Game theory has a definition of being a method of analyzing firm behavior that highlights mutual interdependence among firms. game theory has been used since as early as the early 1900's. It can be traced back to the western times when card counting became a benefit to poker players where it can help a player guess what cards may still be in the deck and what other players may have in their hand.
Game theory is also used in everyday life and can be as used as a group of friends deciding on where to go for dinner, or as complicated as a big player in the fast food industry taking out little, small "ma and pop" type restaurants.
Collusion is an attempt to suppress the competition and a cartel is a group of firms who agree explicitly to coordinate their activities to raise the market price or decrease the market output, creating more demand and profits. These actions are nor morally right but also have implications in a legal responsibility.
Sunday 18 September 2011
Exercise 6-2: Starbucks
Starbucks would be considered part of a perfect competition market because they are creating competition for small coffee chains all across North America. They would realign their business practices to create regulations to create a positive buzz around the company which will only help them in the long run. It is difficult to manage a large number of stores and have them all be profitable which may be why they closed a number of stores. But it may also be to help some of the smaller business become better competition to them and help them become a better and stronger business in the long run.
Both of these things that they are doing will hurt them short term. They are large enough of a company though that it really should not matter at all as they can make up for it without any worry at all. It will benefit them a lot in the long run and that is what they are most concerned about. They are most concerned about being a profitable and long prospering company and long term success will definitely help them achieve that.
They have been able to charge such high prices because people demand their coffee and are willing to still purchase it at the high prices that Starbucks charges. Their is still an extremely high demand for their coffee and I think that the high prices actually help. If they lowered their prices I think it would hurt them as their revenue would decrease as well as the demand for their coffee may also see a surprising decrease.
Both of these things that they are doing will hurt them short term. They are large enough of a company though that it really should not matter at all as they can make up for it without any worry at all. It will benefit them a lot in the long run and that is what they are most concerned about. They are most concerned about being a profitable and long prospering company and long term success will definitely help them achieve that.
They have been able to charge such high prices because people demand their coffee and are willing to still purchase it at the high prices that Starbucks charges. Their is still an extremely high demand for their coffee and I think that the high prices actually help. If they lowered their prices I think it would hurt them as their revenue would decrease as well as the demand for their coffee may also see a surprising decrease.
Exercise 5.5: Long Run Costs and Economies of Scale.
A buisness that I would like to create is a sporting goods store. I would sell all types of stuff from different sports including basketball, football, baseball, hockey, track and field, tennis, golf and other sports. It would be a very big store to include all of these things and sell all of these products.
Some short term costs would be paying for all of this apparel and products as well as doing immediate building renovations and designing stuff to start up the store. Long term costs would be hiring the employees. Building rent would be a fixed cost for the business.
My store would have a certain target market. We would target active people of all ages. It doesn't matter on gender, weight, or skill level we would supply sporting equipment for everyone who wants to get involved in sports any way that they want to.
Some short term costs would be paying for all of this apparel and products as well as doing immediate building renovations and designing stuff to start up the store. Long term costs would be hiring the employees. Building rent would be a fixed cost for the business.
My store would have a certain target market. We would target active people of all ages. It doesn't matter on gender, weight, or skill level we would supply sporting equipment for everyone who wants to get involved in sports any way that they want to.
Exercise 5-2: Law of Diminishing Returns
Points in the debate article by Lemieux that are very mertible are ones like "government intervention against smoking becomes less effective is that smokers who were the most easily persuaded have already quit" or that "too much information may also kill information". There are other points though that take away from the debate like the ones on propaganda and cigarette taxation.
Other solutions for the government to increase production would be to have cigarette and tobacco companies do more advertising as there are already enough taxes to help out the government and there are clearly laws that have warnings about what these products do. Tobacco is something that will always be in demand as it and the chemicals in it are very addictive so supply and demand does not have as great an affect as it would on other products so it is important that tobacco companies always have enough for supply.
Other solutions for the government to increase production would be to have cigarette and tobacco companies do more advertising as there are already enough taxes to help out the government and there are clearly laws that have warnings about what these products do. Tobacco is something that will always be in demand as it and the chemicals in it are very addictive so supply and demand does not have as great an affect as it would on other products so it is important that tobacco companies always have enough for supply.
Oil and Gas industry in Alberta
The oil and gas industry in Alberta is an interesting one to say the least. It is in the news a consistent amount and is constantly under the spotlight for all of the natural resources that are needed for the industry to prosper and the many, many rules and regulations that have been made over the years. I would still say that the industry is improving in ways that it is making strides to get better but there are still too many issues revolving the industry to say that it is improving overall.
We are running lower on resources in the industry though which goes back to supply and demand. As supply for gas and oil will increase, the demand for it will increase and help the industry. That is until it runs out and the industry will eventually die and the world will be in trouble oil and gas are two of the most important natural resources in the world. Oil and gas are inelastic as they will be needed and paid for no matter what the price due to their importance to so many people.
Oil and gas is an industry that is moving in the right direction and the wrong direction at the same time which is also what this article here states: http://www.albertaoilmagazine.com/2011/09/two-steps-forward-three-steps-back-in-shale-gas-debate/
We are running lower on resources in the industry though which goes back to supply and demand. As supply for gas and oil will increase, the demand for it will increase and help the industry. That is until it runs out and the industry will eventually die and the world will be in trouble oil and gas are two of the most important natural resources in the world. Oil and gas are inelastic as they will be needed and paid for no matter what the price due to their importance to so many people.
Oil and gas is an industry that is moving in the right direction and the wrong direction at the same time which is also what this article here states: http://www.albertaoilmagazine.com/2011/09/two-steps-forward-three-steps-back-in-shale-gas-debate/
Exercise 4-2: Elasticity and total revenue
My graph for the article I found did not work but here is the link for my article : http://unicorn.sait.ab.ca/uhtbin/cgisirsi/DQQAX3wxgD/SAIT/106310014/9
It is about the theory of elasticity and where the idea originally came from. It was quite an interesting read and I learned a solid amount from it. It states that elasticity has to make balance for the price to be at a perfect number to maximize revenue. If the elasticity of a product makes it too high it may cause consumers to stray away from it and decrease revenue. It also may make the price to low and as sales will increase money will not be gained at the same rate because the product is not worth as much with a lower price.
Elasticity is an interesting topic and is one that is much up for debate. It can either minimize or maximize the revenue of the product depending on how it affects the product and its prices.
Exercise 3-2: Graphing Changes to demand
Demand is altered by the supply of a certain product or service in an economy. According to the graphs on pages 50 and 51 of the textbook as supply is increased the demand decreases at a similar rate.
When it comes to baseball cards there are certain old and rare cards that are very difficult to get a hold of. They are very much in high demand and have extremely high values of hundreds of thousands of dollars due to the low supply of them. Certain Honus Wagner baseball cards go for over a hundred thousand dollars mainly because there are only 10 of them in existence. The company that produced them only made a small amount of them increasing the value and demand for these specific cards.
The effects of supply on demand is evident in supply vs demand line graphs. These graphs demonstrate what happens when supply is increased or decreased over a period of time and how it affects demand. Here is a picture of how these graphs work and the effects that supply has on demand: http://www.google.ca/imgres?q=supply+vs+demand&um=1&hl=en&client=firefox-a&sa=N&rls=org.mozilla:en-US:official&biw=1366&bih=525&tbm=isch&tbnid=V62jznZvqEIrTM:&imgrefurl=http://en.wikipedia.org/wiki/Supply_and_demand&docid=IFlvHL8us8hCoM&w=240&h=240&ei=2LJ2Tu-0JcPm0QHbxrHgDQ&zoom=1&iact=hc&vpx=201&vpy=160&dur=2074&hovh=192&hovw=192&tx=131&ty=124&page=1&tbnh=154&tbnw=154&start=0&ndsp=12&ved=1t:429,r:0,s:0
When it comes to baseball cards there are certain old and rare cards that are very difficult to get a hold of. They are very much in high demand and have extremely high values of hundreds of thousands of dollars due to the low supply of them. Certain Honus Wagner baseball cards go for over a hundred thousand dollars mainly because there are only 10 of them in existence. The company that produced them only made a small amount of them increasing the value and demand for these specific cards.
The effects of supply on demand is evident in supply vs demand line graphs. These graphs demonstrate what happens when supply is increased or decreased over a period of time and how it affects demand. Here is a picture of how these graphs work and the effects that supply has on demand: http://www.google.ca/imgres?q=supply+vs+demand&um=1&hl=en&client=firefox-a&sa=N&rls=org.mozilla:en-US:official&biw=1366&bih=525&tbm=isch&tbnid=V62jznZvqEIrTM:&imgrefurl=http://en.wikipedia.org/wiki/Supply_and_demand&docid=IFlvHL8us8hCoM&w=240&h=240&ei=2LJ2Tu-0JcPm0QHbxrHgDQ&zoom=1&iact=hc&vpx=201&vpy=160&dur=2074&hovh=192&hovw=192&tx=131&ty=124&page=1&tbnh=154&tbnw=154&start=0&ndsp=12&ved=1t:429,r:0,s:0
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