Along these lines, unemployment may decrease, as this has different favorable circumstances, for example, lower government using on profits and less social issues. However, this phenomenon includes a number of different expenses. Firstly, if economic growth is unsustainable and is higher than the long run pattern rate, inflations are liable to be seen. An increase in economic growth could prompt an equalization of issued installments. In case the expanded customer expenditure causes further development, there will be an increase in the import sector.
Cooper and Kaplan (1991) discuss that having an ABC costing system could have a financial gain for companies. Managers decision are critical, especially if the strategy is to earn profit. The ABC-costing system could point managers to decision that would enable the company to make more profit. The price of products should be reconsidered. In some cases, for the company to be copmetitive, prices will have to be dropped for products that are produced in large batches and in other cases the price should be increased for more specialized products that demand more (Cooper & Kaplan, 1991).
When workers see that their wages have risen, they supply more labor, leading to a lower unemployment rate. Workers may not realize immediately that their purchasing power has fallen due to quickly rising prices, but over time, their expectations and understanding changes and they begin to supply less labor, thus resulting in the natural rate of unemployment and high inflation. Phelps illustrates this phenomenon in his expectations-augmented Phillips Curve. His contributions have better explained the relationship between unemployment
To gain market share a lower price is set and once it is established a higher price can be set. Cheaper prices can get them higher sales and that recover the cost as business benefit for bulk buying. Advantages and disadvantages of using this strategy (analysis): Organizations use this strategy to gain customers and increase their sales. Another advantage of this strategy is it can also reduce competition as weak competitors might withdraw. The disadvantages include if they plan to increase the price customers would switch to another company so it is harder to increase prices.
The economic logic behind protectionist immigration agendas is that an increased population increases the labor supply and stops there. In this scenario, the equilibrium wage rate of labor supply and labor demand would be lower than the pre-immigration equilibrium wage rate, and the logic holds. Instead, separating scenario from real-world application would present previously unaccounted for effects. Being so, what actually occurs is as follows. As before, as the population increases with immigration, the labor supply would also increase, but the increased population would also lead to increased consumer spending and demand (i.e.
SOURCES OF MARKET POWER 1. ECONOMIES OF SCALE: Reduction in cost of production by an increase in production volume is Economies of scale. It is also referred to as diminishing marginal cost. Reduction in cost will help the firm to: • Drop its prices thereby increasing its demand • Charge the same amount and earn a higher profit A combination of the above two can also be considered. Spreading fixed costs over a larger production base is one way to generate operational efficiencies.
With higher production costs and productivity at it maximum, companies cannot maintain profits by producing the same amounts of goods and services. As a consequence, the increased costs are passed on to customers, causing a rise in the overall price level (inflation). Demand-pull inflation occurs when there is an increase in collective demand, categorized by the four sections of the macro economy: governments, households, businesses and foreign buyers. When these four sectors at the same time want to purchase more output than suppliers can produce, buyers compete to acquire limited amounts of goods and services. Buyers then bid prices up, again and again, causing inflation.
The rational expectations theory is often used to explain expected rates of inflation. For example, if inflation rates within an economy were higher than expected in the past, people take that into account along with other indicators to assume that inflation may further increase in the future. The rational expectations theory also explains how producers and suppliers use past events to predict future business operations. If a company believes that the price for its product will be higher in the future, for example, it will stop or slow production until the price rises. Since the company weakens supply while demand stays the same, the price will increase.
Intermediaries sometimes increase the final price of the product because having a number of intermediaries means that each one have to gain a profit for himself which increases the final price of the product especially if the distance between the producer and the consumer is short and the functions of the intermediaries can be held by the producer with low cost. But sometimes having intermediaries reduces the final price of the product, that’s because of the specialty of the intermediaries to distribute and transport the products which lowers the price of these costs following the economic rule “economies of scale” which states that: as the quantity increases, the cost per unit decreases. Intermediaries also save the company costs of making communication contacts, storing, transporting, and marketing the products to bigger surface of consumers. for example, without the intermediaries the company must increase number of workers and lorries to deliver the goods to all the consumers. Also the division of tasks specializes each chain member and gives them expertise in their certain tasks which in turns decreases the overall cost of the product.
Retailers earn their profits by providing services to buyers of the population, when they consume goods. Retailers are dependent for their livelihoods on the buying power of the consumers in the community which includes all members of that community. The buying power of the consumers is a function of their connection to the economic base of the importing community. The factory workers in the community earn money for their company by producing goods which are sold to another community. The “value added” by the factory workers, minus profits retained by the factory owners, is transformed to cash and distributed through the payroll to the workers.