Microeconomics

1. Carmex uses demand-oriented, cost-oriented, profit-oriented, and competition-oriented approaches when setting prices. There is large amounts of information Carmex must consider when using these approaches. Carmex must produce products at prices people are willing to pay. Carmex’s demand approach uses consumer tastes and preferences to determine prices. Consumers want “value,” and Carmex must price products accordingly. Dropping a cent of the price of products so they end in a 9 makes it…

List the two assumptions that underlie the conclusion that free markets are efficient. Explain how these assumptions either do or do not apply to an industry of your choosing. Pg 150 The two assumptions that underlie the conclusion that free markets are efficient. The number one assumption is that the markets are imperfect competition with each other. This means that a company does not have enough market power to control the quantity or price of a good. The second assumption is that the outcome…

a. Consumer surplus: Consumers are willing to pay a certain amount for a good or service. The variance in that price is considered consumer surplus. When the price is less than they are willing to pay, the amount (or quantity) of that good or service increase. When the price is higher than they are willing to pay, the amount (or quantity) of that good or service decreases. An example of consumer surplus is as follows: Consumers are willing to pay $1.00 for tuna fish. Tuna fish is…

1-According to Miller, the price taker refers to a situation in which a company must accept the prevailing prices in the market of its products because the firm cannot influence the price (Miller, R. L. 2012). In other words, when there is competition, a firm must set the price of its product below the competitive price in order to obtain customers, but when the price is above the competitive price, customers will not buy that product. According to the author, the perfectly competitive model is…

Every day many people sit and think on how people in the different countries figure out how products such as various good and service and how the money it been divide between good and services. Production possibility frontier is graphical representation of combinations of amounts of two goods or services that an economy can produce by transferring resources from one good or services to another and it also referred as the production possibilities curve (Production Possibilities Frontier). The…

What are managerial diseconomies of scale and what, if anything, can be done about this phenomenon? Decreasing returns to scale or diseconomies of scale implies rising average costs (AC) as the firm’s output and scale increase (Samuelson and Marks). Samuelson, William, and Stephen G Marks. Managerial Economics. 6th ed. Hoboken, NJ: John Wiley and Sons, 2006. Print. Economies of scale takes place with the growth of the firm. A business faces diseconomies of scale when the management team…

There are four major types of competitive market structure, these include: Perfect competition, Monopolistic competition, Oligopoly and Monopoly. The competitive market structure an organisation belongs to is determined by the nature of their product, the number and size of other firms in the market and the entry and exit conditions of that market. The two organisations I will be comparing and contrasting are Tesco and Sainsbury’s which I believe belong to the Oligopoly market structure. The…

Introduction In the market place, elasticity demonstrates the change to a products demand or supply quantity in response to a change in price. Price elasticity of demand demonstrates how much of a product is demanded by the consumer when the price increases or decreases. When this occurs, if the quantity demanded changes very little, this is called an inelastic good. However, if the quantify demanded shows significant change, the good is considered elastic. Price elasticity is a useful tool for…

Derived demand for labor depends on the market value or product price of the good or service (McConnell, Brue, & Flynn, 2011). The demand for labor depends on productivity of the market value of goods produced (McConnell, Brue, & Flynn, 2011). The production of products is done by laborers, or the labor demand, and the derived demand is from the demanded product that is done by the same laborers. The concept helps determine the demand for the labor of specific goods, what is needed, how much is…

This section divided in two cases: a first case is an inventory model designed for retailer and second case is an inventory model designed for the supplier. 4.3.1 Case I: Inventory model of the first cycle (0 ≤ t ≤ T) designed for retailer At first, at t=0 retailer has his delivery and put up for sale at a stock dependent demand rate. The stock for retailer decreases due to the combined result of demand and deterioration. At t=t1 inventory becomes zero and shortages occurs during the period [t1,…