ECONOMICS ASSIGNMENT

Economics assignment



Economics assignment

OBJECTIVES

As a person with knowledge of economic theories, the author has always brought up to his superiors the viability of strategy formation regarding the analysis of these topics and at times fails to understand the reasons or logic behind certain strategic implementations imposed on it.

By delving into this project paper, the author intends to have better insights into how economic theories are thought up, formulated and then imparted down into the subsidiaries of the business. The author hopes to have an in-depth understanding as to how the economic theories enable businesses to compete effectively and profitably in this era of internationalization where competition is extremely intense. (Vienneau 2005)

In order to reinforce the learning objectives, two key focal issues were focused upon i.e. innovation and diversity. Innovation was discussed with regard to economic theories where they were renowned for their developmental capabilities to constantly innovate. Diversity came under strategic thinking and formation as the author considered the diverse culture, political climate, economic surroundings, social environment, technological settings, government policies and legal systems in order to better understand the issues being discussed.

  

 

DISCUSSION

The effect of a hot summer on ice cream

1) Demand / Supply

It is a common knowledge that that when the ice cream is being sold in a free market at a price where consumers are so demanding than what the cheap ice cream manufacturers can supply, then add the fact that it is summer then this shortage enables the cheap ice cream manufacturers to increase the prices of their ice cream products. Therefore, the heightened demand on ice cream will cause the increase of the prices of the ice cream. Those consumers that have the capability or purchasing power will bid up the market price.

On the other hand, the prices of the ice cream decrease when the number supplied by the cheap ice cream manufacturers surpasses the number demanded by consumers, as well as when the weather changes from hot to colder seasons. This price/quantity balancing mechanism eventually helps the ice cream market to reach an equilibrium point, where changes are not given so much significance. A status of stability in the ice cream business is reached when the cheap ice cream manufacturers are ready to sell an accurate quantity of ice cream products as their consumers would like to purchase(Kirman 2002).

2) Cost of production

The general rule is that when this will rise, ice cream manufacturers will cut back on product leading to decrease in supply.  However, the evidence of the price-sensitive industries continuing their businesses is a primary exemption to the rule.  The existence of learning curve, oligopolistic market structures and risk diversification of large international firms has the ability to absorb price shocks to the cost of inputs, technology, organizational changes and government polices (taxes).  As observed, there is an eminent presence of rationality exemplified by these producers.  Since they have the financial, structural and strategic depth, they enter an industry which has dynamic and unpredictable cost of ...