Running head: THE BASIC CONCEPTS FOR ECONOMIC REASONING The Basic Concepts for Economic Reasoning International Economics Will Bury`s Gose Global Part I Will Bury has invented a technology that gives the option of reading text materials digitally or listening to it with synthetic voice which sound realistic (Will burry`s goes global, UOP). In this paper I will explain economic concepts founded in Will Bur’s scenario, which will Bury`s have to take some important business decisions. The economic concepts in Bury’s Price Elasticity Scenario are: A. Supply and demand
Supply and demand is one of the and basic concepts of the global economics and is Considered a backbone of market economy. Demand is defined as the amount of product that consumers are able and willing to purchase during a specific period of time at each of a series of possible According to the law of demand, the higher the price of the good the less People will demand it, if all other factors remain equal. So there is inverse relationship Between the price and quantity demanded. The main factors which affect the demand and finally the Purchases are. These factors will be help to find out the amount of books he needs to sell. 1.
Number of consumers in market 2. Consumers income 3. Consumers preferences 4. Similar Goods prices 5. Consumer’s expectations about future prices. Supply is defined as the amount of product that producers are able and willing to make available for sale At each of the series of prices during a specific period of time (Mc Connell and Brue). According to the Law of Supply as price increases, the quantity of the supply increases; and as the price falls, the quantity Supplied fall. So there is a direct relationship between price and the quantity supplied. Basic factors Which affect the supply is 1. Number of sellers in the market . Price expectation 3. Resource price 4. Prices of other goods 5. taxes and subsides 6. Technology Will Bury must understand the theory of supply and demand. The good understanding of these two Concepts will allow Bury to understand the market equilibrium with quantity and price in relation to Demand and supply. B. Elasticity of demand and supply Elasticity is defined as the degree to which a demand or supply reacts to the price change . Elasticity has Different types Like price elasticity of demand measures how sensitive is the quantity demanded to a Change in the price of goods. Price elasticity of supply measures how ensitive is the quantity supplied to A change in the price of good when elasticity is less than 1 in absolute value, the relation is inelastic. Inelastic demand supply means that the quantity demanded is not very sensitive to the price. When the Elasticity is greater than 1 in absolute value, the relation is elastic (McConnell & Brue, 2004). Elastic demand Supply means that the Quantity demanded is sensitive to the price change. General formula for price Elasticity is ELASTICITY =%CAHNGE IN QUANTITY/%CAHNGE IN THE PRICE By using this concept Bury`s can calculate the consumers buying capability when the product prices Increases or decline. . Substitute Goods Substitute Goods are the goods that can be used to fulfill the same needs one in the place of another. It Means that demand for same kind of goods is bounded together by the fact the consumers could trade of One good for the other, if it becomes advantageous to do so. According to Will Burry Scenario the 500 Page book on CD is a substitute for burry’s audio files of book, that is why, Will burry’s must stay Current On marketing research and stay current on other potential competitors who may offer substitute Products, because an increase in the price of goods will result in an increase in demand for its substitute Goods. . Cross Elasticity of Demand The cross elasticity of demand measures how sensitive consumers purchases of one product are to a Change in the price of some other product . The formula for cross elasticity of demand is Exy = %Change in the quantity demanded of product/%change in the price of product Y The cross elasticity of demand for substitute products will always be positive, because the demand for one Good will increase if the price for the other good increases (McConnell & Brue, 2004). This concept will show Will Bury how the price of substitute goods offered by competitors will be Based on how much his product sales.
The Basic Concept for economic reasoning part II Burry’s Issues Identified Will Bury is an a enterprising inventor, who has stepped into the business with some prosperous Outcomes. Before taking any business decision, we must help him out in understanding major issues he is Going to face and how he can apply the international economic concepts to solve those issues. After going to scenario, the Burry’s first issue to identify is US economy and how it works’ . The world Economic systems are classified according to whether they are ‘’ market systems’’ or “command Systems”.
We operate within the market system called capitalism. This type of economy does not accept Any government intervention, like price fixing, quotas and industry substitutions. The consumer has need And wants and product is considered a “want” in market economy. Now a days, the basic problem in the market system is scarcity. The consumers and producers make Decisions in buying and selling on basis of scarce resources, such as labor, land and capital. One Important resource involved in labor is time. And Bury has limited resources to start up his company as a Sole proprietor.
But he still have seven year time period to be a prosperous before competition become a An Issue for him. So from all aspects Bury’s appears to be in the start up phase of his business. Therefore as a new business owner bury needs to consider these economies resources which are Limited Like, land, capital, Labor and entrepreneurs Bury’s must understand the resources scarcity and develop some basic economic queries in which to Operate. These include a. What will be my products? (Innovative listening book discs), b. who will be my Target consumer? (Readers). C. How will I produce it from consumer? This seems to problematic for Him in scenario). For this purpose he did research to find whether people want to read digitally, listen to books they enjoy for pleasure, or want to read physical book (Will burry`s goes global, UOP). Now Burry’s has decided to produce his newly invented product, and major difficulty he faces is how to Produce his product for his consumers. Few opportunities missed by the Bury’s will be discussed here, Like working of market economics and its major determinants supply and demand are important factors Which he needs to understand.
Demand and supply market are the basic factors in determining burry’s Pricing issues for his product. Quantity demanded of the products is determined by the consumers. And quantity demanded is the price amount of product to, which consumer’s are willing to pay for a given Product at a given price. The factors like price, consumer’s income, household personal preferences, Income and wealth, expectation of product, influence the quantity demanded by the consumer and the Consumers buying capability for the specific product.
Demand will fluctuate if any of these factors vary. For Burry’s the substitute product is talking books industry. Since the Burry`s company is seeking profit, He Need to determine comparative advantages over substitute products in order to yield his highest Possible Returns. According to his plans, he needs to utilize the low price or the cheapest production Techniques for his given start phase, which will help him to minimize waste for the this will help to Maximize personal freedom and will lead to economic growth, because of its profits which, bury desires.
Company. Consumers buying power and scarce resources like, land raw material and capital are helpful Determinants of production or supply demand. Finally Burry’s needs to understand about different branches of economic system to spread his business in Major international markets like, china, Japan and India… The main two branches, which I Refer, are the Micro economics and Macroeconomics. Microeconomics explains and describes specific Economic Business, that how does it operates and how does it manages its resources and profits, such as Burry’s Company.
And macroeconomics is the study of behavior outside the firm or organization. Economics and how they operate. As Bury has plan to Ship his labor and production issues oversees, which means doing business in Different economy, will Subject his company to potentially elevated operational costs he needs to access. As Bury’s want s to determine the price elasticity of his products which he plans to supply, he must follow to following theorem. According to which if Bury will increase s the amount he is supplying the market he will see an increase in the price of product.
The higher the amounts supplied the more elastic the price. But Bury must Understand that this true for long term suppliers. Some important factor s Which Bury’s need to know about price elasticity is: 1. Presence of naturally occurring raw material 2. Time required for whole production process 3. The production spare capacity, which means if there is more apres capacity in an industry, the easier it would be to increase output ,if the price goes up. 4.
The storage capacity of merchants means if they have more goods in stock they can respond to change in price quickly. According to price elasticity of demand d for any given product like Bury’s can be inelastic If the consumer will pay almost any price for his particular product, but it can be very elastic if The consumer will only pay a narrow amount of monies in monetary terms (McConnell & Brue, 2004, p. 356, 320). Conclusion: Once Bury becomes familiar with these concepts and how they relate to his particular Venture, his entrepreneur abilities can take him far.
Realizing and using these fundamental Concepts could make Burry’s dream of success come true, but failing to do so can also destroy His dreams. Referrences McConnell, C. L. , & Brue, S. L. (2004). MicroEconomic of product Market (2nd ed. ). : Mcgraw Hills Companies. University of pheonix material. (2009). Will Bury`s Goes Global. Retrieved from University of pheonix material, Economics Eco/gm561 website. opportunity costs. (2004). Net Mba Business Knowledge center2009. Retrieved from, 2009, from http://www. netmba. com/econ/micro/cost/opportunity/