Supply and Demand Simulation Amanda Huenefeld ECO/365 Sadu Shetty January, 14, 2013 Introduction Supply and demand are the two influences that govern pricing in the larger picture of a viable economic market. The two factors are like two forces. Equally the conclusive levels of supply and demand, and the comparative levels of the two in contrast to one another, are significant. The standard of supply and demand is that if one or both varies, there will be a transient difference in the amount of product manufacturers are equipped to sell and the quantity that consumers are willing to buy. This difference will cause the market price to increase or decrease when necessary until the quantities are the same.
Production costs include raw material costs as well as the cost of labor. It includes long run as well as the short term expenses incurred. Long run costs have no fixed factors of production, while short run costs have fixed factors and variables that impact production. Efficient long run costs are persistent after the combination of outputs with the purpose of a firm producing results in the preferred extent of the goods at the lowest possible cost. Long run production cost for low calorie microwavable food includes the cost of machinery and land for setting up the manufacturing unit.
Elaine Ust ACC 202 Module 4 Case Allocating fixed costs Activity based management and activity based costing is different from a more traditional costing method because it uses multiple cost drivers and multiple overhead pools to allocate or apply overhead to products and cost objects. The main characteristics of ABC and ABM is that the charge the division or products for use of overhead resources consumed by charging for activities that are thought to drive costs. The goal is to create awareness that activities drain resources and have the products that use the resources have the costs mapped to their product or division. In this way the divisions and products that use the most resources are charged for those resources. Traditional allocations with one resources to spread overhead often charges products an "average rate" and so fussy and difficult products get a break (charged less than they consume or "under costed") and easy low-hassle products look worse than they are (charged more then they consumer or "over costed").
According to Keynes, why might deflation create problems for an economy? ▪ In expectation of increased spending, too many entrepreneurs would begin businesses and most would fail. ▪ The cost of repricing goods would increase costs, and therefore reduce profits, for businesses and they would cut production. ▪ People would drop out of unions because unions would become ineffective at keeping wages of members high. ▪ Consumers might expect prices to fall further and cut back consumption now.
(Exhibit 2.7) At interest rate above i, there is a surplus of loanable funds. At interest rate below i, there is a shortage of loanable funds. When a disequilibrium situation exists, market forces should cause an adjustment in interest rates until equilibrium is achieved. If the prevailing interest rat is blow i, there will be a shortage of loanable funds. The shortage of funds will cause the interest rate to increase, resulting in two reactions: 1.
Consumer price and producer price in 2009 to 2012 continue to drop and raise the price for consumers was not steady. The direction and magnitude of price change in the Producer Price Index for finished goods anticipates a similar change in the Consumer Price Index for all items. When this assumed relationship is contradicted by the actual movements of the two series. The answer is that conceptual and definitional differences between the PPI and CPI—differences which are consistent with the uses of the two measures—contribute to the differences in their price movements. A primary use of the PPI is to deflate revenue streams in order to measure real growth in output.
The increase in receivables could be due to an increase in accounts with higher credit limits. The issue arises with an increasing amount of consumers unable to pay off these high
5. a) If the price is not in equilibrium then there will be a difference in supply and quantity of goods. b) Prices increase because at a given price the amount of products being supplied is less than the demand of that product. c) The quality of the product is affected by the increase in price. Increase in price may lead to a decrease in quality. d) Price control on products is good for their sale in the black market in poor quality.
Threat of New Entrants is weak. Entry barriers are high because of the economy, significant experience-based cost advantages, other cost advantages held by industry members (e.g., access to inputs, favorable location), brand loyalty (which comes from membership and other services), strong network effects and high capital requirements. 5. Substitute Products or Services is moderate. Warehouse clubs like a magnet for customers and pulling them away from other traditional retail channels such as supermarkets, department stores, drugstores, office supply stores, consumer electronics etc… All three warehoused club rivals - Costco, Sam’s and BJ’s – have similar strategies: Low prices, low operating costs, geographic expansion – Costco; Sam’s Club concept is to sell merchandise at low profit margins, which means at low prices to members; and BJ’s offers brand-name merchandise at prices that were significantly lower than the prices found at retail, supermarkets, dept.
The elastic VS inelastic states that the law of demand depends by how much quantity demanded responds to a price change. When a price change causes larger change in quantity demanded then the price would be elastic. However when a price change causes smaller then the demand is elastic. The law of demand states that as prices raise the people would like to buy less and the quantity demanded falls. As the prices fall, the people would like to buy more and the quantity demanded increases.