidate a competitive position outside the country. Then, the firm registers impressive profits, but faces fierce criticism from the stakeholders. Then, from a strictly fiscal standpoint, the company follows a sustained growth trend, even in times of economic crisis, when other companies go bankrupt.
All these elements, alongside with others,…… [Read More]
Over the last few years, it is evident that the airline industry in the U.S. has been experiencing long standing as well as novel challenges (The American Antitrust Institute, 2012). These includes the increase in the price of fuel, slowing demand for air travel and pressures to expand globally. Consolidation among various airlines across the country is the most common remedy that most of the airline firms are applying.
In April 2012, the U.S. Airways made an announcement to move and take over the American Airlines. American airline is the fourth largest airline in the United States while U.S. Airways is the fifth (Plane Buzz, 2013). This merger, therefore, will make the U.S. Airways- American the largest in the United States with a combined share of more than 21% (The American Antitrust Institute, 2012).
The merger is worth 11 billion U.S. dollars and will turn America into the largest…… [Read More]
The small island nation of Petrolo has massive oil reserves that are ranked number five globally in terms of high grade petroleum. On the downside, the global industrial economies have significantly slowed down in petroleum consumption. In fact, the global demand for oil is presently at a 25-year low. The prices of oil are approximately 30 percent of what they were 1 year ago. In the present day, the price of a barrel is $40 whereas Petrolo’s current average cost of pumping oil is $50 per barrel. This is a major concern for Petrolo owing to the losses being incurred for every oil barrel. As a special consultant to the President, my task is to undertake an evaluation of the economic impact of four different options and provide a specific recommendation for what Petrolo as a nation should do.
Option 1: Stop pumping until the market price reaches at…… [Read More]
Macroeconomic and Microeconomics Differences With Examples:
Microeconomics and Macroeconomics are two separate branches of the same field, economics. Together they help us better understand the market dynamics and economic forces that shape them. Macroeconomics deals with the aggregate performance of the economy, the industries and discusses such serious issues as inflation, unemployment and growth. Microeconomics on the study hand is solely concerned with the smaller picture. It is mainly concerned with the performance of units that make the economic whole. It economics were a big picture; microeconomics would be the pieces that complete the picture. Macroeconomics on the other hand looks at the bigger picture. When we discuss the performance of one organization e.g. IBM or Dell, we are talking into consideration the microeconomic viewpoint. But when we talk about the entire computer industry on the whole, this is when macroeconomics comes into the picture.
Basically the entire economic study…… [Read More]
Production and Market Competition
Microeconomics Module 3 - Case Production, Costs, Profits Cost Profit in assignment, review reference material: Rittenberg Libby T. Tregarthen. (2009). Chapter 8: Production Costs. Sections 1-4 Principles Microeconomics.
Choice of factors of production
A firm's choice of factors of production to change will be determined by likely outcomes of the change. In the short run, a firm can only increase its variable cost. The required consideration in this case is marginal return. The needs to assess whether increasing a variable cost leads to; increasing marginal returns, diminishing marginal returns or negative marginal return. In the long run, a firm's production factors can all be changed. The firm will need to consider the marginal benefits and loses from capital or labor increments.
The considerations that the restaurant manager need to have is the likely change on its cost function. The manager should also be guided by the…… [Read More]
UNNNG HEAD: Microeconomics
All the countries in the world are dependent on each other nowadays. Countries need natural resources that are not present in their homeland or they may also be in need of some finished goods that they don't produce. This interdependency gives a beginning to trade between countries. The notion of international trade has become quite common nowadays as all the countries are participating in it. In addition to fulfilling the requirements of the country, international trade also increases overall efficiency of the production of a good. As some countries have the resources to produce certain goods at a lower cost than other countries. So, that cost efficient country can be given the chance to produce that good for other countries as well so that the overall cost of that product falls. The decision of international trade is undertaken by economies keeping either comparative or…… [Read More]
In 1998, a study of supermarkets in the Los Angeles area and Orange County area found that a gallon of milk could cost as much as $3.75, while many neighborhood stores in more affluent neighborhoods charged as little as $1.05 per gallon (Odabashian 1998).
The overall quality of the food sold in low-income areas continues to tend to be of inferior nutritional quality, compared with that of higher-income stores: the food is higher in sugar, and lower in protein and fiber (Lehrer 2010). Low-income areas are less apt to have safe open places to house farmer's markets. Low-income neighborhoods have been called by First Lady Michelle Obama 'food deserts' or places where it is virtually impossible to find healthy food at a reasonable cost. In terms of asymmetrical information as well, lower-income consumers may also not know as much about nutrition as higher-income consumers, and thus exert less demand pressure…… [Read More]
Macroeconomics and Microeconomics in Organizational Success
XYZ Company is aware that macroeconomics and microeconomics play a general role in its organization's success. The significance of macroeconomics and microeconomics in organizational success is attributable to the fact businesses makes decisions through complex processes. The multifaceted nature of business decision making process is brought by the complexity of consumer decision-making. Moreover, business organizations utilize macroeconomic and microeconomic data to make critical decisions that determine their success or failure. Therefore, it's important for XYZ Company to understand the role of macroeconomics and microeconomics in order for the management to make appropriate decisions that contribute to success. Some of the most important concepts in this process include supply and demand, consumer choice, aggregate supply and aggregate demand, and elasticity.
Overview of Macroeconomics and Microeconomics
Macroeconomics and microeconomics are two components that relate to economic activity and processes. Microeconomics is a concept that relates to…… [Read More]
Elasticity is a concept in microeconomics that reflects "the degree to which a demand or supply curve varies among products" (Investopedia, 2013). Thus, the degree to which demand or supply of a good changes with a change in the price. This dynamic can be calculated using the following formula:
Elasticity = (% change in quantity / % change in price)
In general, a good is characterized as elastic if the change in quantity is greater than the change in price, in other words if E > 1. If the change in quantity is lesser than the change in price, demand for the good is considered to be inelastic. If the demand changes exactly as the price changes, in order words if E = 1, then the good is said to be perfectly elastic. Perfect elasticity is uncommon, and is observed mostly in theoretical examples (Moffatt, 2013). There is also reverse…… [Read More]
Role of Economics
Economics asks what commodities are created, how these commodities are created, as well as for whom they are created. Economics is the study of capital, banking, money, as well as wealth.
Economics is the study of commerce amid nations. It assists clarify why nations sell abroad some goods and bring in others, as well as analyzes the effects of placing economic barriers at national frontiers.
Economic Graphing Models
Values of X are calculated the length of the horizontal axis and are positive, as well as escalating as we shift to the right of the origin2 (middle) and are negative, as well as declining as we shift to the left. Values of Y are calculated the length of the vertical axis and positive and escalating as we shift up from the origin and negative and declining as we shift downward from the starting point. At the center mutually…… [Read More]
Expectations, according to Pigou, could be actual concerns regarding real factors, but could also themselves be a source of fluctuations independent from any other factors (Collard 1983). Pigou also believed that 'psychological causes' had the potential of persisting to the point that the system would be unable to attain equilibrium, and expectations may therefore be formed that address genuine uncertainties (Collard 1983). Forecasting errors, according to Pigou, were deserving of attention, due to their addictive and multiplicative effects (Collard 1983). Pigou believed that eliminating errors resulting from expectations, such as optimism or pessimism, could reduce industrial fluctuations by approximately 50% (Collard 1983). It is noted by Collard (1983) that Pigou's assessment of the effects that expectation has on the economy are more thorough than anything similar put forth by Marshall.
The opposition Pigou had against Keynes later developed into the formulation of the Pigou effect or real balance effect, which…… [Read More]
Micro Economics: Chapter Summaries
Microeconomics Chapter Summaries
Summary 'Chapter 7: Monopoly'
Market power refers to the ability of one of more firms in an industry to impact the pricing and supply of products and services for general consumers (Hall & Lieberman, 2010). A firm holding market power experiences a downward slopping demand curve. Monopoly is one of the four major types of market structures (Boyes & Melvin, 2009). It refers to the dominance of only one supplier (or producer) over the entire market (McEachern, 2012). Since a monopolist firm does not have any direct competitor in its industry, it sets prices and supply options itself. Unlike other market structures, monopoly has only one market demand curve, i.e. The demand curve for the monopolist firm and for its industry are same (Shiller, 2009).
Being the only supplier in the industry, this firm can impact the prices of products or services by…… [Read More]
Economics Questions; Production Possibility Curves and Nonresidential Investment
Using the data from Heritage Org, the countries with ranked in 1st, 51st and 101st were identified and information provided was used complete the following table. For the country ranked in 101st place there was no data ranked at 101st for the unemployment rate given, however, if a figure is required, trading economics provide the last available data which places the unemployment level at 1% which was measures in 2010 and is assumed to remain correct (Trading Economics, 2013).
Government Spending as a percent of GDP
Growth rate of GDP
It is possible to use the data to drawn draw some production possibility curves. A production possibility curve, which is also referred to as a production possibility…… [Read More]
Micro Economics Shut Down Decision
The October, 2000 announcement that Nortel Networks would enter the customer relationship management (CRM) application market by acquiring Clarify for more than $2 billion in stock stunned the majority of people. The question on everyone's mind was, "How can a hardware giant succeed with a software business?" The answer, coming only 18 months after the acquisition closed, was that it couldn't.
Nortel purchased Clarify in its bid to become an eusiness provider by extending its hardware Internet foundation product lines which include optical, local area and wireless Internet products by adding applications to manage eusiness relationships that the Internet facilitates. Three quarters of Nortel's customers were large communications carriers such as MCI and AT&T, newer carriers like Qwest, or wireless carriers such as Sprint PCS. The rest were corporations. Nortel made the bet that company's spending a billion dollars on its hardware infrastructure would also…… [Read More]
Microeconomics and Indicators of Agriculture and Manufacturing
When experts and professionals look at microeconomics, the study of behavior of the economy as a whole even though it can be very complex because there are many factors that weights it. Furthermore these economists and other analysts take the data they assess with numerous other monetary signs that they determine that allows them to update us on the general well-being of the national market. There are different sectors (markets) within the financial realm that assists the consumers from the information determined as well as the businesses, and government so these three departments can make wise decisions. In microeconomics consumers desire to recognize how difficult or simple it could be to find work, the cost or price of the goods and services they prefer or use regularly, how consumers look in to borrowing money like determine who to do business with because of…… [Read More]
tells that Volkswagen has been found, and admitted to, cheating on emissions tests for its vehicles. That cheating had shown that diesel was cleaner than unleaded, which in turn resulted in favorable tax treatment for diesel. This in turn increased the demand for diesel products, as they were cost-competitive versus gasoline cars. With the admission that Volkswagen falsified these tests, leading to the conclusion that unleaded gasoline is the cleaner of the two fuels, there are significant implications including the possible reversal of tax policy in the EU away from favoring diesel as a fuel source for automobiles.
The market for fuels is typically subject to various regulations, and emissions are one of the regulations that govern this market. Tax policy is based on multiple factors but in Europe in particular tax policy is based on the desire to control emissions. Tax policy moves the fuel market out of equilibrium,…… [Read More]
Cindy is making a consideration to investing in a new business consists of the installation of solar panels. In the current periods, this has been perceived as a profit making venture. This is for the reason that the world continues to shift more and more into renewable sources of energy of which solar power energy is one of the leading ones. Another reason is that the government has made incentives to the industry by giving out subsidies to the suppliers in this market so as to increase the number of solar panels being produced. Bearing this in mind, Cindy is necessitated to take two decisions. First of all, there is a need to review the probable or likely profit or loss that can come about in this business in the forthcoming by making an allowance for the impending prospects for this line of business. Cindy needs to take…… [Read More]
There are rumors, the Forbes report goes on, "that the owners are looking to sell the team, which has sizeable debt and has had a hard time attracting season ticket holders" (Forbes).
Another struggling franchise mentioned often in analysis as a financial loser is the Atlanta Thrashers. Forbes reports the team lost 10% of its value in the 2008-09 season and is now worth $143 million. Local revenue per fan is $10 and the Thrashers' debt is 46% of its total value; player salaries were $39 million and gate receipts were $23 last season. "A nasty and continuous legal battle amongst the eight owners…has resulted in the team turning to Goldman Sachs for investors"
(Forbes). Although the Thrashers are not in the so-called Sun Belt, Atlanta is not known for ice, snow, and cold, like the more traditional hockey venues experience.
The financial struggles of some teams today is not…… [Read More]
simulation featured a number of different economic concepts. The first is the issue of the supply curve. Shifts in the supply curves occur as the result of changes in price, or also in changes in demand. When the price of a good in the market changes, firms are likely to increase production. When the price of a good in the market decreases, some firm are likely to reduce or eliminate production. Also, technological improvements can serve to increase supply by making firms in the industry more efficient.
There are also shifts in the demand curve. Such shifts occur when there is a change in the price or a change in the supply. There can also be external shocks such as recession that affect the amount of demand in the economy. When the price of a good drops, this typically will cause demand to increase. When the price of a good…… [Read More]
Externalities and Financing Government
Microeconomics Today -- hat is a fair tax?
Tax the rich, give to the poor! Tax the gas-guzzling SUVs of the rich, and give the money to the poor! Or, at very least, give the revenue in the form of tax breaks to independent and corporate organizations attempting to make alternative fuel vehicles. In theory, it seems like an excellent idea. However, although a higher gas tax may seem like a pro-environmentalist policy and superficially progressive in its political tenor and tone, in fact a gas tax really functions in its application as a regressive tax, penalizing the poorer rather than the wealthier Americans. It goes contrary to the fair financing of government, one of the philosophical principles of this nation.
Application of Microeconomic Theory -- regressive taxation and economic incentives for changes in consumer behavior through changes in tax policy
Two of the most controversial…… [Read More]
The movie Margin Call recounts a fictionalized version of the fall of Lehman Brothers in the autumn of 2008. The story centers around the trading floor, the company's exposure to toxic mortgage-backed securities and its responses to these challenges. The movie discusses and provides a framework for analyzing a number of financial concepts. This report will use Margin Call to discuss a number of different microeconomic concepts that are seen in the movie.
Lehman Brothers is ultimately a story of market failure, so this is a natural starting point for this analysis. Marker failure occurs when the "quantity of a product demanded by consumers does not equate to the quantity supplied by suppliers" (Investopedia, 2013). Market failure is evident in a number of ways, based on the story of the movie. For example, the traders are instructed to unload their positions in the toxic assets, but…… [Read More]
Subway Economic Analysis
Economic Business Analysis
Subway Corporation: Economic Business Analysis
Microeconomics centers on the study of the economic makeup of individual households, firms, and government. As franchise firms fall into this category, it is clear that small business owners, such as franchise owners, face the day-to-day task of dealing with many economic decisions in order to keep their businesses both functional and successful in order to turn a profit. One such example of this type of franchise is Subway. As the world's largest restaurant chain, Subway franchise owners make decisions every day that contribute to the bigger picture, helping keep Subway one of the world's most recognizable and successful franchises.
In understanding why an economic business analysis of the Subway Corporation is one worth completing, one can ask: what makes Subway interesting? Subway's success story is seemingly unparalleled in terms of growth and global acceptance.…… [Read More]
Monopolies and Trusts:
Appropriate Areas for Government Intervention?
Capitalism is the economic system that has dominated the United States virtually since the day of its independence. A social and economic system based on the recognition of individual rights; capitalism demands that owners' rights to control, enjoy, and dispose of their own property must be respected. In a capitalist system, the purpose of government is to protect individual economic rights, and to make sure that no one individual, or group may employ physical or coercive force upon any other group or individual. The success of capitalism is well evident. The surpluses that this system produces have enabled individuals to experiment; to create new products, and market new ideas. These private surpluses are traded in a free market in direct competition with other buyers and sellers. Such competition is best represented by the efforts of two or more parties acting independently to…… [Read More]
Speech to local Chamber of Congress -- Macroeconomic vs. Microeconomic influences today
Let's take a macro view of this problem! Let's take a micro view of this problem! hen we use such expressions colloquially, we usually mean taking a large vs. A small picture perspective. It is usually assumed that having a big picture perspective is the better one, because it is more far reaching in its nature. But a critical holistic view of macro and microeconomics theory shows that decisions made on the small-scale, or microeconomic level, can critically impact average buyers and sellers in ways that often are invisible to the naked economic eye of the consumer or capitalist as well. Both micro and macro factors must be considered together when making economic decisions on a personal level.
Microeconomics, also defined as classical economics as first preached by Adam Smith in his text the ealth of Nations, or…… [Read More]
The third degree discrimination is when businesses set prices depending on the location and the market segments. Here the supplier will identify the various market segments and have varying prices for the same item due to the varying consumer classes in these regions. The sales managers always have to look at the characteristics of the market and the customers in general.
The factors that the sellers consider here are age of the potential clients and their population in a given area, the economic standards and their purchasing history. This will enable the recommendation of varying prices for the different market segments. This is a discrimination criterion frequently used by the textile industry run by my father in Indonesia and particularly on the export textile. He has countries that will generally buy at higher rates than others hence he does his research and sets the prices accordingly.
It is noteworthy that…… [Read More]
If there is a risk that one of the family members will lose his or her job, that will add risk to the purchase decision. The riskier the purchase decision, the lower the price will need to be in order to compensate for that. Another factor here is the expected change in housing prices or interest rates. Buyers are inclined to enter the market if they believe that the cost of home ownership will be higher next year, but they may delay purchases if they believe that costs will be lower next year.
ith new home sales last summer, the dip could be in part due to worries about a double-dip recession. The summer was characterized by an inane fight over the debt ceiling, something that shattered confidence of many in the political system, and some of the key actors within that system. A fractured political system is one that…… [Read More]
Human capital is used for acquiring knowledge and skills which increase individuals' value and productivity. Such skills are experience, training, and education. These skills aids in providing resources to enhance economic growth, and produce new businesses and technologies.
Despite affording costs in the United States, college education has raised individual's income. More educated persons have higher IQs and well educated and rich parents. Similarly, above hundred other nations with diverse cultures and economic systems, educated people have the same standards.
From the viewpoint of individuals, the college education increases benefits and income, while from the viewpoint of society; it enhances desirable social norm and values, communication and democracy, and produces effective leaders. Its monetary benefits include lowering of the probability of unemployment. On the other hands, non-monetary benefits include psychological benefits i.e. social acceptance, ability to communicate better, and make wise decisions.
On the labor market experience, obtained…… [Read More]
It has been found that in general, the elasticity of demand for health care is -0.17, meaning that for a $1 increase in the cost of health care there is a decline in demand of $0.17 (Ringel et al., 2005). Health care is a unique product. It would be reasonable to think that the cost of one's health is irrelevant -- that consumers would place nearly infinite value on their health, resulting in very little elasticity of demand. Indeed, a figure of -0.17 indicates that this is true to a significant extent. Demand for health care does not drop precipitously when health care costs increase. In the United States, however, it does drop. There are several ways in which consumers reduce their health care expenditures in the wake of increased prices. They may switch from branded drugs to generics; they may reduce their level of care; or they may seek…… [Read More]
Supply Demand Simulation
Macro and Microeconomic Principles
From the simulation, the two major microeconomic principles are supply and demand. The simulation majorly focuses on the supply and demand of rental properties in Atlantis. In addition, the influences on supply and demand form the major topic discussed in the simulation. The macroeconomic factors clearly stated in the simulation are changes in the population trend, choosing to rent or buy apartments and factors that directly influence these changes. Colander (2010), states that the quantity demanded always increases with falling prices and quantity supplied reduces with receding market prices (Colander, 2004). The company's supply is almost 2,000 apartments; the company speculates at reducing the vacancy rates to 15% to increase demand, a clear applicability of the demand law.
Demand and Supply Shifts
The availability of rental apartments, demand for rentals, number of potential renters and the pricing are the common factors that affect…… [Read More]
The supply and demand simulation featured a number of different economic prniciples at work. In terms of microeconomic principles, two that were featured prominently was the relationship between supply and demand. The impact of these two variables on the price and availability of apartments in Atlantis was at the core of the simulation. Another was price elasticity of demand. There were also some macroeconomic principles outlined, as they affect supply and demand. One was the overall population, its growth and demographic change. These factors all contribute to the supply and demand characteristics of the Atlantis rental housing market. Another macroeconomic concept that came into play was the concept of equilibrium and the effects of price ceilings on both supply and demand.
External factors cause the supply and demand curves to shift. The supply curve is shifted, for example, if there is new supply in the market. A new building…… [Read More]
Potato Chip Industry
Given that the new company is now run as a monopoly, how will this benefit the stakeholders involved, such as the government, businesses, and consumers?
The conventional economic case in opposition to a monopoly is that, since the cost structure is the same, a monopolistic business will manufacture goods at a decreased output in order to charge higher prices. The opposite is true in the case of a competitive industry. In a monopolistic market, not only do consumers suffer but also governmental efficiency is questioned (as a result of lower spending and tax rates) (Krugman and Obstfeld, 2008).
Another view of Monopolistic markets is that, manufacturers mostly take advantage of the economies as they produce and supply products and services on large scales which results in the fall of average total cost of the production. However, this fall in average cost ultimately increases the monopoly profits. Consumers…… [Read More]
Subway Supply and Demand
Supply and Demand
Subway Corporation: Supply and Demand
Supply and demand of a good or service in economics is the basis for economic analysis in its entirety. Supply and demand centers on the different quantities that a producer or producers will make available to the market at different prices over a given period of time. The law of supply and demand is twofold. The law of supply functions that as price increases, producers are willing to produce and sell more, while if price decreases, producers are willing to produce and sell less. The law of demand is vastly similar. It functions in a manner that as price increases, the quantitiy people are willing to buy decreases, while as prices decrease, the quantity that people are willing to buy increases. The law of supply and demand illustrates a constant push-pull between the products that are…… [Read More]
Subway Microeconomic Analysis
Subway Corporation: Microeconomic Analysis
Subway is an American restaurant franchise that primarily sells submarine sandwiches and salads. Since its inception in 1965, Subway has blossomed into one of the world's most successful franchises, with 35,015 restaurants in 98 countries as of August 2011 (Subway, 2011, p.1). Subway restaurants have been consistently ranked in Entrepreneur Magazine's "Top 500 Franchises," and in March 2011, Subway surpassed McDonald's in its ranking of most popular fast-food restaurant in the United States in a poll of over 43 thousand social media users (Jargon, 2011, p.1).
With its promise to provide both quality fresh ingredients and impeccable customer service, Subway has earned a place in the upper echelon of American franchises, seeing consistent revenue streams, increased employment, and a consistent and loyal consumer base. In viewing the microeconomic makeup of Subway, along with its strategies for success in the market, one can gauge…… [Read More]
In order to understand the ways that different changes in the external environment will affect the demand for milk, some assumptions need to be made with respect to the milk market. e know that demand for milk will increase as wealth increases, which is the result of milk being something of a luxury item (Arnold, 2007). This means that there is some degree of correlation between wealth and milk consumption, and that implies that if wealth declines, milk consumption will also decline.
e also know that demand for milk is somewhat price inelastic. hen prices rise, people still pay them (Dohery, 2007). This is the result of two factors. The first is that there is a baseline demand for milk that is not going to be affected by price. The second is that the demand for milk is affected more by the wealth of the purchaser than the cost…… [Read More]