Expert answer:Economic 4 short answers ,need very accurate answe
Answer & Explanation:eco_t1_15.doc There is a collection of 4 short-answer questions. It is due no later than Sunday, October 7 th at midnight.You need very good at Economic, and give me the most accurate answer.
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ECO 6655
Name _____________________
Question 1: In your opinion, what are some identifiable links between
economics and managerial strategies? (You may highlight points learned
in this course, mention points from previous experiences that this course
clarified or any other avenue you so choose).
Question 2:
Considering the particular firm/industry you work for now or
you may use one from the past if it lends itself to this question
better. Answer ALL the following questions. You may either
answer these in an enumerated form or written paragraph form.
If you would like to “interview” a friend or family member about
his/her job that will work as well. Make sure to document and
comment on what the job is as well.
a. What were the key forces shaping the nature of competition
and the opportunities for profit in that industry?
b. What, if anything, did firms do to insulate themselves from
these forces?
c. Was the product homogenous or heterogeneous?
d. Note some of the substitute products for the product being
produced.
e. Was geography a factor in the determination of this market?
f. Were there many competitors or was this industry
dominated by a small number of large firms?
g. Was the demand for the product elastic or inelastic?
h. What type of control did your firm exert over prices?
i. Was this industry government regulated? Or did regulatory
policies affect your pricing and output decisions?
Question 3: Excerpts from “The Economics of the Rose Market,” by
Don Matthews: Some of you may have experienced the same thing
this past Valentine’s Day.
A day of love, romance, and of course, the market process. Why are rose
prices so high on Valentine’s Day? Ask the lovers-the consumers-they
say the florists. Ask the florists, and they will say it’s the wholesalers.
Ask the wholesalers, and they will say it’s the growers. Ask the growers,
and they say it’s the costs.
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Valentine’s Day is the most popular rose day of all, more than 60% of the
roses Americans buy during the year are bought for three days:
Valentine’s Day, Mother’s Day and Christmas.
Valentine’s Day is by far the most popular, accounting for 1/3 of all a
rose grower’s annual sales. This is almost 130 million roses for one day.
Roses can’t be cranked out like hamburgers or oil changes. Roses require
time, care, warmth and sunlight. According to Roses Incorporated,
commercial rose growers in the U.S. operate nearly 900 acres of
greenhouse areas at a capital investment of about $1 million per acre.
A. What or Who is the real reason behind the price hike of roses on
this holiday?
B. The gigantic demand for roses creates a gigantic demand for what
types of resources?
C. Given these resources are not free, they cost the grower, how are
producers able to recoup these costs?
D. How would you categorize the market for roses, (perfect
competition, monopolistic competition, oligopoly or a monopoly?)
Justify your answer.
Question 4:
See the article attached and the questions below.
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Name _________________________________
The Joy of Economics: Making Sense out of Life
Robert J. Stonebraker, Winthrop University
Automobiles: Different People, Different Prices
You can’t find a better deal!
…..local automobile dealership ad
My friend Laurie is a shopper supreme. She refuses to pay full
price. In the local mall she ignores any rack or counter not bedecked
with a sign crying: Final Clearance: 75% Off. She combs through thrift
shops, yard sales and factory closeouts. She bargains with clerks and
managers. And it works. She finds unimaginable bargains: a $250
dress marked down to $8 because of a ripped seam she can mend in five
minutes, a $75 pair of shoes for $3.50. She loves the chase; she loves
the challenge. The mere mention of a shopping trip can make her
nostrils flare like a thoroughbred being led into the starting gate.
She loves to shop. She lives to shop. But not for
cars. Dragging her into a car dealership is like dragging her in for a root
canal. She demands Novocain for both.
It was not always so. Some years ago, with her Volkswagen
Rabbit mired in terminal decay, she plunged eagerly into the hunt for a
replacement. She did all the right things. She studied consumer
guides. She prowled area dealerships and talked to current owners. She
quizzed mechanics about reliability. She took test drives in a variety of
models. And, after an exhaustive search, she made her choice. A Nissan
Altima. A red Nissan Altima. Only one step left: close the deal.
Disaster. The sales staff would not budge on price. She
cajoled. She threatened. She begged. She tried other dealers. No
soap. Defeated and deflated, she quit.
A few days later, after a mournful recitation of her trials, a friend
— a young, male friend — offered his assistance. He offered to negotiate a
better deal. A better deal? Impossible. Laurie’s retail record was
unblemished. Surely this young man could do no better. But he could.
And he did. Within a week he had negotiated a deal that saved Laurie
over $1,000.
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Name _________________________________
How did he do it? How could he extract concessions that eluded
such a shopping maestro as Laurie? Simple. He was offered a better
deal because he was a male. Women and minorities face discrimination
in the labor market. Often they fare no better as consumers.
Economists Ian Ayres and Peter Siegelman trained nineteen
pairs of test buyers for automobiles who were closely matched in terms of
age, education, and attractiveness. The test buyers dressed in similar
yuppie-style attire and drove similar cars into the dealerships. They
worked from identical bargaining scripts and gave comparable answers
to questions about their professions and address. The members of a pair
differed only with respect to sex and/or race.
Pair members bargained independently for the same model car
in the same dealership, usually within three days of each other. The test
buyers negotiated prices for over 300 cars at more than 150 dealerships
in the Chicago area.
The results were striking. Both initial and final offers supplied
to females and/or African-Americans were significantly higher than those
given to their white male counterparts. African-American males fared
the worst. They were socked with prices some $1,000 greater than those
quoted their white counterparts. The actual differentials are listed in
Table I.
Table I
Average Price Differentials
(Prices in excess of those offered to white males)
Buying
Group
Offer
Initial
Final Offer
White
females
$109
$
92
African-American
females
318
246
935
1,101
African-American
males
whites
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All females and non407
481
Name _________________________________
Why? Are the owners bigoted? Do dealership owners push their
salespeople to discriminate? Or is the salespeople themselves? Car
salesmen have never ranked among the most respected American
professionals. They are the butt of almost as many scurrilous jokes as
are economists. Is racial and/or gender discrimination another layer of
ooze on their already slimy image?
Perhaps. But if owner and/or salesman bigotry were the cause,
women and non-whites should be treated most poorly in dealerships
owned and operated by white males. They are not. African-American
buyers were charged the same price differentials by African-American
dealers as they were by white dealers. Female customers were treated
just as poorly by female salespeople as they were by male
salespeople. Neither the race nor the gender of dealers and/or
salespeople seemed to matter.
Ayres and Siegelman conclude that statistical discrimination is
the real culprit. Blatant bigotry is not the cause. Rather, dealers and
salespeople use race and gender to make statistical inferences about the
consumer’s sensitivity to price — what economists term price elasticity.2
Price discrimination
Firms often employ price discrimination. They try to segment
their markets and charge different prices to customers with different
demand elasticities. The theory is simple. Identify those customers with
highly-elastic demands (they’re the ones who are very sensitive to price
and will be driven into the arms of your competitors by high prices), and
cut prices. Next, identify customers with less-elastic demands (they’re
the ones who are insensitive to price and are likely to buy anyway), and
drive the price to them up. In other words, charge $40 for a new tire in
your shop, but charge $60 for the same tire to the motorist stranded on
the highway.
Such discrimination is fairly common. Discounts for children
and/or senior citizens and special introductory rates for new magazine
subscribers are more benign examples. But segmenting the market is
not easy. Safeway cannot easily identify which customers will acquiesce
to a higher price for broccoli; nor can K-Mart easily detect which
customers have an inelastic demand for batteries.
Car dealers practice haggle-every-time discrimination. They try
to guess the maximum price each individual customer is willing to pay,
and charge accordingly. They ask strategic questions about occupation,
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Name _________________________________
address, family, and what other dealerships shoppers have visited. All
are designed to help predict what a consumer might be willing to pay.
Consumers play the same game. They hide information and
deliberately mislead dealers. You may recall an old Cosby Show television
episode in which Dr. Huxtable, trying to hide his true income, dons his
rattiest clothes before entering the auto showroom. But it’s tough to hide
your race or gender, and car salespeople regularly use racial and gender
stereotypes to infer demand elasticities.
While dealers and/or salespeople may know little or nothing
about a particular customer, they know quite a bit about statistical
differences among races and genders. They know that women and
African-Americans typically enter the showroom with less information
and less proclivity to bargain. Although white males often salivate at the
chance to lock horns with car dealers in a bargaining struggle, females
and African-Americans may be unaware that bargaining is even
possible. Ayres and Siegelman cite a Consumer Federation of America
survey that discovered that many female respondents, and more than
one-half of African-American respondents, believed that sticker prices
were non-negotiable.3
Armed with such knowledge, salespeople will rationally adopt a
more stubborn stance while bargaining with female and AfricanAmerican customers. Their stern posture may not be the result of
bigotry, but the results are the same. Women and non-whites pay more.
________________________________________
Notes:
1.
Ayres, Ian and Siegelman, Peter, “Race and Gender
Discrimination in Bargaining for a New Car,” American Economic
Review, volume 85, number 3, June 1995, p. 304 (18).
2.
Price elasticity measures how sensitive consumer demands are
to changes in price. Specifically, it measures the percentage
change in quantity demanded for a given percentage change in
price. When consumers are very “price-sensitive,” demand is
highly elastic: a small percentage change in price will unleash a
large percentage change in the quantity demanded. If price is only
a minor concern to consumers, a price change will cause only a
small percentage change in sales and demand is less elastic.
3.
Ayres and Siegelman, op.cit.
________________________________________
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Name _________________________________
Questions:
1. Give examples of other forms of price discrimination not
noted in the article and comment on the effectiveness of this
strategy.
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Name _________________________________
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