PROF washington watson

The market structure for Goodnight Electronics Company, where I work is oligopoly whereby the competition is limited, and the market is shared by a small number of sellers. There are barriers to entry. Demand elasticity is the change in quantity demanded per change in a demand determinant. The elasticity of demand in price refers to a measure used to show how the demand for a product is responding to the change in its price (Barber, 2002). Quantity! When the quality of the electronics is high or if a customer needs a high-quality item and the price is a bit higher than the customer may stretch a little bit and add more money to buy the product hence the elasticity of demand for the product goes up. If a large change in price occurs and the change in quantity demanded is small the demand is referred to as inelastic (Perloff, 2008). In electronics, the products have no substitutes hence the elasticity of demand is low since when the price increases there are no substitutes that customers may turn to. Is this a Monopoly then?

In oligopoly there are few sellers in the market hence each oligopolist is likely to know the actions of the other sellers. Therefore the decisions of one firm affect all the other firms hence before a firm taking a step one should evaluate the influence he or she may make to the other firms. It is very difficult for an oligopoly to determine what output it will maximize its profits. When the prices change all firms changes their prices to avoid being different since it may result in loss-making. What the other firms will follow after a price change depends on the effects of the price change. If a firm raises the prices of its commodities the other firms may be reluctant to raise the price of its products so as to acquire more market share and the income of the firm which raised the price of the products goes down since most people will prefer buying to those firms selling at a lower price. In a case where the firm lowers the price of its products the other firms will follow and lower their prices too to avoid losing customers to this one firm. In conclusion, it is difficult for a firm to change the prices of its commodity since a rise in price leads to a loss of market share and also a decrease in price invites the other firms to reduce their prices.

Marginal cost is the change in the total cost that arises when the quantity produced increases by one unit. In case the marginal cost of a product is higher than the price of the product it would not be advisable to produce a product since the profit is very low. This is the reason why firms hesitate to sell products if the marginal cost is greater than market price to avoid making losses. Marginal revenue refers to the additional amount of money that will be generated by increasing product sale. Firms have marginal costs that tend to be low when the level of production is low and higher marginal costs when the level of production is high. In oligopolies, the marginal revenue is always less than the set price of the commodities. The aim of any business is to make a profit. Hence the level of spending must be lower than the level of revenue. Thus when the level of marginal revenue is higher than the marginal cost of the produced product then the firm makes a profit on the product being produced. A good understanding of marginal revenue could be of importance to the decisions made regarding with the firm. The price of any commodity is however determined by the level of supply and demand which is determined by income, seasons and other conditions under which people operate at different given times. Prices can change for many reasons including consumer preferences.

Product differentiation is the process of distinguishing a product or a service from others with the aim of making it more attractive to attract more market. Market segmentation involves dividing a broad target market into groups of consumers who have common needs and then put in place strategies to target them. Businesses need to differentiate their products from those of competitors to attract more market. Firms need to produce unique products so as to get a competitive advantage. While determining on how to differentiate and to do market segmentation, some strategies should be put into place (Perloff, 2008). The basic needs should be considered including the price the level of quality of products should be considered. The things that your customers would like to buy and delighted to use should be considered to ensure customer satisfaction. In market differentiation, the size and shape of the product should be desirable to attract more market. The quality of the product should be high, and the design and looks of the product should be attracting for the sake of the market. In marketing product differentiation is important in outstanding the competitors. Product differentiation requires a product to be different in its physical attribute and other mean so as to distinguish it from other similar brands from other competitors offered in the market hence inviting more consumers (Perloff, 2008). Price differentiation serves as a non-price competition. Also, it may promote a product much more through improved taste and quality as compared to those of other competitors in the market. Producing better quality goods that are in accordance with the desires and expectations of customers is a good strategy that may be applied in product differentiation and segmentation.

Marketing departments use different strategies to increase their revenue and amount of profit. The need of pricing strategies is to attract more new customers in buying the product and maximizing profit. Decoy pricing strategy may also be used whereby the seller offers three products for sale. Two of the three products tend to be similar and he or she sets the price of the two products higher and the other product is set a lower price. People tend to compare between the two products which are attractive and they buy one of the two products with the higher prices. Large companies can afford to buy large amounts of goods and pay less for the utilities. Lower operating costs firms have the advantage of operating with lower prices and then what a new competitor in the market could afford. In an oligopoly, any competitor willing to join the market with higher prices is restricted unless he or she has different conditions (Perloff, 2008). The high amount of capital may keep new competitors from joining the industry. Capital includes getting money for buying new materials and paying the workers which may not be that easy hence becoming a barrier to entry in the industry. Other than pricing strategies businesses use other different policies to increase customers. These strategies are known as non-pricing strategies.

They include giving better quality services to customers and being friendly to them by offering after sales services. Additionally, having a good relationship with the retailers and suppliers in the distribution of goods is a good idea. Giving discounts to customers when the market is very encouraging. Giving cards of appreciation to customers and also free gifts and offers increases market share (Negbennebor, 2002). In oligopoly being competitive is the main thing. Competitive firms have a higher advantage since the growth rate is high than for the other firms. The net profit of a competitive firm is also very high compared to the other firms.

Variable costs are those costs that differ within a company such that as the level of production increases the variable costs rises and the costs lower as the production decreases (Negbennebor, 2002).These variable costs include wages and all the materials used in production. Variable costs depend highly on the output therefore they vary. With the increase in labor and the capital of the business the variable cost of the business. Fixed costs remain constant no matter the quantity of goods or services produced. Fixed costs include rent, insurance costs and advertising costs, buildings, machinery. Profit maximization requires minimizing both variable costs and fixed costs. Otherwise, if the production cost gets higher the profit realized will be very minimal. The fixed costs remain constant throughout the business period. Variable costs are more relevant in making production decisions compared to the fixed costs.

References

Barber, J. R. (2002). Elasticity. Dordrecht: Kluwer Academic.

Melvin & Boyes (2002), Microeconomics 5th ed. page 267. Houghton Mifflin

Negbennebor, A (2002): Microeconomics, The Freedom to Choose page 291.

Perloff, J. (2008) Microeconomics Theory & Applications with Calculus. Page 445. Pearson

Comparative and Absolute Advantage

Content	Met	Partially Met	Not Met	Comments:
The student based their assignment on a new, realistic good or service from an industry they are working in or in which they are interested in working.	x			Goodnight Electronics Company
The student identified the market structure of the industry (monopoly, oligopoly, competitive monopoly).	x			Oligopoly
The student determined the elasticity of demand for various quality ranges of the product based on textbook theory and judgments about the degree of luxury vs. necessity represented by various brands (e.g. a luxury car vs an economy car).		x		The definition is not correct?
The student determined how pricing relates to elasticity of demand for competing models.	x			Talked about the items being inelastic.
The student explained how changes in the quantity suppled as a result of pricing decisions might affect the selected product or service’s marginal cost, marginal revenue, and market share as production volume rises. The student also discussed the possible reactions of other producers if one producer changes its pricing strategy.		x		Talked about the kinked demand. Marginal cost is wrong the first item that you produce will cost a lot (fixed costs) as you produce more the marginal cost should be less and then go back up.
The student determined strategies that a company might use to develop product differentiation and market segmentation. The student also discussed the possible alternative non-pricing strategies that might be available and the possible alternative non-pricing strategies to increase barriers to entry.	x			Talked about making products more attractive.
The student discussed how producers might alter the mix of fixed and variable costs to support their pricing strategy.		x		How will you minimize fixed and variable costs. Can you trade one for the other?
The assignment is 1,400 words in length.	x
		Total Available	Total Earned
		7	6.25/7
Writing Guidelines	Met	Partially Met	Not Met	Comments:
The paper—including tables and graphs, headings, title page, and reference page—is consistent with APA formatting guidelines and meets course-level requirements.		x		The header is very long so the page number has dropped to the second line.
The paper includes properly cited intellectual property using APA style in-text citations and a reference page.			x	Barber, J. R. (2002) is an engineering textbook, send me a screen shoot of where he talks about elasticity that you have quoted/paraphrased and I will give you credit.
The paper includes paragraph and sentence transitions that are logical and maintain flow throughout the paper.	x
The paper includes sentences that are complete, clear, and concise.	x
The paper follows proper rules of grammar and usage including spelling and punctuation.	x
		Total Available	Total Earned
		3	2.25/3
Assignment Total	#	10	8.5/10
Additional comments: 1459 words; 8% turnitin