This difference will cause the market price to increase or decrease when necessary until the quantities are the same. Microeconomics and Macroeconomics
Growth maximisation is where the firm’s main goal is to increase the size of the firm as much as possible. Some firms may have the objective to maximise revenue, this basically is when a firms aim is to achieve as high total revenue as possible and occurs when marginal revenue to equal to zero. Another objective of s firm may be a profit satisfaction, this is where a firm produces a profit which is deemed to be a reasonable level, which is satisfying to stake holders and is not maximising profit. The best example in a leisure market is a firm that has been recently set up and wants to survive so the first couple of years their target will be to make a profit and survive. If they try to maximise profit it would an unrealistic competition as
If exports were to increase this would result in an increase in AD, as the balance of payment is a factor. The subsequent result of this increase in AD would mean an increase in supply, leading to an increase in the rate of employment, as firms are forced to take on more workers in order to fulfil demand. This means that the increase in exports would reduce specifically cyclical unemployment ( demand deficient unemployment). This is because the increase in exports would result in a increase in AD, hence curing the deficient demand. Furthermore, the cost of the formerly unemployed, i.e.
So to be able to have a productive and successful business, business owners may want to look into maximizing their profits by way of the profit maximization concept. Profit maximization is when a company comes to a conclusion on the price and output level that will turn the maximum profit by using this particular process (Wikipedia). Granted there are many different approaches to this problem; however in this essay we will be considering the TR to TC method and the MR MC method. Tiffany C Wright expressed that the total revenue to total cost method is dependent on the fact that profit equals revenue minus cost. Total revenue equals price time’s quantity.
The relationship between marginal revenue and total revenue is the change in total revenue with respect to the variable change in quantity. Marginal revenue = demand MR = d(TR)/dQ, where Q is quantity. For each additional unit of output sold total revenue increases but only by the amount equal to the marginal price of the output unit. • As we increase the number of units sold which generate a positive marginal revenue, the total revenue increases (The total revenue increases when marginal revenue is positive) • When marginal revenue is zero the total revenue does not change and the total revenue is maximum (When MR = 0, TR Δ = 0) B. Define marginal cost Marginal cost is the total cost to produce an additional unit of goods sold.
• A differentiator gains a competitive advantage because it has the ability to satisfy customers’ needs in a way that its competitors cannot, which allows it to charge a premium price for its product. • Premium prices → increased revenue → superior profitability • A differentiator invests its resources to gain a competitive advantage from superior innovation, excellent quality, and responsiveness to customer needs • A product’s appeal to customers’ psychological desires is a source of differentiation. ▫ Example? 13 Differentiation • Generally, a differentiator chooses to divide its market into many segments and offer different products in each segment • A differentiated company concentrates on developing distinctive competencies in the functions that provide competitive advantage ▫ These are still expensive! • A differentiator must control its cost structure to ensure the price of its products does not exceed the price customers are willing to pay for them • When differentiation stems from the design or physical features of the product, differentiators are at great risk of being imitated ▫ Example?
1. What is the main difference between the law of demand and the price elasticity of demand? The law of demand tells you that quantity demanded will increase as price falls, or conversely, that quantity demanded will decrease as price rises. So, the law of demand says there is an inverse relationship between price and quantity demanded. By contrast, the price elasticity of demand tells you “how much” quantity demanded changes when price changes.
In each case consider whether there is a movement along the supply curve (and in which direction) or a shift in it (and whether left or right). (a) New oil fields start up in production. (b) The demand for electricity rises. (c) The price of gas falls. (d) Oil companies anticipate an upsurge in demand for oil in electricity generation.
To understand market equilibrium it is important to understand supply and demand and how this will determine the price charged for a product or service. The law of demand states that all other things being equal or held constant, as the price of a product or service increases the demand will decrease. Economists break down the factors affecting demand into five categories; price of product, income, price of complimentary and substitute goods, tastes, taxes, and expectations both of price and quality (Krugman & Wells, 2013). The law of supply states that all other things being equal, as the price of a product or service increases the supply of that product or service will also increase. The four factors that affect supply are price, input price, technology, and expectations of price and quality (Krugman & Wells, 2013).
| 7 | Demand | Willness to purchase + powers to purchase | 8 | Individual demand | Demand of a single person. | 9 | Market demand | Agregate of all individual demands. | 10 | Law of demand | When price of a commodity increases, its demand decreases and vice versa. | 11 | Supply | Quantity of a good offered for sale in the market on a particular time. | 12 | Law of supply | When price of a commodity increases, oits supply also increases, and vice versa.