Principles of Economics - Assignment Example

Thus, the price of goods to be sold to them shall be cheaper. Conversely speaking, tourists are less likely to question and be discouraged by imposition of higher prices of goods since they are just visiting the college town. Thus, local residents shall be offered goods and services at lower prices as compared to visitors’ prices of similar goods. Further, locals should be the only ones aware of the pricing difference. They come very often and I am able to make relationships with them brings more revenue to the business.

With my price discrimination strategy, I would not only help with the revenue of my business. More importantly, I would also make a profit and gain more customers. 2. Suppose the cable TV industry is currently unregulated. However, due to complaints from consumers that the price of cable TV is too high, the legislature is considering placing a price ceiling on cable TV below the current equilibrium price. If the government does make this price ceiling law, diagram and explain the effects with supply and demand analysis.

If the cable TV company is worried about disgruntling customers, suppose that the company may introduce a different type of programming that is cheaper for the company to provide yet is equally appealing to customers. Explain what would be the effects of this action. - Price Ceiling is actually a government-imposed limit on the price charged for a product in a particular industry. Governments usually require price ceiling to protect consumers from conditions that could make necessary commodities impossible.

However, a price ceiling can cause troubles if imposed for a long period without any controlled rationing. Price ceilings can generate negative results when the correct solution would have been to increase supply. In the example given, the price ceiling has a considerable impact on the market. Cable TV Company finds that it cannot charge what it had been before the imposition of price ceiling. This may result TV Cable Company to drop out of the market. The consequence will be a reduced supply.

Meanwhile, customers and/or consumers suddenly find they can now buy the product for less, so quantity demanded increases. These two events results in the quantity demanded which may exceed the quantity supplied. This may cause a shortage unless rationing or other consumption controls are imposed. 3. Consider a perfectly competitive market. Analyze and explain in detail using graphical tools to show what you expect to happen to the number of firms and firm profitability in the short run and long run a) if demand for the product falls and b) if demand for the product rises.

- A perfect competitive market is filled with buyers and sellers so nothing can affect the market price. If the demand of the product falls it is tolerable because the firm does not pick the price, the firm just chooses how much to make at the given market price. The firm does not lose anything. If the demand for the product increases then the firm benefits of course and the price is not changed. There is no need to cut the price to sell more because the firm picks the amount they are willing to sell; if the price is increased buyers will fall off.   4. Discuss why some long-run average cost curves are steeper on the downward side than others.

Discuss fully. - Long run average cost curves show the economies and diseconomies of scale of a specific firm. So when a firm gets