ECON wk 3

Most firms and businesses in our economy operate under monopolistic competition, and product

differentiation in this market type is one of the main factors that lead to price differentiation. In

addition and because prices affect quantity demanded inversel

y (higher prices lead to lower

quantity demanded, and lower prices lead to higher quantity demanded), marginal revenue (the

additional revenue obtained from producing and selling an additional unit of output) will always

be lower than prices on the demand

curve because lower prices leads to lower revenue.

Please review the following simple yet useful video that explains the concepts of costs and

profits.

·

Revenue, Profits and Prices

Because ease of entry is high in both perfect competition and monopolistic competition markets,

and because making economic profits will always attract new producers (entrants), how do firms

survive and make profits in t

hose markets?

Provide an example of a firm or a small business from the real world that is surviving the

dynamic nature of monopolistic competition and discuss some approaches they have used (or are

currently using) to compete and survive in the market.

Q.

1

In

addition, provide an example or a scenario from your personal (or professional)

experience, an observation, a story that you have read, or an idea or a thought that you

might have for practical, creative, and/or effective ways to minimize production costs

in

order to maximize profits.

Aldi & Monopolistic Competition

Probably one of the most noticeable businesses that survived and thrived during good and bad

economic times that I have observed is Aldi. Aldi used to be known for its cheap and low

-

quality

fo

od, in addition to low customer service level. This differentiation helped Aldi thrive during the

economic decline (recessions) since people were looking for ways to save money and not

focusing too much on service and/or quality products.

However, Aldi ha

s evolved, still offering lower

-

priced products, but now you can find all

-

natural

products, a gluten

-

free section, organic items, and fresher produce. So, Aldi evolved to meet the

growing needs for healthier and diverse commodities while appealing to the n

ewer generation

that emphasizes

"less waste", meaning they prefer smaller, friendly, and more efficient stores

over huge but expensive ones.

One way Aldi minimized costs, was to not provide any free bagging articles

--

at Aldi, one needs

to bring their own

bags or pay a small fee for Aldi bags. I believe Aldi has a great business

model that is adaptable, flexible, diverse, and appealing.

Share your thoughts, story, and

observation with us.

Q.2

Provide your example of a firm or a small business from the real wo

rld that is

surviving the dynamic nature of monopolistic competition and discuss some approaches

they have used (or are currently using) to compete and survive in the market.

Please recall

the reading, a monopolistic competition market structure is not a m

onopoly market

structure. These are two different markets.

Most firms and businesses in our economy operate under monopolistic competition, and product

differentiation in this market type is one of the main factors that lead to price differentiation. In

addition and because prices affect quantity demanded inversely (higher prices lead to lower

quantity demanded, and lower prices lead to higher quantity demanded), marginal revenue (the

additional revenue obtained from producing and selling an additional unit of output) will always

be lower than prices on the demand curve because lower prices leads to lower revenue.

Please review the following simple yet useful video that explains the concepts of costs and

profits.

 Revenue, Profits and Prices

Because ease of entry is high in both perfect competition and monopolistic competition markets,

and because making economic profits will always attract new producers (entrants), how do firms

survive and make profits in those markets?

Provide an example of a firm or a small business from the real world that is surviving the

dynamic nature of monopolistic competition and discuss some approaches they have used (or are

currently using) to compete and survive in the market.

Q. 1 In addition, provide an example or a scenario from your personal (or professional)

experience, an observation, a story that you have read, or an idea or a thought that you

might have for practical, creative, and/or effective ways to minimize production costs in

order to maximize profits.

Aldi & Monopolistic Competition

Probably one of the most noticeable businesses that survived and thrived during good and bad

economic times that I have observed is Aldi. Aldi used to be known for its cheap and low-quality

food, in addition to low customer service level. This differentiation helped Aldi thrive during the

economic decline (recessions) since people were looking for ways to save money and not

focusing too much on service and/or quality products.

However, Aldi has evolved, still offering lower-priced products, but now you can find all-natural

products, a gluten-free section, organic items, and fresher produce. So, Aldi evolved to meet the

growing needs for healthier and diverse commodities while appealing to the newer generation

that emphasizes "less waste", meaning they prefer smaller, friendly, and more efficient stores

over huge but expensive ones.

One way Aldi minimized costs, was to not provide any free bagging articles--at Aldi, one needs

to bring their own bags or pay a small fee for Aldi bags. I believe Aldi has a great business

model that is adaptable, flexible, diverse, and appealing. Share your thoughts, story, and

observation with us.

Q.2 Provide your example of a firm or a small business from the real world that is

surviving the dynamic nature of monopolistic competition and discuss some approaches

they have used (or are currently using) to compete and survive in the market. Please recall

the reading, a monopolistic competition market structure is not a monopoly market

structure. These are two different markets.