Do market participants need to know about the invisible hand for it to function? Explain your answer. Adam Smith was referring to how individuals try to better themselves and to live a better life while in turn helping the society and economy move to a middle ground where demand and supply are equal. In addition it gives consumers the freedom to buy what they desire and allows the sellers to sell the items they wish. It is not necessary that market participants know about the invisible hand but how the invisible hand operates in regards to consumer’s wants and needs and how those needs help stabilize and regulate the market through supply and demand.
Policymakers in the government can respond to the monopoly problem by trying to make industries more competitive, regulating the behavior of monopolies, turning some private monopolies into public enterprises, or do nothing. Price discriminate means the exactly same product could sell to different consumers for different prices, even though the costs of producing for the products are the same. Price discrimination is impossible when product is sold in competitive markets. For a firm to price discriminate, it must have market power. There are three lessons to be learned about price discrimination are price discrimination rational strategy for a profit-maximizing monopolist, price discrimination requires the ability to separate customers according to their willingness to pay, price discrimination can reduce the inefficiency inherent in monopoly.
1. What is the mechanism by which the "invisible hand" pushes markets to equilibrium? The mechanism by which the “invisible hand” pushes markets to equilibrium is PRICE. According to the author, “..prices are the instrument with witch the invisible hand directs economic activity (Mankiw, P10). Based on the price factor, buyers determines how much to demand.
Financial Decision Making Essay Explain the theoretical rationale for the NPV approach to investment appraisal and compare the strengths and weaknesses of the NPV approach to two other commonly used approaches. Introduction Net Present Value (NPV) is defined as the different between an investment's market value and its cost. NPV rules states that we will accept the project if it creates a positive NPV, and will reject the project if the NPV < 0. In other words, NPV is a measure of how much value being created today by undertaking investment. Managers need to make investment decisions and calculating NPV can help them to see the likelihood of investment being profitable.
As mentioned previously, Adam Smith, a highly regarded economist, demanded that in order for economic success, the”invisible hand of the market” must be in control, rather than the government. This notion involves the establishment of free enterprise and greater openness to international trade and investment (e.g the abolition of tariffs). Free enterprise results in the value of various goods and services being determined by supply and demand meaning that suppliers are unable to manipulate prices. It also encourages investment as people can see the potential to make a return – without the government capping prices. On the other hand, this idea of free trade is highly disadvantageous, and even harmful, to the Global South with the Global North dictating prices.
The above calculations have been performed using the CLTV method described in the case. Your team assignment is to analyze these data, and the information given in the case, to balance CLTV and current profitability. You should make strategic and tactical recommendations for how to manage these three customer segments. Specific questions to consider: (max 2 page write up to be printed and submitted, one per group) * What should RBC’s strategy be for managing each market segment? * What should RBC do about customers who are unprofitable?
Price *Improve competitiveness in pricing with a totally different strategy or approach than competitors. Need competitors’ selling prices, strategies by benchmarking. *Low prices as a long‐term approach to business to attract more customers. They can implement this strategy by lowering transportation and storage costs. Need supply chain, inventory, order processing, replenishment, and manufacturing process data.
The LM Curve will see a shift to the left and decrease the value of "Y" if the IR is higher than the ER of the market. The GDP is increasing in value and there will be an increase of savings.. If the IR was below the equilibrium, the opposite of the previously stated would occur. The LM Curve would see a shift to the right, therefore increasing the value of "Y". The GDP value would then decrease, due to the move from Point A to C, and increase employment which would decrease savings.
Buyer-Seller Relationships ——An Analysis Based On Analogy of Relationships When it comes to buyer-seller relationships, the concept of value is always the focus of the topic. What is Value? Value is benefits received for burdens endured, that is Value= ΣBenefits – ΣCosts (excluding price). However, the equation is just part of the story since value need to be clarified as a perception. So the whole equation should be concluded as Client Benefits – Client Cost(excludes price) = Value offered- Value Gap = Value Perceived – Customer Incentive to Purchase = Price.
Some of the key assumptions include slight government interference in the economy, consumers are able to make decisions because they are informed about the products they are looking to purchase and the price of the products and banks and laws exist for the sole purpose of easing commerce. The conclusions that can be drawn from the market capitalism model and how the business, government and society relationship are as follows; government regulation needs to be limited, corporate performance is measured in profits and the ethical duty of management is to make sure that the interests of the shareholders are met. In the market capitalism model, each individual has the power to own private property and freely risk these investments. The Dominance model can be described as the model where businesses and the government dominate (or control) the general populace. Within this model, the rich elite are the ones that control businesses at the expense of the average person.