Economy Questions and answers
The following link will take you to an interactive graph of a competitive market.
http://college-cram.com/study/economics/supply-and-demand/equilibrium-curve-shifting-the-curve/
- Provide examples of a variable that affect the supply curve and a variable that affects the demand curve.
- Think of a product or service that use in your everyday life or workplace. Describe how the supply or demand of this product might be changed.
A variable that effects the supply curve is the cost of production of a product or service. An increase in the cost of production would mean a shift to left but a decrease would mean a shift to the right (Beggs, 2017). A variable that effects the demand curve is the size of the market. The larger the market size is, the more the demand curve shifts to the right because of the increased numbers of those wanting a specific product or service (Amadeo, 2017). If that number decreases, the demand curve shifts to the left, representing a decreased amount in the demand of that product or service.
A product used every day in the legal field is paper. The demand might decrease with the increased use of electronic methods of communication. Addtionally, a decrease in demand from a specific law firm for paper would be that the firm has downsized in the number of attorneys working for the firm. The remaining attorneys can only handle a certain number of cases per year, therefore reducing the amount of paper needed. A shift in the supply of paper might be due to a forest fire in an area that produces a lot of trees that are used for paper. Another shift in supply might be because of one country that produces a lot of paper or has a large market share has increased costs to supply to other countries, therefore making it harder for those countries to obtain the paper without raising resale costs in the long run.
References:
Amadeo, K. (2017, July 4). When Demand Changes No Matter the Price. Retrieved from https://www.thebalance.com/shift-in-demand-curve-when-price-doesn-t-matter-3305720
Beggs, J. (2017, August 13). All About the Supply Curve. Retrieved from https://www.thoughtco.com/introduction-to-the-supply-curve-1147940
- Provide examples of a variable that affect the supply curve and a variable that affects the demand curve.
The variable I chose that can affect the supply curve is Natural Disasters (Rittenberg & Tregarthen, 2012). When the most recent hurricane disasters hit the coast of Texas, we all saw an increase in gas prices because of the incident. A natural disaster such as a hurricane hitting one of the areas where oil refineries or distribution hubs are located can decrease the supply and increase overall costs. The variable I chose that can impact the demand curve is demographics (Rittenberg & Tregarthen, 2012). When consumer demographics change, the business model will adapt with the change. For example, if there is another “baby boom” in the United States, we could see an increase in baby product demand. Another example of demographics impacting demand could be the population of elderly, which would require increases in the number of medical services, hospice care facilities, and retiring homes.
- Think of a product or service that use in your everyday life or workplace. Describe how the supply or demand of this product might be changed.
A product that I use nearly every day is bottled water. The supply for this product can change if the company I purchase from (Dasani) came under health code violations and their operations were suspended until further testing. If this were to occur, there would be a higher demand for output from other water distribution companies which could drive the cost of bottled water up. If this were to occur, I would be more likely to use tap water rather than bottled water, which is an unnecessary expense. The demand for this product could be changed if a heat wave was to occur. This was common in Southern California, and I remember my mother would start storing water after Christmas because Summers were very hot. Demand could also increase because of contaminated tap water, which occurred in Michigan. Demand for purified water increased, and although it is illegal, some businesses were elevating prices on bottled water.
Movie theaters, airlines, and many other businesses like to charge customers different prices based on time of the day, age, and purchase dates. Why?
Provide an example of a price discrimination for a good or service that you thought it to unfair. Do you still believe that the discrimination is unjustifiable?
Almost every business today uses some form of price discrimination. The reason they do this is for the sole reason of generating more profit. While most instantly think of price discrimination as a bad thing, that is not always the case. There are actually three different classification of price discrimination that are separated into degrees 1, 2, and 3.
The first degree is the one that I thought of first. It is when seller or business charges for a product because they know that people will still buy it an increased price. Some examples are sports stadiums, theme parks, and many other places or events.
Second and third degree are actually beneficial to those it affects most of the time. Second degree price discrimination is when a product is offered at a discounted rate when the quantity purchased is increased, such as buy one get one fifty percent off items. Third degree discrimination is when prices vary for different customers, for example senior citizen discounts, or employee discounts.
Of course, when it comes to saving or spending more for a product, we all want to spend less, but there are sometimes I find price discrimination unethical. For example, charging 10 dollars for a beer at a football game is fine in my opinion, but charging 5-10 dollars for a bottle of water is not. When it is an item that is purely for enjoyment and not necessary to remain in good health I think it is acceptable. A similar example of price discrimination that I believe is wrong is when there is a natural disaster and business charge 3-5 times more for a case of water because they know people need it.
Ruby, D. (2003). Price Discrimination. Retrieved November 20, 2011 Retrieved from: http://www.digitaleconomist.org/pd_4010.html
Rittenberg, L. & Tregarthen, T. (2012). Principles of microeconomics. Irvington, NY: Flat World Knowledge, Inc.
Answer 2
Price discrimination is a price strategy used at various stores or events. The strategy charges customers different prices for the same product or service to different ages, purchase dates, and or time of day. Companies will conduct price discrimination strategies in order to maximize their profits. Airlines will typically sell tickets much cheaper months ahead of time, but more expensive days before or the day of the flight. This is because the demand for the flight is so high, they are sure that no matter the price, the passengers are willing to pay it to get to their destination. Movie theaters will use similar tactics, but on an hourly basis. Most movie theaters are at their peak sales around nighttime after everyone is off work or school and have time to go to the movies. Therefore, daytime prices may be cheaper because the audience is not as big, but at night, when the movie theater has the most viewers, they raise the prices because that’s the only time that the public has time to watch the movie. One of the discrimination tactics that I have seen that seem to be a bit unfair are bar fees. I have seen regulars at a bar being charged $10 to enter the bar although students get in free. It is understandable that the bar is trying to attract a different group of people, but the regular attendees are there everyday and have to be charged because they do not have a student ID. I do not think that price discrimination is unjustifiable as it is a technique that companies use to earn more profit. There are other options that the consumers can use to avoid the maximum cost if they research it.
For this week’s discussion, come up with an example of diminishing marginal utility you’ve encountered recently.
Diminishing marginal utility is the level of use (utility) consumers experience when consuming multiples of a good over time (Rittenberg & Tregarthen, 2017). I think food is the obvious choice for me, especially when I am eating multiples of the same items. One of my greatest weaknesses is Reese’s Peanut Butter Cups, because they are my favorite candy. The yearning I feel does decrease the more I consume, which is a fitting example of how the utility diminishes the more I consumer. The margins at which the utility decreases are determined by how hungry I am, as well as how badly I feel while eating them. Utility is extremely subjective because the utility I may feel for this candy is much different from someone else, so the rate at which it diminishes could be slower for me and higher for others.
I imagine that food is the perfect example for diminishing utility because the margins at which they decrease become more apparent when you feel full. I experience this frequently with coffee as well, because after my first cup of coffee, which is a necessity, the second cup is not as tempting. Although I do not drink coffee as much as I used to, once the caffeine took effect, I noticed the need for further stimulation decreased significantly. The same concept for food is apparent depending on the amount of time it is consumed over. If consumed quickly, the margins at which the utility diminishes may be less because it takes awhile for your body to adjust to being full.
Nicotine is an example of low diminishing marginal utility because the need to use nicotine is driven by how much nicotine you use. If you use more nicotine throughout the day than the average person, the rate at which the utility diminishes is less than infrequent users.
References
Rittenberg, L. & Tregarthen, T. (2012). Principles of Microeconomics. Irvington. Flat World Knowledge, Inc.
Answer 2
I will start by defining the law of Diminishing Marginal Utility: this law explains how the continuous use of goods and services eventually reaches a downward slope, meaning the benefit or objective purpose has achieved and continues use has will serve minimum to no advantage and has hit its utility curve.
Energy drinks are my consumption for this post, such as Red Bulls and Monster drinks. When I’m about to hit the gym I will drink one of the two energy drink to get me energized, which helps at the beginning of the work then I start to get sluggish and unmotivated so of course I drink another and the drive comes back for about 10 min then, of course, I would have another which gives me no perk what so ever. Consuming the first red bull increases utility, which gave the motivation at the start of my workout, and the second drink added a little more push, but third drink had no effect on my drive to continue with my activities. Understanding the laws of diminishing utility explains why after consuming several drinks it reaches a down point at some time.
Cologne has a higher Marginal utility than most products I have will purchased, due to the fact that it doesn’t matter how many times you utilize it the smell will not diminish until you wash it off, there are many other but I chose this one because I like to smell good and it made more sense to me.
