Help For Your Introductory Economics Course

Here is one more milestone three tip that I’d like to share in order to help you determine the market structure of your industry. Perfect Competition and Monopoly markets are very rare, so it is most likely that your firm operates in a monopolistically competitive industry or in an oligopolistic industry. How do you figure out which market fits your firm’s industry? A great way to do this is by utilizing the four firm concentration ratio. Suppose that the distribution of sales in an industry is as shown in the chart below (market share). You should have already found the market share data for your industry in a previous critical element, but if you are working out of order or skipped over that element, here are some tips on how to find the market share for your industry. What is the four-firm concentration ratio for this industry? To find this, we add up the market share percentage for the top 4 firms. Four firm concentration ratio = 20% + 18% + 12% + 10% = 60% If the top four firms m...

Melanie is a hairdresser and is able to provide haircuts for 8 people each day at a total cost of $50. If Melanie performed 9 haircuts it would cost her $60. What is the marginal cost of providing the 9 th haircut? To solve this problem, we first need to understand what marginal cost is and then figure out how to calculate it. Marginal cost is the additional cost to a firm of producing one more unit of a good or service. In this case, the problem is asking for the marginal cost of going from 8 haircuts to 9 haircuts. To calculate the marginal cost you take the cost of 9 haircuts and subtract the cost of providing 8 haircuts. $60 - $50 = $10. The marginal cost of providing the 9 th haircut is $10.

Kirsten is earning $40,000 per year as a stylist in Sally’s Salon. She has worked hard to save $60,000 and is currently earning 5% annual interest on her savings account. She decides to quit her job at Sally’s Salon and uses her savings to open her own hair salon. In the first year of ownership, her salon earns revenues of $200,000 and has explicit costs of $157,000. What is Kirsten’s profit (or loss) in the first year? Economic profit is the total revenues minus total opportunity costs of all inputs used, or the total of all implicit and explicit costs. For this example we know the following for the first year: Revenue = $200,000 Explicit costs = $157,000 The implicit costs include Kirsten’s foregone salary from giving up her previous job of $40,000 for the year and lost interest from invested savings ($60,000 saved * 5% annual interest so the interest forgone for the year is $3,000) Economic profit = Revenues – explicit costs – implicit costs Economic profit = $200,000 – 157,000 – 40...

Price Elasticity of Demand Sample Problem #1: When Hank’s Hamburger Stand priced its signature burger at $7, they sold 500 burgers per week. When they raised the price to $8, they sold 450 burgers per week. Based on this information, calculate the price elasticity of demand for hamburgers. The price elasticity of demand = percentage change in quantity demanded / percentage change in price Start by calculating the % change in quantity demanded = change in quantity / (sum of quantities / 2), and then multiply 100 to put in % form % change in quantity demanded = (500 – 450) / ((500 + 450) /2) = 50 / (950 / 2) = 50 / 475 = .1053 .1053 X 100 = 10.53% is the change in quantity demanded Next calculate the percentage change in price = change in price / (sum of prices / 2), then multiply by 100 to put it in % form (7 – 8) / ((7 + 8)/2) = -1 / (15/2) = -1/7.5 = -.1333 -.1333 X 100 = -13.33% is the change in price Finally, calculate the elasticity of demand. The price elasticity of demand = perce...

All of the following pairs of goods are substitutes except -We observe the price of soda decreases and the demand for iced tea decreases. -We observe the price of steak increases and the demand for chicken increases. -We observe the price of bicycles increases and the demand for helmets decreases. To find the answer to this question, we must first know that two goods are substitutes when a change in the price of one causes a shift in demand for the other in the same direction as the price change. When the price of soda decreases the demand for iced tea decreases. These goods are substitutes because the demand for ice tea is moving in the same direction (decreasing) as the price of soda. Intuitively this makes sense because you’ll choose to drink one or the other with your meal – probably not both! When the price of steak increases the demand for chicken increases. Again, these goods are substitutes because the demand for chicken is moving in the same direction (increasing) as the price...

Milestone One: Expedia Example.  For the accompanying video that explains this paper, please view on YouTube here and here . Microeconomic Analysis of Expedia Expedia Group is off to an excellent start in 2018. Reports from the first quarter show year-over-year growth rates of 15% in revenue, gross bookings, and room nights (Investors Overview, n.d.). As a consultant hired by Expedia Group I will be analyzing market and business data in order to make recommendations to ensure Expedia’s future success and sustainability in the market. This paper will provide a brief overview of the firm before diving into Expedia’s demand trends over the last 5 years, supply and demand conditions, and the price elasticity of demand for their products. A discussion of the costs of production will follow with an in depth look at variable costs, fixed costs, and the impact to profitability. The overall market section will include a discussion of the market share, barriers to entry, and market structur...