Economics Paper Essay Example | Topics and Well Written Essays - 1000 words

Economics Paper - Essay ExampleOn the other hand if the local currency is strong, the foreign rate of exchange will be high thus making lodges fruits to be expensive. At this situation, the company may opt for a domestic market for its products.In domestic market, the company has about power to decide on the price of its products. However this will depend on market structure of its product i.e. Whether it is a perfect competition, monopoly, or duopoly.In perfect competition market, the pricing strategy will be based on the forces of demand and supply of its product, which will be determined by the take of competition from other players in the market. Perfect competition market has a perfect elastic demand curve. Here the market determines the equilibrium price level. At this equilibrium price, the company will sell as much as it can. A slight increase in price will mean the company will sell nothing.In monopoly market structure, the company has the sole power to decide on the pri ce it will sell its product. That is why monopolist is know as notorious in charging higher price of their products. Monopoly can interfere with the demand of its product by lowering its output here the prices will go up and make more profit.In case of the company being a duopoly, it may collude with the other company that produces the same type of product and charge high prices provided that, there is trust between them. Therefore pricing strategy here will be dependent on trust and cooperation among the two market participants. Question two Most companies argon profit maximise and therefore their core objective is to maximize profit. However others aim at maximizing their sales. Profit oriented searcher will aim to produce the quantity and charge the price given by the point where peripheral revenue equals marginal cost. This is as illustrated in the diagram belowPrice searcher aiming at maximizing sales will produce as a point fit cost curve (TC) cuts total revenue curve m (T R) i.e. at the highest point possible. This is as illustrated below.Price searcher aim at maximizing sales, if his intentions are to promote the welfare of the producers i.e. to create the market to the producers products.In a nutshell, price searcher must therefore choose between maximizing profit and maximizing sales.Question threeElasticity refers to the responsiveness of quantity demanded or supplied cod to change in prices or income i.e. Change in quantity demanded or supplied due to a unit change in price or income. In this scenario I would expect demand for a specific brand of running clothe to be less elastic than the demand for running shoes in general. This is because specific brand limits the taste and preferences of a client. This in turn limits the ability of the customer choice from a wider variety. Therefore a change in price of that specific brand is likely to be highly elastic. Consumers do not receive substitute. Demand for a general brand of shoes will be more elastic since customers have