...MICRO ECONOMICS ASSIGNMENT Name M.AHTSHAM RAFIQ Section C Roll # BBA02123216 Submitted to Prof. Zaigham Abbas * Market supply: Total supply of every seller on which seller is willing and able to sell a good. The market supply curve is found horizontally adding all the individual supply curves. The factors affecting market supply are, 1. Sellers willingness to sell 2. Number of sellers in market 3. Prices * Market Equilibrium: When the market demand and the market supplied are equal then the market is said to be at equilibrium. That means that the equilibrium price will be equal to the demand and supply price. * Budget Line: The budget line explains the product of two that are affordable in certain amount of consumer’s income. 1. When income increases the budget line shifts to right. 2. When income decreases the budget line shifts to left. If the allotted price on the vertical axis increases the budget line makes a parallel shift downwards. If price on the vertical axis decreases then the budget line make a shift upwards. * Producer Surplus: The total revenue that producers obtain from a good and the price paid. This is the difference between the minimum supply price that sellers are willing to afford and the price they actually receive is known as producer surplus. * Price ceiling: It is a legal maximum price that is imposed on the market below the price that otherwise...
Words: 1010 - Pages: 5
...PROJECT ON INDIAN DAIRY INDUSTRY PREPARED BY 1) DURGARAM CHAUDHARI 2) DHRUV SHAH 3) CANUTE FERNANDES 4) ABHISHEK GUPTA Introduction India has attained the first rank in milk production in the world. India produces 13.1% of the total milk production in the world. India has grow its production to around 4% on annual bases in recent yrs, which far exceeds the global average of about 1%. The market size of Indian Dairy is around US$ 45 Billion. This sustained increase in the domestic milk production & also helped in increasing the countries per capita availability of milk. The per capita availability of milk has increased from 112 grams per day in 1968-69 to 252 in 2010-11. About 80% of the total milk produced in the country is in the unorganized sector & the remaining 2 of milk0% is equally by cooperative & private diaries. Production and supply Production in Rural area -98 Production in Urban area- 2% Consumed at home – 35 % Sale at market-65% (urban market sale -82%) Supply via Informal-57%, Cooperative – 18%, Private-25% The major milk producing states in the country are: • Uttar Pradesh • Punjab • Rajasthan • Madhya Pradesh • Maharashtra • Gujarat • Andhra Pradesh • Haryana These states together account to about 70% of...
Words: 1768 - Pages: 8
...financial reporting. One such method is the indiscriminate use of stock options for employees that enable companies to take employment costs off balance sheet and inflate earnings. With the recent ethical issues we have had companies over the years it is important that we pay close attention to financial reporting provided by companies. This method will reduce the equilibrium price and increase equilibrium quantity for this company's products and services. The reason for this is that the wage is bill is shown lower than what it actually is. This causes the supply curve to shift to the right. With an increase in supply, if the firm is a monopoly/oligopoly/monopolistic competition, there will be a decline in the price of the product of the firm. In case the firm is operating in perfect competition, there will only be an increase in the quantity the company sells in the market. The scenario described above indicates that there is a shift in the supply curve, in other words the costs are shown to be lower than what they actually are at the time. The supply curve shift to its right but its elasticity is not affected. As the method described above does not relate to demand, the elasticity of demand is not directly affected. Any market structure, perfect, monopoly, oligopoly or monopolistic competition, the same ethical issues arise, the salary cost...
Words: 955 - Pages: 4
...as related to the number of firms that compete in each one, competition levels, coming into and exiting the economy, the price range of goods, and product variety. I will relate Auto Edge’s market structure to pricing concepts. The demand for goods is related to price sensitivity. This differs. I will align market structures with elasticity of demand structures. A monopoly involves no pressures as related to competition. This can well be related to government regulation. Consumers have no freedom as related to choices. Monopoly is an example of perfect inelasticity. Government regulations are hard to keep without legal restrictions. The post office is a great example of a monopoly. They only deliver envelopes (Hagen, 2014). De Beers is a great example of a monopoly. They offered diamonds very openly. They put a complete lockdown on the whole chain of supply. De Beers put quite a bit of pressure on retailers to just sell their diamonds. The company would buy up all diamonds; so that the diamond supply was limited because of De Beers’ monopoly and ways of doing business. Until a few years ago, another monopoly was seen as related to the commercial airlines. Boeing had a monopoly over certain product lines until now. Pure competition involves many competitors. It has no leader. Competitors come and go. These are very competitive surroundings. No restrictions are in place. Pure competitions...
Words: 2605 - Pages: 11
...your analysis. The economist would approach the problem of alcohol abuse as cost, and how they could put it in real numbers. When measuring the cost of alcohol abuse in any city in the U.S. we must understand what make the assumptions of alcohol abuse comprehensible and to focus on the relevant alcohol abuse. We have to think about such things as health services and medical expenses, premature death, loss of productivity, and alcohol related crimes. In total, the U.S. economy loses an estimated $185 billion each year to alcohol-related problems, according to the National Institute of Alcohol Abuse and Alcoholism. We use the assumptions to help explain, Economics is a discipline, but it is not an exact discipline. Economic theory simplifies situations because it would be nearly impossible to predict and include every relevant variable and factor. Just look at the cost of drunk driving. Drunk driving is a insightful subject to many people because so many lives have been affected by this crime. The National Highway Traffic Safety Administration reports that alcohol-related motor vehicle crashes kill someone every 31 minutes and nonfatal injure someone every two minutes. During 2005, 16,885 people in the U.S. died in alcohol-related motor vehicle crashes, comprising 39% of all traffic-related deaths. What has become known as the Coase Theorem is the proposition that in the absence of transactions cost the level of production of goods or services in an industry in which there are...
Words: 1938 - Pages: 8
...upon a firm’s revenues and costs. Macroeconomics: addresses the economy-level issues which similarly affect a firm’s revenues and costs. Infinite wants: limitless desires to consume goods and services (big house, luxury car, designer shoes). Finite resources: limited amount of resources that enable the production and purchase of goods and services (salary, consulting fees, royalties from book, generous friends). Factors of productions: are resources needed to make goods and services: land (oil, gas, base metals), labour (China/India or Europe), capital (machinery, computers, office spare, retail shops) and enterprise (brings land, labour and capital together and organize them into business units that produce goods and services with the objective of making a profit, like shareholders). Production possibility frontier it shows the maximum number of products that can be produced by an economy with a given amount of resources. This illustrative tool can be used to highlight crucial economic concepts: Finite resources with a fixed quantity of resources an infinite amount of beer, or pizzas, cannot be produced. The frontier shows what it is possible to produce with a limited amount of resources. Opportunity costs the benefits forgone from the next best alternative. If pizza production is reduced in order to make more beer, then the opportunity cost consists of the benefits that could have been received from the pizzas that have not been made. Opportunity costs give the production frontier...
Words: 12239 - Pages: 49
...America has become one of the busiest countries in the world. Each year families are spending less time together; which means that more families are relying on eating out but more on microwaveable foods. Considering the increase in the disposable income, more people are able to afford better lifestyle. However, there has been a change in the styles of cooking in the current markets. With microwaveable food being so popular, the focus is now on how can we make these products healthier. So manufacturers now focus on introducing low calorie microwaveable food into the market. Therefore, increasing sales due to the popularity of these healthy microwaveable choices for consumers. As previously explained in the first assignment, it was mentioned that the market structure for low calorie microwavable food was competitive. We learned in a perfectly competitive market there are a large number of buyers and sellers, the products sold is also homogeneous in nature. The microwaveable food market consists of many buyers and sellers. Even the goods sold are almost homogeneous. This is an indication for us to know that the market for low calorie microwavable food is perfectly competitive. It is perfectly competitive because (1) there are a large number of manufacturers, (2) many consumers are focused on low calorie quick meals, (3) there are no barriers to entry and exit and (4) the product is homogenous. Consumers have different varied personalities and lifestyle trends with different...
Words: 1384 - Pages: 6
...winner is the person whose guess is closest to 2/3M Example: Three players submit bids of 25, 50, and 75. M = 50 thus 2/3M = 33.3 The player who submitted 25 would win. We’re doing: Perfect Competition • A perfectly competitive market has: • A large number of small players, i.e. fragmented supply and demand. • A homogeneous product. • In a perfectly competitive market, firms are price-takers, and MR=p. Firms produce quantity Q such that p = MC. The firm’s supply curve is the inverse of the marginal cost curve. • Construct the market’s supply curve by adding the firms’ supply curves horizontally. Use the market’s supply curve to forecast the effect of demand shocks on the market’s price. • The effect of demand shocks on the market price are larger when supply is inelastic. • At this point, is our analysis complete??? • The decision of Alusaf depends on the forecast of the price of aluminum and the average cost of production. Alusaf’s Hillside Project Seems like a simple business… ! Competitive Market – identical product; no tech. differences; pricetakers ! No room for fancy marketing strategies; nimble operational improvements ! Profitability boils down to a simple equation price – average cost That cannot be that hard? ! Need to understand: • What determines prices? • Which costs are relevant to Alusaf s decision? • What drives industry dynamics? ! For this, we need an economic model...
Words: 2870 - Pages: 12
...At the end of the course, candidates should have attained an understanding of microeconomics and in particular the problems of resource allocation. 1. Introduction Definition of Economics Microeconomics vs. Macroeconomics Positive vs. normative economics Economics as a science Scarcity and wants Opportunity cost. Production Possibility Frontiers Factors of Production 2. Demand, Utility and Supply Demand - price and income Distinction between a movement along and a shift of the demand curve Elasticity of demand Inferior and griffen goods Supply price and cost of production Elasticity of supply Determinants of supply 3. Price Mechanism and Allocation of Resources. Interrelationship between demand and supply Equilibrium price and output Interrelationship between markets Compliments and substitutes Government intervention in the market - Maximum price, minimum price Tax and subsidies 4. Consumer Choice Utility Consumer Equilibrium Marginal utility theory Consumer surplus Indifference Curves 5....
Words: 3990 - Pages: 16
...must make choices because of scarcity, which means that although our wants are unlimited, the resources available to fulfill those wants are limited. Economists assume that people are rational in the sense that consumers and firms use all available information as they take actions intended to achieve their goals. Rational individuals weigh the benefits and costs of each action and choose an action only if the benefits outweigh the costs. Although people act from a variety of motives, ample evidence indicates that they respond to economic incentives. Economists use the word marginal to mean extra or additional. The optimal decision is to continue any activity up to the point where the marginal benefit equals the marginal cost. 1.2 The Economic Problem That Every Society Must Solve (pages 8–11) Discuss how an economy answers these questions: What goods and services will be produced? How will the goods and services be produced? Who will receive the goods and services produced? Society faces trade-offs: Producing more of one good or service means producing less of another good or service. The opportunity cost of any activity—such as producing a good or service—is the highest-valued alternative that must be given up to engage in that activity. The choices of consumers, firms, and governments determine what goods and services will be produced. Firms choose how to produce the goods and services they sell. In the United...
Words: 107306 - Pages: 430
...ON Selling Cost Or Advertising Expenditure Made by Roll no Names 18 Srishty Jain Abstract Selling (Advertising) Cost: Selling Cost (SC) is another outstanding feature of a monopolistic competitive market. This is in the form of advertisement expenditure. Selling Cost and Product Differentiation together enable the producer to maintain some control over market conditions and influence the shape of the demand curve. Both features are interdependent. Whenever a product is differentiated it is necessary to inform buyers; and advertisement is the only medium through which buyers can be told about superiority of that product. Selling Cost by itself is apparent product differentiation. When a product does not contain any genuine qualitative difference, buyers can be made to treat a product differently through advertisements. So whenever products are differentiated and advertised, the market becomes a monopolistic competition. These are the hallmarks of this form of market. The presence of selling cost increases the firm’s cost of production. In order to recover it, firms have to charge a higher price. The net effect of a monopolistic competitive market is pricing goods at a higher rate. Consumers have to bear this extra expenditure. For manufacturing companies, product costs are only costs that are necessary to produce a finished product. As discussed earlier in the tutorial, product costs (i.e. manufacturing...
Words: 3917 - Pages: 16
...Report – Micro Macro Theory and Application Total Cost When producing their new product Sony will have to know about several costs of production in order to produce efficiently and make a profit. Total costs are the sum of fixed and variable costs of production. Fixed costs are those which do not change with production but are always paid regardless of production levels. For a company like Sony these could include their rent for their offices and factories, the cost of their machinery or the cost of utilities needed to run their factories. Variable costs by comparison are those which vary in line with production, the more that is produced, the more variable resources are used and the less that is produced, the less that is needed. For Sony, this could include raw materials, labour costs or distribution costs. Fixed Costs Variable Costs Costs Output The diagram above shows how Sony’s fixed, variable and total cost would look. The Fixed costs are a straight horizontal line as they do not vary with output; they are Sony’s overhead costs and will always have to be paid. Variable costs are represented by an upwards sloping line as they rise as output rises. Total costs start at fixed cost and slope upwards in the same shape as variable cost as it is a sum of the two costs combined. The other costs which Sony will need to consider are its Average Total Cost (ATC) and its Marginal Cost (MC). Average cost can be defined as cost per unit sold. As production is increased and...
Words: 1844 - Pages: 8
...series of price changes in between. Prices change for a number of economic reasons. One such reason is supply and demand. Gas prices rise after 9/11 and after the start of the war with Iraq, it seems to rise when there is any major crises. Supply and demand plays a major part in the fluctuation of gasoline prices. The price of crude oil can and does influence the supply and price of gasoline. When the price of oil rises, the cost of supplying gasoline increases for petrol suppliers, reducing the quantity of crude oil demanded in gasoline production and potentially reducing the supply of gasoline. So its expected that a rise in the price of crude oil to lead to a rise in the price of gasoline. Even when crude oil prices are stable, gasoline prices can fluctuate because of reasons such as the season and local retail station competition. Additionally, gasoline prices can change rapidly due to crude oil supply disruptions stemming from world events, or domestic problems such as refinery or pipeline outages.(3) Crude oil prices are determined by worldwide supply and demand, with significant influence by the Organization of Petroleum Exporting Countries (OPEC). OPEC has tried to keep world oil prices at its target level by setting an upper production limit on its members.(3) also increase in demand for gasoline in the United States and the rest of the world is adding upward pressure on crude oil prices. Price of gasoline is generally more volatile than prices of other commodities...
Words: 1124 - Pages: 5
...revealing the underlying structure of short-run supply curves, the choice of output in the long run and long-run competitive equilibrium. Along the way, the concepts of producer surplus and economic rent are introduced, and the chapter ends with development of the long-run industry supply curve. Section 8.1 identifies the three basic assumptions of perfect competition and section 8.2 discusses the assumption of profit maximization as the goal of the firm. Students often find some of these assumptions to be unrealistic and/or very restrictive, so it is important to acknowledge that the world is more complex, but remind them that our goal is prediction. Although the world does not work quite as simply as the model of perfect competition suggests, the model predicts quite well even when some of the assumptions hold loosely at best. To put perfect competition in perspective, it can be helpful to give a brief overview of monopoly, oligopoly, and monopolistic competition before or after presenting the assumptions of perfect competition. Restrict this discussion to identifying the number of firms in the industry, product differentiation, and barriers to entry and exit. This has the added benefit of stimulating student interest in future topics. Section 8.3 derives the general result that any firm wanting to maximize profit should produce where marginal revenue is equal to marginal cost. It also identifies perfect competition as a special case where marginal revenue equals the...
Words: 8601 - Pages: 35
...CHAPTER 10 PERFECT COMPETITION Assumptions of Perfect Competition The most competitive market structure is pure or perfect competition, which is as competitive as possible. As previously mentioned, market structures are models that summarize how certain markets are organized and behave. For each market structure we have a set of assumptions or characteristics that tell us what kind of industries the model will explain. Only industries that meet the assumptions will behave in the way the model predicts. The assumptions of perfect competition are: Many buyers and sellers: There are so many buyers and sellers in perfect competition that no one of them has any influence whatsoever on the market. The number of consumers and producers is so great that any one of them is like a cup of water in the ocean – their presence or absence makes no difference at all to the market. Identical or homogenous product: Every producer in the market makes exactly the same product – consumers are not able to distinguish between the output of one firm and the output of another. There are no labels, brands or any other distinguishing features used to make a product look distinct. Excellent information: Both buyers and sellers in this market have good information about the product, especially the fact that there are many other producers all making the same product. Relatively free entry and exit: Firms are able to move resources in and...
Words: 15661 - Pages: 63
