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For instance, if a given commodity is inelastic, then changes in the price will not affect the overall number of units sold. However, if a given commodity…
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Download file to see previous pages... This “unnatural” inelastic demand is created as a means of encouraging and influencing the consumer to integrate with the given good or service. This approach is used rather often as a means of encouraging a higher than average integration with a given good or service; hence the way that certain types of goods or services are so heavily marketed and ultimately create an unnatural level of demand as compared to what might otherwise exist should an aggressive level of marketing not be utilized (Van Heerde et al., 2013).
Marginal cost refers to the change in overall cost that occurs when the quantity produced increases by an increment of a certain unit. This is useful in terms of understanding at what point a given manufacturer or producer should cease production and/or at what point it will be economically beneficial to upgrade the production capacity to deal with increasing demand or expected increased demand in the future (Rogerson, 2011). As such, marginal cost is not only associated with raw material inputs and/or labor, it can include the cost of building or purchasing new production space and machinery; up to and including a new factory or factories. The decreasing marginal returns can be noted in the graph below as the areas in both blue and red that appear as high values on the x and y axis.
An oligopoly can be defined as a type of market form that is dominated by only handful of sellers. These oligopolies then have a high likelihood of colluding as a means of setting prices and reducing the entrants to the market that might threaten to drive down price. Oligopolies exist throughout the world and can be noted in the banking sector, automobile production sector, and telecommunications markets (Goettler & Gordon, 2014). Broadly speaking, governments around the globe have made gestures towards regulating and enforcing ...Download file to see next pagesRead More
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