mangerial economics

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Economics

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Look back to the company that you proposed in your initial post for the Unit 1 Discuss.

For each scenario in Questions 1-6, use a supply and demand analysis to make a prediction regarding both the equilibrium price and quantity for your good or service. That is, for each part, tell me whether you expect the equilibrium price of your product to rise or fall AND whether you expect equilibrium quantity to rise or fall.

Include in your explanation which curve is shifting and which shifter variable is affected.

Do not answer Questions 1-6 in your Drop Box submission. Place your answers in the text boxes provided.

1.

Your customers’ incomes increase. (Be sure to note whether the good or service you are providing is a normal good or an inferior good).

2.

The minimum wage is raised in your area, and you must pay your employees more. (Assume you have employees for this scenario, even if that was not part of your initial plan.

3.

A firm that offers the same good or service moves into town.

4.

Your customers expect the price of your good or service to fall in the future.

5.

The price of a good or service that can be substituted for yours falls (the substitute becomes cheaper).

6.

The scenarios in both Question 1 and 2 occur at the same time.

7.

For each scenario presented in Questions 1-6, sketch a graph to illustrate the supply and demand analysis you used to reach your forecast for equilibrium price and quantity. You will have a total of 6 graphs.

Submit your graphs to the Drop Box. I suggest that you sketch each of the six diagrams on a single page of paper. You can then either take a jpeg photo or scan that page into a PDF file. PDFs can be loaded into the Drop Box. JPEGS can either be inserted into Word or a Google document and placed in the Drop Box.

Each graph will be scored as a separate question.

(This is the company I proposed in unit one)

In this case if I were to open a new business or purchase an existing one it would be a full service beauty salon. The full service salon would offer services that not only offer hair, nails, make-up and full spa treatment but access to a personal shopper. The salon would be located in the center of town where would easily accessible for people in town but also out of towners. The area would be in a highly populated area with full view advertisement. “An explicit costs are monetary payments made for market supplied inputs by the business owner or owners” (Thomas, C. R., & Maurice, S. C. (2010). The biggest cost would be the building itself depending on whether or not I decided to lease, purchase or rent the space for the business. I have actually prior experience working in a beauty salon and as well talent for shopping for other people, so that on hand experience will definitely be a plus for the business. “Yu-Lee contends that explicit cost dynamics addresses issues such as understanding the true impact of various actions on the bottom line and eliminating methods that distort numbers and narrow options”( Better cost management. (2001). It is important before deciding on opening up a new business one understands the nature of the business. The implicit cost would be that even though I would be the owner I also would manage the business. Each stylist, make-up artist and nail tech would be required to pay booth rent. However the spa treatment specialist and the personal shoppers would work on commission.

The perspective property would preferably be already be salon ready, simply meaning I would look for previous salon equipped property. In this case searching for property that already has most of what is needed for a salon along with the space would cost my cost tremendously. In conclusion because Iam already knowledgeable on the new business potentially to be opened I have an insight on what is to be expected.

References

Better cost management. (2001). IIE Solutions, 33(7), 16.

Thomas, C. R., & Maurice, S. C. (2010). Managerial economics: Foundations of business analysis and strategy (10th ed.). New York: McGraw-Hill/Irwin.

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Explanation & Answer

Attached.

Managerial Economics: Full Service Beauty Salon
1. Your customers’ incomes increase. (Be sure to note whether the good or service you are providing is
a normal good or an inferior good).
If the income of customers to the beauty salon increases, everything else remaining constant, then the
purchasing power of those customers will also increase. The hair, nails, make-up, full spa treatment, and
personalized shopping services provided at the beauty salon are all normal goods. With more disposable
income, the customers will seek the beauty services more, which is an increase in demand. With
increased demand, the demand curve will shift to the right. Therefore, the current price and quantity
will no longer be at equilibrium. The increase in demand will prompt a rise in the equilibrium price of the
services. The favorable price and increase in demand will prompt an increase in supply of the salon
services; therefore the equilibrium quantity will also rise. As shown in Graph 1.
2. The minimum wage is raised in your area, and you must pay your employees more. (Assume you
have em...


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I was struggling with this subject, and this helped me a ton!

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