Homework Question on Managerial Economics
- Text book: Keat, P. Young, P. (2009). Managerial Economics: Economic Tools for Today’s Decision Makers, Sixth Edition. Prentice Hall Upper Saddle River, New Jersey. ISBN-13:978-1-256-62988-7 or ISBN-10: 1-256-62988-X
- Think of a company that you work, or have worked, for that uses non-price factors to compete in their market. What non-price factors did they focus on to gain a competitive advantage? Which of the four markets do you think they compete in, and why do you think this?
- What is the difference between non-price determinants of demand and non-price variables? Discuss the variables and how they impact the non-price determinants of demand.
- What is mutual interdependence? Describe the possible effects of a firm raising or lowering their price in an oligopolistic market.
- What is price discrimination? Why does price discrimination occur? Who does it benefit?
- What is cost-plus pricing, and what is its relationship to marginal pricing?
Homework Answer on Managerial Economics
Question 1
Non-price factors for competitive advantage are all those factors, other than price, that different firms use in order to get a competitive advantage over their competitors (Keat & Young, 2009). The Walmart stores are one of the companies that greatly participate in non-price competition. This can be seen through their numerous sales and offers, and their colorful website, which advertises their products and offers the option of buying online.
In addition, they offer free shipping of any goods bought that cost above fifty dollars (http://www.walmart.com/). All these factors coupled with their great customer care both during and after sale could give Walmart a competitive edge against its competitors.I think Walmart competes in an oligopolistic market. This is due to the fact that it functions in a retail market, which has a few players who are very powerful. However, due to Walmart’s size, power and the fact that it is an international corporation, it sometimes exhibits the characteristics of a monopoly.
Question 2
Non-price determinants of demand include all the factors apart from price that affect the demand of a certain commodity or service. These include factors such as the tastes and preferences of the consumer, the season, the after sale services, the income of the consumer, the future expectations of the consumers among others (Keat & Young, 2009). On the other hand, non-price variables are items that can affect the demand of a commodity or service that other than price that are measurable, such as the past performance of the seller, customer loyalty, quality of the product or service and the supplier, which affect the demand of a certain commodity or service.