Economics
Name:
Institution:
Economics
Assignment 1
In order for a perfectly competitive market to operate, certain conditions are necessary. First, price takers, who comprise both buyers and sellers, are compulsory. The number of organizations is significant. Thirdly, there are null entry barriers. Fourth, the organizations’ commodities are identical. Fifth, there is full information and lastly, firms comprise profit maximizers. For a monopolistic market, the entry barriers are present and as such, there are null close substitutes for the commodity of the monopolist. However, oligopolistic markets are different since they comprise few competitive firms. Price leaders determine the product prices. Due to the nature of competition, oligopolistic firms can engage in collusion for profit maximization. Furthermore, firms within this market may provide distinguished or homogenous products (Colander, 2010). Physical characteristics such as the entry barriers and the number of organizations illustrate the differences in market structures. Regarding these frameworks, the organization, Apple Inc, operates in an oligopolistic market.
Reference
Colander,
D. C. (2010). Economics. New York, NY:
McGraw-Hill.
Assignment 2
The maximization of economic profits is only possible through the observation of two conditions. Firstly, in the short run, the organization needs to ensure that it selects the degree of output, which will determine the largest gap between the total cost and the total revenue. In addition to this, profit maximization is also possible where the marginal cost is correspondent to the marginal revenue (MC=MR) (Colander, 2010). Indeed, by producing an output level that ensures equality between the MR and MC, it is possible to guarantee maximization of economic profits. Speaking of economic profits, there is a disparity between these gains and accounting profits. Accordingly, economic profits comprise the gap between total cost and total revenue, in which the sum cost constitutes all implicit and explicit expenses in relation to the firm’s used resources. In contrast, accounting profits are total revenues, which are less explicit costs.
Reference
Colander,
D. C. (2010). Economics. New York, NY:
McGraw-Hill.
Assignment 3
Much of the discussion based on Week 3’s readings focuses on a variety of traits and market structures. Indeed, the instructions on different market structures proved to be rather informative, even though most of the information was hard. The main topics that were content to us involved the different forms of market structures evident in an economic system. Understanding these three types of market frameworks was interesting. In addition to this, correlating the structures to the real world provided us with a basic and simpler comprehension of the evidence of perfectly competitive, monopolistic and oligopolistic markets. However, topics such as profit maximization proved to be difficult. One of the reasons for this is because of the concept of short run and long run conditions (Colander, 2010). From the class reading, it is evident that these conditions determine whether a firm is capable of maximizing its economic profits in a short period.
Reference
Colander,
D. C. (2010). Economics. New York, NY:
McGraw-Hill.
Assignment 4
Similar to other corporations, Apple Inc also faces effects from demand and supply. In relation to competition, such forces also influence strong firms such as Samsung to focus on providing new products in order to create a competitive edge within the smartphone market. In addition to this, the introduction of operating systems within smartphones also provides a new form of platform for exhibiting rivalries within the smartphone market. Indeed, Apple’s iPhone 6 possesses the iOS framework, which has consistently elicited strong competition in the recently rivaled market. Nevertheless, firms have utilized the structure of operating systems as a basis for competing against the tech giant. A formidable illustration of this is the Android operating system. Due to the production and widespread availability of this OS, firms involved in the development of smartphones have focused on incorporating such systems. Still on this, Samsung, after the release of its Android-based S5 has proved to be a reliable competitor against Apple’s iPhone 6.
Apart from the threat of new entrants, Apple also faces limitations from the customers’ bargaining power. Corresponding with other earlier versions, the iPhone 6 is also an ostentatious device. This means that it is more expensive than other products. This can force clients to access other cheaper and strong products, which will lead to a decrease in the product’s demand. Actually, organizations produce and offer commodities and services respectively based on clientele demand, which poses an implication on the supply. One of these factors, which influence a product’s demand, is the customer preference. This facet coupled with the product’s desire affects demand curve. In relation to Apple, as many customers desire an upcoming product such as the iPhone 6, the product’s demand curve moves to the right. In addition to this, influence from close relatives and friends possessing a similar product can also trigger further purchase of the new product. However, as the demand increases, the supply remains consistent leading to a shortage of the products as well as an increase in the equilibrium price (Colander, 2010). Nonetheless, due to high equilibrium prices, consumers will cease purchasing the product forcing the demand to decrease.
Reference
Colander,
D. C. (2010). Economics. New York, NY:
McGraw-Hill.
Assignment 5
The organization can utilize certain strategies in order to accentuate profit maximization. For instance, it can focus on product differentiation in order to ensure that it sets higher prices for its products within the market (Colander, 2010). Indeed, by providing high-quality products, the firm is capable of charging high prices on its provisions. The organization can also exploit on the homogeneity of customers scouting for basic smartphones with ordinary functions at rival prices. Through this, Apple can become capable of possessing different customer bases by implementing low-price tactics. Hence, if the price is considerably low, then it may influence a stronger level of demand within its market. Both of these strategies will impose a considerable effect on the marginal revenue and cost. Indeed, in order to provide such products, Apple will need to reconstruct its production and incur more expenses as it attempts to differentiate its products. Adding on, Apple will also gain marginal costs for supplementing other cheaper products. Based on this, such actions will incur an additional gain causing an increase in the marginal revenue.
Reference
Colander, D. C. (2010). Economics. New York, NY: McGraw-Hill.