Q1
The lemonade stand interactive game exemplifies the forces of demand and supply and has useful and interesting insights on the machinations of pricing and quality of a product. In this instance, the market variables are the recipes, the weather conditions, availability and the price. In my business, my strategy was to manipulate these variables in line with mostly the weather condition of the day. For instance, when it was clear and sunny with high temperatures, I altered my lemonade recipe to read like this; 4 lemons per pitcher, 4 sugar per pitcher, 5 ice per cup and sold it at 25cents per cup. Out of 104 potential customers, I was able to sale 55 cups which the game considered as an average performance. The next time it was clear and …show more content…
However, accounting profit and economic profit beget major differences. Accounting profits use actual gains and losses in accordance with accounting standards set by generally accepted accounting principles (GAAP). Its calculation involves total revenues minus explicit costs of goods. These explicit costs feature the direct movement of money. These are expenses like employee wages, raw materials, interest on capital, rent, and transport and so on. Normally, accounting profits are tied to trading periods like fiscal quarter or year. The computations of accounting profits are majorly required for income tax purposes, review of financial performance and preparation of financial statements (LEI et al., …show more content…
Secondly, all businesses are essentially price takers in the sense that they cannot control their product’s market prices. Thirdly, all businesses would command relatively small market share. Fourthly, consumers would have all the information on products and their prices and lastly, the marketplace has freedom of entry and exit (Makowski & Ostroy, 2001).
Firms operating under perfect competition conditions would then get just enough profits to stay afloat in business and nothing more. If it so happens that companies get excess profits, then the machinations of the market would have new entrants to stabilize the profits by pushing them back down (Makowski & Ostroy, 2001).
In a normally and naturally operated competitive market, advertising is used as a tool amongst many to confer a competitive advantage upon a business over others. Advertising thus works to convince potential customers to buy from one business at the expense of another one. However, advertising within the prism if perfect competition usually is geared towards the products being sold as opposed to the brand. This is because under no circumstance can a company acquire a super majority in terms of market share. Therefore, the aim of such an advertisement would be to promote to encourage increased consumption
The lemonade stand interactive game exemplifies the forces of demand and supply and has useful and interesting insights on the machinations of pricing and quality of a product. In this instance, the market variables are the recipes, the weather conditions, availability and the price. In my business, my strategy was to manipulate these variables in line with mostly the weather condition of the day. For instance, when it was clear and sunny with high temperatures, I altered my lemonade recipe to read like this; 4 lemons per pitcher, 4 sugar per pitcher, 5 ice per cup and sold it at 25cents per cup. Out of 104 potential customers, I was able to sale 55 cups which the game considered as an average performance. The next time it was clear and …show more content…
However, accounting profit and economic profit beget major differences. Accounting profits use actual gains and losses in accordance with accounting standards set by generally accepted accounting principles (GAAP). Its calculation involves total revenues minus explicit costs of goods. These explicit costs feature the direct movement of money. These are expenses like employee wages, raw materials, interest on capital, rent, and transport and so on. Normally, accounting profits are tied to trading periods like fiscal quarter or year. The computations of accounting profits are majorly required for income tax purposes, review of financial performance and preparation of financial statements (LEI et al., …show more content…
Secondly, all businesses are essentially price takers in the sense that they cannot control their product’s market prices. Thirdly, all businesses would command relatively small market share. Fourthly, consumers would have all the information on products and their prices and lastly, the marketplace has freedom of entry and exit (Makowski & Ostroy, 2001).
Firms operating under perfect competition conditions would then get just enough profits to stay afloat in business and nothing more. If it so happens that companies get excess profits, then the machinations of the market would have new entrants to stabilize the profits by pushing them back down (Makowski & Ostroy, 2001).
In a normally and naturally operated competitive market, advertising is used as a tool amongst many to confer a competitive advantage upon a business over others. Advertising thus works to convince potential customers to buy from one business at the expense of another one. However, advertising within the prism if perfect competition usually is geared towards the products being sold as opposed to the brand. This is because under no circumstance can a company acquire a super majority in terms of market share. Therefore, the aim of such an advertisement would be to promote to encourage increased consumption