BUSINESS ENVIRONMENT ASSIGNMENT

Business Environment Assignment



Business Environment Assignment

A firm is the smallest unit of production, the objective of its performance is to maximize the economic profits which can be achieved by minimizing cost of production or maximizing the total revenue. The prospects of profit for a firm are further guided by market conditions. In a market where a firm has to sell its output there may be competitive, monopolistic or oligopolistic conditions. Each market type has a different impact on the price and quantity sold by the firm. My paper focuses on the perfectly competitive type only; the reason lies in that it is the easiest of the market structure models to start out with.

This paper first looks at some high points that running through this model, and then uses the covered principles and ideas to explain the impact of satellite tracking system on the economic performance of a typical firm of American trucking industry. The supply-demand model is a partial equilibrium model representing the determination of the price of a particular good and the quantity of that good which is traded. Although it is normal to regard the quantity demanded and the quantity supplied as functions of the price of the good, the standard graphical representation, usually attributed to Alfred Marshall, has price on the vertical axis and quantity on the horizontal axis, the opposite of the standard convention for the representation of a mathematical function.

Determinants of supply and demand other than the price of the good in question, such as consumers' income, input prices and so on, are not explicitly represented in the supply-demand diagram. Changes in the values of these variables are represented by shifts in the supply and demand curves. By contrast, responses to changes in the price of the good are represented as movements along unchanged supply and demand curves. When consumers increase the quantity demanded at a given price, it is referred to as an increase in demand. Increased demand can be represented on the graph as the curve being shifted to the right.

At each price point, a greater quantity is demanded, as from the initial curve D1 to the new curve D2. In the diagram, this raises the equilibrium price from P1 to the higher P2. This raises the equilibrium quantity from Q1 to the higher Q2. A movement along the curve is described as a "change in the quantity demanded" to distinguish it from a "change in demand," that is, a shift of the curve. In the example above, there has been an increase in demand which has caused an increase in (equilibrium) quantity. The increase in demand could also come from changing tastes and fashions, incomes, price changes in complementary and substitute goods, market expectations, and number of buyers. This would cause the entire demand curve to shift changing the equilibrium price and quantity.

Perfect competitive market model contains the following four main assumptions.

1) A large number of buyers and sellers, each acting independently, they are too small to influence ...