Friday, 15 April 2011

Comparing Market Structures

Type of Market
Perfect Competition
Monopolistic Competition
Oligopoly
Monopoly
Number of firms
Very many
Many/ several
Few
One
Freedom of entry
Unrestricted
Unrestricted
Restricted
Restricted or completely blocked
Nature of product
Undifferentiated
Differentiated
Undifferentiated or differentiated
Unique
Implications for demand curve
Horizontal: firm is a price taker
Downward sloping, but relatively elastic
Downward sloping. Relatively inelastic(shape depends on reactions of rivals)
Downward sloping; more inelastic than oligopoly. Firm has considerable control over price.
Average size of firms
Varies
Small
Small
Large
Possible consumer demand
Minimal
Mediocre
Large
Large
Profit making possibility
Minimal
Mediocre
Large
Large
Government intervention
High
Minimal
None
High
Example
Oranges, celery
Clothing stores
Heating and electrical appliances
Local water company








Thursday, 14 April 2011

Game Theory

Game Theory is the idea that everyone lives their life like a game and every individual only makes decisions for their own personal gain.  It is best explained by a poker game.  Everyone is distrustful of those around them and they try and guess their opponents move before they take any action. 

The game theory actually started when the Soviet leaders tried to plan and control everything. The old politicians knew that interpreting and expressing the general will of the people was impossible so they followed their self intrest.  Game theory was also a way to mathematically analyze poker games.

I believe that the game theory still exists in a large amount of the population today.  People like Martha Stewart and Conrad Black didn't steal money for the good of the people, they did it for their own personal advantage.  People like this play their life like a game.

http://www.youtube.com/watch?v=54Dk3x4osik

Wednesday, 13 April 2011

Monopolistic Competition

Monopolistic Competitive Companies

Size:
Small Companies
Medium Companies
Large Companies

Features:


Coffee Shops

Nokia

Coca Cola
Differentiated products

Different beverages and snacks
Different cameras
Different flavours of pop
Control over price

Little control because of their competition with other coffee shops
A fair control over the price because of the demand and competition
Large control because there is a high demand for their products
Mass advertising

Newspapers and radio
Commercials, magazines, and billboards
Commercials, magazines, and billboards
Brand name goods

No
Yes
Yes



Monopolistic Competition is a market structure that has a large number of companies that sell similar products within a narrow price range.

There is very little differentiation within this market structure, although there is a bit of differentiation between companies so that they aren't an exact replica of one another.

Tuesday, 12 April 2011

Competing as Starbucks

I think that Starbucks would be part of a perfect competition market because they have good coffee, loyal customers, and they are everywhere in the world.  Starbucks realigned their business practices because aside from being fast and efficient they want to still provide the intimacy and romance between the customers and the baristas.  A large amount of their stores closed because they weren't making a large enough profit and the unnecessary amount of Starbuck locations minimized the intimacy for the customers and baristas.

By shutting down several stores, Starbucks reduced their costs as well as their profits.  I do think that Starbucks coffee is overpriced; however, they can get away with it.  There is a large demand for their product, Starbucks provides good quality coffee, they are fast and efficient, and they have stores almost everywhere.  If Starbucks were to decrease their prices they would sell more coffee.

This graph represents how the price of coffee effects the amount that is being sold.



Other links used:


Monday, 11 April 2011

Long Run Costs and Economies of Sale

If I were to form a company I would create a chain of dance studios.  My company would offer dance lessons of every style for every age.  I would only have certified dance instructors teaching the classes and I would have an office person at every dance studio.  My first studio would be in Kelowna, BC and as my company expanded I would open up studios in Kamploops, Penticton, Nelson, Cranbrook, and possible Vancouver.  If my company was well off I would expand into Alberta.

My company would target people of all ages.  Not only would my dance studios offer dance lessons but they would also offer fitness classes.  The company would target people looking for a fun way to exercise, as well as dancers that wanted to perform and learn.

Some of the long run costs would include: power bills, heating, teachers wages, and office persons wages.  Repairs of the facilities, costume rentals, and stage rentals are all short term costs.  The fixed costs are rent or mortgage on the facilities.

The Studio Dance Co. is similar to the type of company that I would start.  It offers dance classes in various disciplines as well as fitness classes.  The only difference is that I would open up a chain of dance studios in different towns.  The Studio Dance Co. has trained proffessional teachers, a comfortable waiting area, safe facility, and it also offers summer workshops.  There wasn't much information on the financial aspect online, but by observing their website it seems that The Studio Dance Co. is financially stable.

http://www.studiodancers.com/

Friday, 8 April 2011

Law of Diminishing Returns

In the article "The Diminishing Returns to Tobacco Legislation" the author, Pierre Lemieux, makes some good points about how the frightful pictures on tobacco cases can scare off potential and current smokers.  His arguements weren't very clear throughout the article, lessening the debate.

I think that if the government kept the photos and warnings to cover only 25% of the case they would reach their "sweet spot".  The government would increase their profits if they kept the pictures to a minimum.  If they did that they would still make a profit, inform smokers of the risks, but they wouldn't scare the consumers away.

I think that the article would decrease the demand.  I only think that because it focuses on the negative effect of the warnings and pictures.

Website of article: http://www.pierrelemieux.org/artdiminish.html

Example of the warnings and pictures:

Thursday, 7 April 2011

Elasticity and Revenue


My graph on the quantity, price, and total revenue of Joe Fresh Style yoga pants shows us that at the top of the demand curve, the demand for yoga pants is extremely elastic and on the bottom half the total revenue rises.  As the price drops, both the elasticity and total revenue fall.  The largest amount of total revenue($150) is reached when the quantity is 5 yoga pants and the price is $30 per pant.