...Economics studies how people, acting as individuals or in groups, decide to use scarce resources to satisfy wants. This fundamental economic concept of scarcity is at the core of the discipline. There are never enough natural resources, human resources, or capital resources (man-made goods such as tools, equipment, machinery, factories) to produce everything society wants. Therefore, choices must be made on what to produce, how to produce, and for whom to produce. Choices must also be made at a personal level. There never seems to be enough money or time to have or to do everything one wants. Economics is a way of thinking, a science of making choices. Economists examine the decision-making processes of individuals, businesses, markets, governments, and economies as a whole. An understanding of economic principles helps people to consider not only the short-term effects of a decision, but also its long-term effects and possible unintended consequences; to see the connections between personal self-interest and societal goals; to understand how individual and social choices are made in the context of an economy; and to analyze the impact of public policies and events upon such social goals as freedom, efficiency, and equity. Because of increasing interdependence and globalization, everyone in the United States needs to be aware of the issues in the global economy, their role in that system, and be able to respond to changes so that they can effectively maintain...
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...define economics, microeconomics, and the law of supply and demand. The paper will identify the factors leading to a change in supply and a change in demand, and will also analyze the basis for the trends in consumption patterns discussed in the article “As US Shoppers Retreat, Can World Thrive?” The author of the paper will analyze the article by considering the utility derived from the products mentioned in the mentioned article, and will describe what has occurred to change the demand for, or the supply of, the good or service. The paper will then conclude with the market prices of the products or services. Define Economics Economics is the research and study of income, production, land, investments, taxes, government spending and labor. Economics is a study of how people choose to earn and spend their resources. The choice needs to be made individually by people and countries about what goods and services they can purchase and which ones they need to delay. Resources are scarce and are pushing people and countries to make choices. Economics is studied from two perspectives. The first being governments of nations seek to maximize the production of countries. This perspective is referred to as macroeconomics. The second perspective is of individuals and firms; this perspective is known as microeconomics. Define Microeconomics Microeconomics refers to the study of economic activity from the viewpoint of an individual firm or groups of individuals. Microeconomics studies how firms...
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...Economies of scale Economies of scale are the cost advantages exploited by expanding the scale of production in the long run. The effect is to reduce long run average costs over a range of output. These lower costs represent an improvement in productive efficiency and can feed through to consumers in lower prices. But economies of scale also give a business a competitive advantage in the market-place. They lead to lower prices and higher profits! The table below shows a simple representation of economies of scale. We make no distinction between fixed and variable costs in the long run because all factors of production can be varied. As long as the long run average total cost (LRAC) is declining, economies of scale are being exploited. Long Run Output (Units) | Total Costs (£s) | Long Run Average Cost (£ per unit) | 1000 | 12000 | 12 | 2000 | 20000 | 10 | 5000 | 45000 | 9 | 10000 | 80000 | 8 | 20000 | 144000 | 7.2 | 50000 | 330000 | 6.6 | 100000 | 640000 | 6.4 | 500000 | 3000000 | 6 | Returns to scale and costs in the long run The table below shows a numerical example of how changes in the scale of production can, if increasing returns to scale are exploited, lead to lower long run average costs. | Factor Inputs | | Production | | Costs | | (K) | (La) | (L) | | (Q) | | (TC) | (TC/Q) | | Capital | Land | Labour | | Output | | Total Cost | Average Cost | Scale A | 5 | 3 | 4 | | 100 | | 3256 | 32.6 | Scale B | 10...
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...Econ 1 Professor Carter December 12, 2011 Microeconomics In My Daily Life Throughout my life, I have always been reading and hearing about economic issues and concepts, but I never thought about the impacts of economic models on my personal life. Before learning about microeconomic concepts, I always thought that a course in the field of Economics, would teach me theories that only apply to the economy of a nation as a whole and not to an individual’s life. However, there were a lot of concepts throughout this course that I found relative to my personal life. Among all the concepts that I have learned in the Microeconomics course, “Opportunity Cost”, “Sunk Cost”, and “Supply and Demand” have the most impact on my daily life. “Choice and Opportunity Cost” is one of the most important concepts of Microeconomics that I found it relative to my everyday life. Similar to many other students, limited time during the school semester, forces me to make choices about what to study, when to study, and how to estimate the opportunity cost of every choice. Applying opportunity cost concept in my day-to-day life helps me better schedule my study time. For instance, I usually choose to study during weekdays because the opportunity cost of studying on these nights is lower than studying on Friday or Saturday nights, when usually more exciting events are happening. On the other hand, if my alternative on weekend is to stay home and organize my closet and do my laundry, I would...
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...Over the course of this class we will cover the following topics: Principles of Economics (week 1) Thinking Like an Economist (week 1) Supply and Demand (week 2) Market Efficiency (week 3) Consumer Surplus (week 2) Your assignment for the final paper is to write a 2 to 3 page paper (double spaced) about how 3 of the above concepts applies to your daily life. For example how does consumer surplus impact the decisions you make when shopping for groceries? Be creative and think hard about these important concepts. Please use ProQuest and cite at least one source in text. Your paper will be due on Saturday night of the last week of the module. Submit your paper to Smarthinking. Attach their feedback along with your final submission. Smarthinking has about a 48 hour turn-around time so plan accordingly. Day to Day Concepts Perla Gomez ECN220 September 7, 2013 Sheneman Day to Day Concepts The thought of Economics can be a scary one. It is full of big words, difficult concepts, and challenging theories that can be hard to understand. The concepts that underlie Economics are scary ones and at some point were difficult to understand. However, I found that I could apply most of these concepts to my daily life. Supply and Demand, Consumer Surplus, and Thinking Like an Economist are all part of my day to day activities. I use them so often that I don’t even realize I am using them or taking advantage of them. Even if you have no idea what these are, chances...
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...Week 1 Knowledge Check Concepts Business Systems Productive Resources Law of Supply Law of Demand Calculating Profit Calculating Profitability Effect of the Business Model Mastery 100% 100% 67% 100% 100% 100% 100% Questions 1 2 3 Score: 20/21 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Concept: Business Systems Concepts Business Systems Mastery 100% Questions 1 2 3 1.What are the three components that make up a business system? A. Business commerce, business organization, business occupation B. Business organization, business management, business exchange C. Business commerce, business organization, business market D. Business market, business management, business organization Correct! The three components that make up a business system are as follows: business commerce, business occupation, and business organization. 2.Which term refers to the total money or assets of a business? A. Competitive advantage B. Sales revenue C. Capital D. Wealth Correct! “Profit that is kept in a company and invested in its business increases its capital, the total monetary value of its financial assets such as cash, property, land, stock, patents, and brand name” (Jones, 2007, p. 8). . 3.Information technology, e-commerce, human resource management, and procurement are included in what type of value chain function in a business? A. Tertiary function B. Complimentary function C. Primary value function D. Secondary value...
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...Question 2: Explain the concept of a concentration ratio. Is the concentration ratio in a monopolistically competitive industry likely to be higher than for a perfectly competitive industry? Explain your answer (6 marks) Suppose the minimum point on the Long-run Average Cost (LRAC) curve of a soft drink firm’s lemonade is $1 per litre. Under conditions of monopolistic competition, will the price of a litre bottle of lemonade in the long-run be above $1, equal to $1, less than $1 or impossible to determine. Illustrate your answer using a diagram (2 marks for diagram plus 2 marks for explanation) Question 5: Explain the impact of external costs and external benefits on resource allocation; (2.5 marks) Why are public goods not produced in sufficient quantities by private markets? (2.5 marks) Which of the following are examples of public goods (or services)? Delete the incorrect option The Judicial system--------------------------------------------------------------------------Yes/No Pencils --------------------------------------------------------------------------------------Yes/No The quarantine service----------------------------------------------------------------------Yes/No The Great Wall of China-------------------------------------------------------------------Yes/No ...
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...Quiz1 Question 1 3 out of 3 points Correct The flat-screen plasma TVs are selling extremely well. The originators of this technology are earning higher profits. What theory of profit best reflects the performance of the plasma screen makers? Answer Selected Answer: innovation theory of profit Correct Answer: innovation theory of profit Question 2 3 out of 3 points Correct The primary objective of a for-profit firm is to ___________. Answer Selected Answer: maximize shareholder value Correct Answer: maximize shareholder value Question 3 3 out of 3 points Correct Various executive compensation plans have been employed to motivate managers to make decisions that maximize shareholder wealth. These include: Answer Selected Answer: requiring officers to own stock in the company Correct Answer: requiring officers to own stock in the company Question 4 3 out of 3 points Correct The Saturn Corporation (once a division of GM) was permanently closed in 2009. What went wrong with Saturn? Answer Selected Answer: Saturn sold cars below the prices of Honda or Toyota, earning a low 3% rate of return. Correct Answer: Saturn sold cars below the prices of Honda or Toyota, earning a low 3% rate of return. Question 5 0 out of...
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...MBA502 Economic Theory and Applications: Chapter 8 Applicable Questions (Pg: 220): 1) Find and label the monopolist’s profit-maximizing output and price: The chart shown below represents monopolistic competition, short run. P MC P1 MR D 0 Q1 Q At: Q1 MR=MC; P > MC/ATC (ATC not at minimum) A monopolistically competitive company reaches the maximum-profit output at the point where marginal revenue (MR) is equal to marginal cost. Profit will be greater than marginal cost and average total cost. At this point, profits cannot be increased by changing the production level. Increases in production will cause a decline in profits, because it adds more to cost. Decreasing production will decrease revenue, since there will less inventory to sell. The profits shown in this graph cannot be maintained, since other firms will also produce similar products. This causes the demand curve to become more elastic, and shift back toward the origin, until it becomes tangent...
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...Business Proposal ECO/561 July 18, 2013 Business Proposal A business proposal gives a perspective buyer an intended and scale offering from the seller. In addition, a business proposal has to establish a reasonable interest in growth not only for the company or business, but also with the transferring interest in the clientele and consumers. This will provide the company a detailed analysis of economic and financial benefits and costs, which are used to maintain cash flows. According to McConnell, Brue, and Flynn (2009), “costs exist because resources are scarce, are productive, and have alternative uses.” Therefore, this gives companies and businesses the opportunity to improve or limit the existing services and goods. As a result, this business proposal is providing the information on Thomas Money Service Inc. and Future Growth Inc. (FGI) (University of Phoenix, 2013). Thomas Money Service Inc. is a finance company established in 1940, which provides business loans, commercial real estate loans, and business acquisition financing loans (University of Phoenix, 2013). In 1946, FGI branched off from Thomas Money Service Inc. to inquire into equipment financing (University of Phoenix, 2013). Therefore, Thomas Money Service Inc. developed an economic system, which gives the factors of production and methods used to motivate, coordinate, and direct economic activity (McConnell, Brue, & Flynn, 2009). As a result, Thomas Money Service Inc. has survived a strong company...
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...analytical An analytical framework for evaluating e-commerce business models and strategies Chung-Shing Lee The author Chung-Shing Lee is Director of Electronic Commerce Resource Center and an Assistant Professor of Information Systems and Technology Management in the School of Business at Pacific Lutheran University, Tacoma, Washington, USA. Keywords Internet, Economy, Innovation, Strategy Abstract Electronic commerce or business is more than just another way to sustain or enhance existing business practices. Rather, e-commerce is a paradigm shift. It is a ``disruptive’’ innovation that is radically changing the traditional way of doing business. The industry is moving so fast because it operates under totally different principles and work rules in the digital economy. A general rule in e-commerce is that there is no simple prescription and almost no such thing as an established business or revenue model for companies even within the same industry. Under such conditions, an analytical framework is needed to assist e-commerce planners and strategic managers in assessing the critical success factors when formulating e-commerce business models and strategies. This research develops an analytical framework based on the theories of transaction costs and switching costs. Both demand-side and supply-side economies of scale and scope are also applied to the development of this framework. In addition, e-commerce revenue models and strategies are also discussed. Based on the analytical...
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...Economics 247 Assignment 2 Version A This assignment has a maximum total of 100 marks and is worth 10% of your total grade for this course. You should complete it after completing your course work for Units 6 through 10. Answer each question clearly and concisely. 1. In perfect competition, one result of the model was that there were no economic profits in the long run. In a monopoly, the firm typically earns a positive economic profit. Why is there this difference? The lack of barriers to entry will allow competitors to enter the market unil economic profit is zero. These firms are price takers, and they cannot affect prices because their demand curve is horizontal. (4 marks) 2. Assume that a single firm in a pure competitive industry has a fixed cost of $6500 and variable costs as indicated in the table below. a. Calculate the TC, AFC, AVC, ATC, and MC columns for this firm. (5 marks) Total Output | TVC | TC | AFC | AVC | ATC | MC | 00 | 0 | | | | | | 600 | 70,000 | | | | | | 1000 | 76000 | | | | | | 1400 | 81000 | | | | | | 1800 | 87000 | | | | | | 2200 | 90000 | | | | | | 2600 | 93000 | | | | | | 2800 | 96000 | | | | | | 3000 | 100000 | | | | | | 3100 | 110000 | | | | | | b. Explain the concepts of economies and diseconomies of scale, and describe the underlying reasons why both occur. (4...
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...Introduction The primary purpose of this report is to execute an economic analysis on Apple Inc. We will review the impacts that the competitive market has had on Apple, since it was founded in 1976. This report will detail how Apple Inc. is both a dire example of the adverse effects of monopolistic competition on a company as other companies into the market; as well as an exceptional example the economic rewards yielded by innovation and brand differentiation within a competitive market. An analysis of Apple Inc would be incomplete without reviewing its past and present competitors. Reviewing these competitors will help the reviewer gain insight into comparative advantages held by other companies and the economic impact this has had on Apple Inc. this report will review the industry as a whole in order to understand the impacts of industry level supply and demand upon Apple Inc. The report will briefly examine the impact of market prices and international trade as an aspect of this report. More importantly, it will review specialization is undertaken by Apple Inc and the economic benefits gained by this course of action. Essentially, the economic view of Apple Inc is looking a company set within the market structure of monopolistic competition and how it has successfully used innovation and branding to turn itself into a pseudo-oligopoly despite competitors continually entering the market. Industry analysis Reviewing Apple Inc involves investigating the competitors...
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...Profit Profit - the difference between the purchase price and the costs of bringing to market. - Is any amount of money that is left over from a company after all financial expenses have been paid. It is the money they are able to save once the business purchases have been made. - Is the money a business makes after accounting for all the expenses. - The positive gain from an investment or business operation after subtracting for all expenses. Opposite of loss. Different profit concepts 1. Normal profit is the minimum level of profit needed for a company to remain competitive in the market. - Occurs at the point at which the resources available to the firm are being efficiently used and could not be put to better use elsewhere. It is important to note that zero economic profit does not mean that the company is not earning any money (accounting profit). It is simply a measure of how well resources are being used relative to all possible options. 2. Sub-normal profit – is any profit less than normal profit (where price is less than average total cost). 3. Abnormal Profit – is any profit achieved in excess of normal profit – also known as supernormal profit. When firms are making abnormal profits, there is an incentive for other producers to enter the market to try to acquire some of this profit. Abnormal profit persists in the long run in imperfectly competitive markets such as oligopoly and monopoly where firms...
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...One of the industries which perhaps has shown the most changes in market model is the airline industry in the United States. The airline industry can be analyzed different before and after deregulation and before and after the terrorist’s attacks of September 11th. These events have changed the industry in terms of both airfares and market concentration in major airports. Prior to deregulation in the 1970’s the Department of Transportation (DOT) served its goal by looking after the public interests. Once the focus of the DOT shifted to assuring airlines were operating under strict safety standards and procedures this gave a chance for airlines to take on any domestic route it felt capable of performing. Deregulation resulted in structural changes for airlines. Following deregulation, most of the largest airlines began to operate in the now well known hub-and-spoke system, which allowed for efficient connections for passengers from small- and mid-sized cities, but it also has increased airline concentration at hubs. As a result, the net effect has been to increase the choice of carriers at non-hub cities and to increase the frequency of service but also to increase the market concentration at hub cities. According to Parkin, (2011) most governments use a mechanism for allocating airport boarding gates and facilities, in some cases it even allows for competitive bidding for boarding gates and landing rights thus encouraging competition among airlines, and it also might encourage...
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