ECONOMICS

Economics Questions

Economics Questions

Question # 1: Briefly discuss one of these issues and then see if you can relate the issue to ANY of our TCOs.

Answer to Question 1

Ignoring total cost of ownership (TCO) could be potentially fatal for the long run survival of companies. TCOs that most companies fail to account for in their records include: maintenance and repair costs, sustaining costs, and disposal and environmental costs. Apparently, there are no short run demand and supply implications of TCOs (Heymann & Bloom, 1990). In the long run, however, these costs are reflected in changing consumer behaviors related to demand (Colander 2003). For instance, with the advent and popularity of green consumerism, many consumers are considering being more environmentally friendly with their cars.

Accounting for TCOs, however, is a complicated task. This is possibly because the estimates for TCOs could not be objectively reported. Moreover, company managers are keen to hide these not-so-objective costs to reflect good earnings for their investors, creditors, and shareholders. Reporting friendlier, objective, and easily measurable costs help companies to keep their financial statements strong whilst risking its own long term future (Heymann & Bloom, 1990).

Question # 2: What changes Starbucks coffee faces after shifts in demand for premium coffee. How does the market react if the coffee crop is being eliminated?

Answer to Question 2

A product's market may move to a new equilibrium upon the change in demand or supply of a product. In our case, Starbucks demand has increased because of the shift in consumer taste and preference. As a result, Starbucks might raise its price to manage the substantial increase in demand. Over the period, Starbucks would consider increasing its production. Once Starbucks moves to new production capacity, it will increase its supply to the tune of demand level. This will create a ...