Taco Bell?

It is interesting to think of the law of diminishing margnial utility and how it relates to almost every decision made. Whether you are going to a drive thru to get some food or going to the store to get a new pair of sunglasses. There are billions of examples, but it is interesting to see that it really does apply to almost any good or service that must be purchased. For instance, it used to be nice to go to Taco Bell and get 3 of those grilled stuffed burritos. After a while I soon realized that after the first one (sometimes after the second) I just was not in the mood for the third. I would look at it like why did I buy you? I could have easily spent that money on something different that would have satisfied me just as much as the first or second burrito. Now I am stuck with a third non satisfying burrito that is just going to end up giving me a food coma. I am going to start asking the burrito what it can do for me instead of letting it get the best of my wallet.

I hope Taco Bell lowers the price of these burritos because it will not be worth buying these otherwise. Then I would buy 3 and save the third for later.

Monopolistic Competition

    According to what we have learned in class, Monopolistic Competition has a large number of firms, there are no barriers to entry, and there is product differentiation. Quality Control measures ensure product reliability and effectiveness. The Four Firm Concentration Ratio is the total percentage of revenue collected by the four biggest firms within a certain industry. So 100% would be a monopoly and anything under 40% would be monopolistic competition. The higher the percentage  means there is less competition. Monopolistic Competitive companies are able to set their own price which is good because this allows them to be the expert in the field of business in which they are pursuing.  The efficient use of pricing and marketing will allow for profit maximization as long as their Average Transaction Costs are above the demand for their product. Average Transaction Costs must intersect with Marginal Costs (Cost to make one more product) above this Demand curve. Setting the price is tricky and seems that it must be done cautiously and might require trail by error. This method of pricing is usually used to drive other competitors out of business but is not recommended for normal operations. There is a signifigant amount of Deadweight Loss using this diagram of Profit Maximizing. Profit Maximizing is always sought out but could maximizing profit also be a negative aspect of running a business? If a business operated at just under full maximization could it sell more product because of the lower price of the good?

  

Consumer Surplus and Perfectly Competitive Markets

It is always nice to save money when purchasing certain products. Although sometimes it seems this can be quite the opposite.

Consumer Surplus is the difference between the maximum price consumers are willing to pay for an additional unit of that certain product and the market price at which it is set. The Consumer Surplus is found above the market price but below the demand curve. The higher the market price is, the less consumer surplus will result.

In a Perfectly Competitive Market, producers want to get more producer surplus and diminish consumer surplus but finding the equalibrium can be challenging. By raising their market price they will eliminate the consumer surplus which can also create a Deadweight Loss. The Deadweight Loss happens when marginal costs exceed marginal revenue and marginal benefit. 

Different types of pricing strategies can enable companies to get the most out of their products in the market. Price Discrimination is one of the best ways for a company to find this equalibrium price by using information obtained from research to target certain markets. These prices are not reflected by the costs differences. Is consumer surplus maybe a good thing for companies to hold onto? Without consumer surplus, consumers will try and find other means of buying that same product, and loss of consumers could hurt profits. Only in monopolistic companies would this not be detrimental too because there would be no possible equal substitutes.

Price Setters vs. Price Takers

Price setters can be greedy when establishing a price to sell their product at. This can result in paying more for a product then consumers woulod normally want to expect to pay. This can allow for another business to come in sell that same product for a fraction of the price to bring the overall price down. A consumer will not pay the higher price if they can simply go somewhere else and get that same product for less. When price setters establsih a low price some other businesses cannot match that low price which can cause financial problems.

Price takers know that fluctuation in prices will happen and they must prepare ahead of time to compensate for any change in price that could effect business. These sudden changes in price affect their total revenue. If less product is sold because their price is not correct they must adapt to the going price at the moment and accept financial losses in hopes that it will pick back up. Determining whether or not it will be a long term loss or a short term loss will be important.

Whether or not its better to be one or the other it seems that businesses are switch hitters in which they must be both a setter and a taker. If they have certain knowledge about specific information that will give them the edge to be the Price Setter, if they want to possibly stay off the radar and build they can take the price set by competition. It almost seems the cons and pros are about equal?

Apple vs Samsung in Patent Dispute

     Recently Apple and Samsung got wrapped up in a lawsuit over intellectual property rights. Samsung was granted access to view some of Apple's unreleased and unacknowledged products with the retrun compliance of letting Apple view some of Samsung's new product line. The issue was that the products shown by Apple were unreleased and not granted permission to be known about while Samsungs products have already been advertised and promoted. Apple is even saying that Samsung "copied" Apples products.  To Apple and its legal council, this is an unfair advatage.

What does this have to do with microeconomics?

      This could start a new wave of new technology clashes creating lawsuit after lawsuit of stolen/ misused technology gains. Companies exposing valuable information about new releases that havent been reported yet. These are two giant smartphone companies with global capacity. This rise is technology will allow for expansion within companies but can hurt expansion if not done at the right time. Although I doubt early information about a product that was already anticapated to hit the market will seriously damage Apple's revenue, however, it still is their property and intellectual property wars could be on the forecast for new and old technology businesses, even more than it already is. The loss of thier competitive edge in the market is exactly what Samsung seems to be trying to do. By seeing Apple in the courtroom is a sign of fear. Do they feel that the demand for their new product will be less if customers already know what it will be?

It seems there is still some rising tension between the two competitors for the bigger grasp on the smartphone market.

Source: http://www.businessweek.com/technology

Intel chips and smartphones?

Intel has noticed that different types of chips found in smartphones may start to hurt Intel's business. Since Intels chips in PC's have slowed down due to the rise in demand of smartphones this will cause negative numbers and loss of market for Intel. They want to get their chips into the smartphone industry to compete with ARM's marketable licensing. Other competitors are able to challenge Intel but Intel has the servers. Chips for smartphones are way less expensive than chips for PC processors. Intel already has servers that help run other mobile devices this would just be their way of expanding their technology and stretching their production posibilities curve outward. If they could get into the smartphone market they could become unstoppable. According to their research smartphone shipments have increased over 80%. Intel could start looking for a way to create a low cost and energy efficient processor. Intel still powers PC processors and hopes to find a way into the smartphone market. As Intel starts to invest more into this, competition could rise causing them to have to spend more to be in the lead if that will be possible. It seems that Intel, already globally known, could expand growth more and diversify to help sustain losses in the PC market. Would Intel computer chips in smartphones be a good idea? It seems that the cost of smartphones could boost tremendously if so. This could be the opportunity window that smartphone chip company's need to boost their business. There would be little competition if they suddenly acheived that access into the market. It could speed up phone connection at the cost of convenience.

McDonalds Stock

      

      This slow and steady giant is making its way through any economic situation and making more money as it makes new trails, sort of like a lake harvestor. Even through the midst of a healthier American living environment, Mcdonalds proves to show that it is much needed and is not going anywhere anytime soon. Everytime one item on the menu is over used and forgotten they simply add another menu item to replace it. This company seems like it is the biggest fast food chains around, it is not invincible of course but it has rooted itself a fine foundation.

      McDonalds stock (MCD) is currently sitting at 80.54 per share. This share, last year to date was at about 67.25 on June 5th 2010 thats a 13.29 difference per share in one year. Even looking back further would show that it has been on the rise slowly like a ninja. It is not a huge difference in pace, but it is steadily rising, positively. This could be an interesting stock to keep your eye on. It probably will never generate millions of dollars but it can be nice to hold onto for a while and watch it grow like a Mcgarden.

Specialization vs Diversification

   
    Specialization is the use of resources to focus production on one or few number of goods and services. This type of business puts its focus primarily on perfecting a certain type of product or service to ensure that it is top notch and exceeding the bsic version of that same product or service.

    Diversity is the expanding of a certain item or idea in order to reach out to more potentials.

   A great example of specialization would be a Starbucks or Fossil. Both companies offer a product or service that is "above the norm"  in quality. Starbucks coffee is rich in flavor due to its coffee beans used to produce the product. Less quality beans would produce less quality coffee tastes. It could take years to acquire a great relationship with a good quality bean distributor and use trial and error to determine what works and what doesnt work. Starbucks offers their product at a higher price because the quality is better and has specialized in the coffee industry. Fossil is another example. Fossil has been making high quality watches since 1984 and have specialized in creating watches that can exceed other brands that make watches as an extra thing to do. Their higher price relfects their knowledge in the watch industry and becasue they have been around for a while they can also somewhat determine what works and what does not work. They are not the oldest. Different "tastes" can hurt these companies such as the lack of use for watches due to the rise in technology. Since many people have cell phones this deters the use for watches because all cell phones come with the time as a basic commodity now. They can become an iconic accessory to some people. A possible way to overcome would to create the watches to do more than just tell time to offer more of an incentive. Starbucks has faces a problem with lower prices from competitors that want to establish themselves as a new place to get coffee for a lower price. The quality for these competitive coffees is not as good as Starbucks but the lower price can lure customers to switch. It might be hard for Starbucks to match these lower prices because they have been sustained on the current prices for some time but their good quality coffee will endure the test. Overall, specialization is great thing and a dangerous thing. All strategies have risks, but it seems specialization ensures more direct connection and can depend on a better foundation for future changes in the economy, as opposed to diversifying to reach more markets. Companies like McDonalds that try to reach every market and customer can appeal to more and charge a lower price but offer lower quality but more quantity.Which is better?

  Is specialization better than diversifying?