Strayer University

Assignment 2: Operations Decisions
Submitted by:
Name
ECO 550

Dr. Lundondo Mumeka
Date: 14 Aug 2014

Today, life has become very fast. In today’s fast living world, the value of time has increased a lot. Most of the people are working and hardly find any time to cook for themselves. In this busy schedule, the introduction of low calorie microwavable food has lives of people much more easier. These products are easily consumable and hence have become very popular. As discussed in assignment 1, the market structure (or selling environment) was perfectly competitive. In a perfectly competitive market there are a large number of buyers and sellers. The products sold in this market are perfectly homogeneous. Examples of perfect competition are vegetable market, market for cereals etc. In a real world situation, there are many sellers of low calorie microwavable food. If we observe the demand side, we can also find a large number of buyers in the market. With large number of buyers and sellers, if we examine the nature of the product, then we can see that the products are almost homogeneous.
The main characteristics of perfect competition are:
i. Many buyers and sellers ii. Free entry and exit iii. Information is perfect iv. Homogeneous product
Now, firms under perfect competition have no market power and hence cannot affect the market price. They are bound to sell at the ongoing market price.
But recently, it has been observed that the characteristics of the market are changing. Since the tastes of people are different, there is a lot of scope for product differentiation in this market. The sellers are also taking the advantage of this taste differentiation and are differentiating their product. Thus the sellers of the microwavable food industry are trying to outperform each other. Due to product differentiation, the products no