: Demand Estimation A. Market Characteristics & Demand estimation The price, quantity data provided in the data set is a reasonable approximation for the demand estimation of the product. However we are assuming that the other depending variables like advertising, substitutes are not affecting the demand schedule. Market structure is monopolistic in which many competing producers/retailers sell products/services which are differentiated from each other. In monopolistic competition, firms behave as monopolies in the short-run. Some of the characteristics of the retail industry in which Wal-Mart operates as follows. 1. Monopolistic market has many producers and consumers but no single market leader with influence over market price 2. Consumers choose the producers based on brand, advertising. 3. Producers still influence market price with relatively less entry and exit barriers. B. Linear vs Log-Linear Demand Curve Linear demand curve assume that changes in price, prices of complementary/supplementary goods, income, advertising and related factors will lead to a constant marginal effect. We assume linear demand curve within the given range of data. Since we assume that the effect of unit change in the independent variable will lead to a constant effect on demand in linear demand cure analysis. Hence changing elasticity is the basic assumption under a linear demand curve. In Log-linear demand curve we assume that there will be varying change in the demand due to unit change in the independent variable (price), but the elasticity of the demand is assumed to be constant. Constant elasticity is the basic assumption under a log-linear demand curve. Part 2: Regression Analysis Summary Table: Linear Demand Curve Regression Stat... ... middle of paper ... ...s and Statistics, 59 (3), 355-359. Christ, Carl F. (1985). Early Progress in Estimating Quantitative Economic Relationships in America. American Economic Review, 75 (6), 39-52. Eales, James S., & Unnevehr, Laurian J. (1988). Demand for Beef and Chicken Products: Separability and Structural Change. American Journal of Agricultural Economics, 71 (3), 521-532. Farnham, Paul G. ( 2005). Economics for Managers. Upper Saddle River. NJ: Pearson Education, Inc. Ferger, Wirth F. (1932). The Static and Dynamic in Statistical Demand Curves. Quarterly Journal of Economics, 47 (1), 36-62. Hirschey, Mark. (2006). Managerial Economics. Stamford CT: Thomson Higher Ed. McGuigan, James R., Moyer, R. Charles, & Harris, Frederick H.deB. (2005). Managerial Economics: Applications, Strategies, and Tactics with Economic Applications. Stamford CT: Thomson Higher Ed.
This report discusses the evaluation of Wal-Mart’s strategic planning process. The purpose of this evaluation is to compare and analyze the performance to help better measure our operation and financial conditions as well as enable us to accomplish our future objectives and to continue growth.
This organization belongs to the oligopoly market structure. The oligopoly market structure involves a few sellers of a standardized or differentiated product, a homogenous oligopoly or a differentiated oligopoly (McConnell, 2004, p. 467). In an oligopolistic market each firm is affected by the decisions of the other firms in the industry in determining their price and output (McConnell, 2005, P.413). Another factor of an oligopolistic market is the conditions of entry. In an oligopoly, there are significant barriers to entry into the market. These barriers exist because in these industries, three or four firms may have sufficient sales to achieve economies of scale, making the smaller firms would not be able to survive against the larger companies that control the industry (McConnell, 2005, p.
An oligopoly is a market structure in which a few firms dominate. When a market is shared between a few firms, it is said to be highly concentrated. Although only a few firms dominate, it is possible that many small firms may also operate in the market.
Oligopolies present kinked demand curves. These curves are downward-sloping, similar to traditional ones. However, they are distinguished by a convex bend at a discontinuity. This change in elasticity shows that price rises will not be match by competitors, yet prices reductions will (B&W). Therefore, firms will tend not to raise prices because a small increase will lose customers...
Demand can also be 'inelastic'. By inelastic demand we mean that that demand remain constant irrespective of change in price (refer graph below).
“If, however, changes occurred in the other determinants of demand, we would expect to have a shift in the entire demand curve” (McGuigan, Moyer, and Harris, 2014). Some of the changes that would cause the demand curve to shift right would be increase in the purchaser’s income, decrease in price of the competitor’s product, a wave of consumers looking to switch from high-calorie food to low-calorie food could also shift the demand curve. For the demand curve to shift left factors such as an increase in price of our competitor, a decrease in our customer’s income, or a third competitor entering our
Wal-Mart’s competitive environment is quite unique. Although Wal-Mart’s primary competition comes from general merchandise retailers, warehouse clubs and supermarket retailers also present competitive pressure. The discount retail industry is substantial in size and is constantly experiencing growth and change. The top competitors compete both nationally and internationally. There is extensive competition on pricing, location, store size, layout and environment, merchandise mix, technology and innovation, and overall image. The market is definitely characterized by economies of scale. Top retailers vertically integrate many functions, such as purchasing, manufacturing, advertising, and shipping. Large scale functions such as these give the top competitors a significant cost advantage over small-scale competition.
A monopoly is a market in which there is only one supplier for the product. In the real world a prefect monopoly is rarely established and monopolies often have one large firm and include a tiny amount of other small firms. A monopoly market is often characterized by profit maximizer, price maker, high barriers to entry and price discrimination. A monopoly can have power in the market because of economies of scale, technological superiority can no substitute goods among other factors.
Price elasticity of demand illiterates the change in quantity demanded as price changes. Elasticity is the responsiveness of how a simple change in one variable can escalate another change in particular the change in demand and supply. The formula for calculating the price elastic demand is Price Elasticity of Demand = % ∆ In Quantity Demand / % ∆ In Price. Relating to Price elasticity demand an example I can give is assuming that the prices of electricity went up by 50% and purchases of electric went down by 25% by using the formula above we can calculate that the price elasticity of electric is Price Elasticity = (-25%) / (50%) = - 0.50. Therefore for every percentage electric increases the quantity purchases decreases by half a percentage. Price elasticity is usually negative which is stated in the example as electric prices goes up the quaintly of electric demanded will drop. In addition it means that it cooperates with the law of demand as price increases quantity demand decreases. The understanding of price elasticity is very important to know how the relationship between the price and demand of the product and how it can determine the products demand. If the quantity demanded changes a lot while the price changes a little bit that products is elastic this can mainly be products which have alternatives and products which can change consumers mind if price changes by even 1p. For example if the price of paracetamol A increases the quantity demanded will fall when consumers swap to the cheaper paracetamol B. No change in price and no change in demand this product is inelastic. For example as the price of petroleum i...
The law of demand states that if everything remains constant (ceteris paribus) when the price is high the lower the quantity demanded. A demand curve displays quantity demanded as the independent variable (the x-axis) and the price as the dependent variable (the y-axis). http://www.netmba.com/econ/micro/demand/curve/
An oligopoly is defined as "a market structure in which only a few sellers offer similar or identical products" (Gans, King and Mankiw 1999, pp.-334). Since there are only a few sellers, the actions of any one firm in an oligopolistic market can have a large impact on the profits of all the other firms. Due to this, all the firms in an oligopolistic market are interdependent on one another. This relationship between the few sellers is what differentiates oligopolies from perfect competition and monopolies. Although firms in oligopolies have competitors, they do not face so much competition that they are price takers (as in perfect competition). Hence, they retain substantial control over the price they charge for their goods (characteristic of monopolies).
A Monopoly is a market structure characterised by one firm and many buyers, a lack of substitute products and barriers to entry (Pass et al. 2000). An oligopoly is a market structure characterised by few firms and many buyers, homogenous or differentiated products and also difficult market entry (Pass et al. 2000) an example of an oligopoly would be the fast food industry where there is a few firms such as McDonalds, Burger King and KFC that all compete for a greater market share.
Figure I I .4 illustrates the effects of an increase in demand. OD is the original demand curve so that the equilibrium price is P and quantity Q is demanded and supplied.
The market price of a good is determined by both the supply and demand for it. In the world today supply and demand is perhaps one of the most fundamental principles that exists for economics and the backbone of a market economy. Supply is represented by how much the market can offer. The quantity supplied refers to the amount of a certain good that producers are willing to supply for a certain demand price. What determines this interconnection is how much of a good or service is supplied to the market or otherwise known as the supply relationship or supply schedule which is graphically represented by the supply curve. In demand the schedule is depicted graphically as the demand curve which represents the amount of goods that buyers are willing and able to purchase at various prices, assuming all other non-price factors remain the same. The demand curve is almost always represented as downwards-sloping, meaning that as price decreases, consumers will buy more of the good. Just as the supply curves reflect marginal cost curves, demand curves can be described as marginal utility curves. The main determinants of individual demand are the price of the good, level of income, personal tastes, the population, government policies, the price of substitute goods, and the price of complementary goods.
The price of cars will caused movements along the demand curve. In addition, shifts of the demand curve for cars will be caused by the price of complement goods, the appearance of substitute products, citizens’ income and the government policies.