Blogging about Market Structures

In this final blog entry, market structures have been compared. By comparing the market structures we can see economically which structure makes the most sense to help both consumer and producer. Here are my findings:

	Perfect Competition	Monopolistic Competition	Oligopoly	Monopoly
Number of firms	Lots	Several	Very few	One
Freedom of entry	Unrestricted	Unrestricted	Restricted	Completely restricted
Nature of product	Undifferentiated	Differentiated	Both differentiated and undifferentiated	Unique
Implications for demand curve	Horizontal slope	Downward sloping but still elastic	Downward sloping and inelastic	Downward sloping, most inelastic
Average size of firms	Smaller firms	Small-Medium	Larger firms	Very large; only 1 firm
Possible consumer demand	Products with high demand	High demand	Low consumer demand for Oligopoly	Very low consumer demand for Monopoly’s
Profit making possibility	Slightly smaller due to #of firms	More possible, fewer firms	With very few firms, possibility of profit is high	Very high
Government Intervention	Low	Low	Medium-High	High
Possible performance of firms	Many firms can succeed since demand is high	Still allows for more firms to succeed	Possibility of largest firm to perform well is high	As long as government intervention doesn’t take possibility away, the firm can perform extremely well.

I have added the row "possibility of performance of firms" as I think it is important to compare which market allows for the most firms to be successful.

Blogging about Elasticity and Revenue

For this blog I'd like touch on the issue of smoking, and how the elasticity of the product effects the total revenue. In this editorial response I used as my source; not only does is speak on the trends in smokers getting younger and younger (and how this is a bad thing) but also how that effects the price and demand.

The younger the smoker, the higher the damand for the product; they have to have their fix, although they may not be willing to pay the higher price. Yet the prices may be lower, the total revenue increases as the damnd is high.

In my graph of totally made up figures, it states that as the price stays more reasonable, the product is more elastic. The unitary elasticity is set at 25. The product becoomes inelastic as prices are higher climbing toward $100 a pack.

The total revenue climbs as the prices are more reasonalble and demand is still high (even among those older smokers trying to quit who still smoke on occasion). Total Revenue falls as prices are raised.

Link to my article:
http://search.proquest.com.libresources1.sait.ab.ca/canadiannews/docview/351846053/1394ADFE2344D10617E/3?accountid=13652

Blogging about Game Theory

Game theory. It's quite a concept, it's interesting to think about-it makes you think not only about business and how people think, but also about people in general. The main ideas behind game theory are that individuals live life as a game, only focused on their own self interest-trying to win the game. Every person for themselves, since it would be mathmatically impossible for each person to get what they want if it was up to the government. "Individuals want to maximize thier own pleasure." Game theory introduced a dark vision of the human race-everyone for themselves and not trusting of anyone else.

John Neumann and Oskar Morgenstern developed the theory by looking at it like a poker game. Every person in the game constantly thinking, guessing the next move and focusing on themselves, and only themselves to make the most money. The theory doesn't allow trust, in fact it assumes that nobody is trustworthy, much like the bluff in poker.

A short comic strip reguarding a basic principal of Game Theory

There is evidence of game theory in the current market, currently not to the extent as it seemed to be in the early 90's. In business, however I believe there will always be signs of game theory. A business will always want to thrive, always wants to make money. Businesses do this by ensuring they produce what consumers want, scanning the market constantly thinking in terms of the future, like a poker player. Obviously businesses are looking out for themselves, that's how they make money; sometimes that includes putting others' out of business, it can seem ruthless; but it is not illegal, so it's just something that happens. I don't see evidence of each business or business person being distrustful towards everyone...I think that's why we're starting to see more company's merge now too, or help eachother out, such as Starbucks and Pepsi selling eachothers' products.

The payoff matrix is used to determine the best possible action (for a company) while taking into consideration the possible reaction of any rival companies The matrix works by having each cell broken down into 2 options: one company cheats, or doesn't cheat. Also it produces a winner- what will happen if one company does cheat, or also what happens if one company doesn't cheat, or what happens if both cheat. It's tough to put into words.
Here is a payoff matrix between 2 large, recognized companies, Target and Wal-Mart.


Collusive actions occur when firms decide they don't want to be in competition with eachother, but rather take equal parts of the market, either geographically, who has more existing clients or agreeing on a fixed price. The term "cartel" is the term that describes the formal agreement of cooperation among the firms involved.


References
http://wps.prenhall.com/wps/media/objects/6814/6978492/Esntls_ISG_Fig8.gif

http://static.environmentalgraffiti.com/sites/default/files/images/Game-theory-2.jpg

Blogging about Monopolistic Competition

Monopolistic Competitive Companies

Size:	Small Company	Medium Company	Large Company
Features:
Differentiated products	Lucky Lager co.	Ben & Jerry's Ice cream	Wal-Mart
Control over price	Dollar Store	Co-Op	The Brick
Mass advertising	Local car dealerships	Tim Horton's	MacDonalds
Brand name goods	Joe Fresh (superstore)	Old Navy	Nike
Product Distribution	Kijiji	Amazon	Apple
Other feature ??
Other feature ??

Lucky Lager cans                    

I've tried to keep most company names recognizable. Lucky Lager co, is a much smaller beer company. Like all beer, the product is slightly different but basically the same. Lucky differs from most companies in price and look.
Joe Fresh, which is superstore's clothing line is still a brand name...but on a much smaller scale than the 2 other company's in that row.
Product distribution is one I added. While there are of course still many, many stores that offer goods, the online "store shoppers" are a big market. Those websites are all distributers that are only online and have small shares in a very large market.
I've left 2 rows blank, tell me what you think.

Monopolistic Competition: An imperfect market structure wherin there are a large number of firms, but each firm is relatively small compated to the market. The market allows for many similar products/companies that are not identical. Monopolistic competition market encourages only competitive firms.
-Christian Makowski

Differentiation plays a large role in this type of market structure. The slight differentiation is the only thing separating monopolistic competition from monopoly. The differentiation of products is what determines perhaps a lower price of one good, or a feature that makes a product better, or the materials that make a better quality product. Without this product differentiation, the monopolistic company wins and we pay what they want us to pay; we buy what the want us to buy. All of our consumer power would be gone.

References:

http://www.facebook.com/luckybeer
http://www.concretemoose.ca/wp-content/uploads/2010/06/kijiji-logo1.png

I'm not sure how many of you were in a place that showed U.S. commercials during the Olympics this summer. I was, and this commercial is why I put McDonalds under mass advertisements. This ad was on so many times I can't bare to watch it anymore (though I'll admit the first couple hundred times it was on I enjoyed it).

Blogging about Competing as Starbucks

Starbucks logo

It's funny, in all my courses so far at SAIT, I've had to report on Starbucks in some way. They're such a large and popular company, so I understand why they make the news so much but I have to admit, it's often for the wrong reasons. According to our textbook the term perfect competition is: a market it which all buyers and sellers are price takers. What exactly is a price taker? A price taker is a(n):firm that can alter its rate of production and sales without significantly affecting the market price of its product.
Read more: http://www.investopedia.com/terms/p/pricetaker.asp#ixzz284JSJ8c4

Starbucks would be considered a part of a perfect competition market because their main product is coffee, coffee has a very large profit margin. No matter how many coffee's they sell in a day, the price of each coffee stays the same; without affecting the market price.

What I read in the articles made it clear to me that it was time for Starbucks to realign their business practice. I call it the "Starbucks Complex" it's where there is just too many stores, Starbucks has managed to saturate their market... with their own stores! Starbucks should focus less on expansion (that would help with store closeurs) and refocus on being the best store they can be, make the best coffee in the most efficient way, while being great at customer service. They've had to close so many stores because of poor planning. They didn't think enough in long term, they just wanted fast expansion in a poor economy. Also they didn't seem to think that too many stores could be a bad thing, well obviously it can be. The main reason for Starbucks having to close so many stores comes down to very poor long-term thinking.

Starbucks Japan

I'm not one who frequents coffee shops much, for me it's just not worth it. Starbucks is quite expensive. The reason: prestige pricing. By pricing their product(s) just a little higher than the competiton, it gives the illusion that their product is superior, therefore, they can charge a higher price. Starbucks gets away with these prices because they have been in the market so long that people are dependant on their coffee now and will pay what they have to to get it, they're almost addicted. Wheather they lower their prices or not, I'm not sure what happens, but one thing is fore sure; if they focused on being the best coffee chain, rather than the largest, they could increase profits and have much fewer store closeurs in the future.



References:
http://www.yourlogoresources.com/starbucks-logo/ Starbucks logo

http://www.databaseanswers.org/tutorial4_getting_started_with_db_design/index.htm Menu Picture

http://inventorspot.com/articles/starbucks_japan_grows_while_american_stores_close_15672 Store Picture
http://starbucksgossip.typepad.com/_/2007/02/starbucks_chair_2.html
http://www.cbc.ca/money/story/2008/07/01/starbucks-closures.html)
http://starbucksgossip.typepad.com/_/2007/02/starbucks_chair_2.html

The above links are links given to the class, articles used in my research.

Blogging about Long Run Costs and Economies of Scale

For this exercise I've been exploring what could possibly be my own business. In this day in age when healthy lifestyles are "in" and it's becoming more and more popular to life an active life, the business I've chosen to explore is a gym. There are many competitors in this field, such as world health club and 24 hour fitness. Most gyms these days offer all the bells and whistles for more and more hidden fees. As somebody who frequents gyms, I don't want to be paying for all these things I don't need. I miss the small places that are just a gym, just what you need and nothing unnecessary. My gym will offer high quality free weights, machines and cardio equipment. The option for a personal trainer will be available, as well as a part-time physio therapist; these are both essential to gyms and makes for a better experience for the customers, as too is the day care centre. My gym will not have: a sauna, steam showers, juice bar (as I feel this is an unnecessary expense), hot tub or tanning beds. This gym will focus on what is needed for health. This gym will offer the basics so that people can come in and be healthy, have a great workout and head home.

As many gyms it is important to start off on the smaller scale and not try and compete with the big guys right away, but build towards it. Just one building is necessary, should be a good size though. One story large enough for 3 rows of cardio equipment, at least 2 machines per body part (i.e. 2 arm curl machines) and an area for yoga mats and an ab station; bathrooms/change rooms should already be a part of the building. The target market is men and women high school age to seniors, who want a good workout and to pay a fair price for what they get. Mothers and Fathers with kids who maybe can't afford fancy places, but have an option for child care. High school kids or college students, again who don't need all the extras. For a gym, the target market is very large.

24 hour fitness, Hollywood

It can be quite expensive to run a gym (like any business) however by keeping things simple we can eliminate unnecessary costs. Long terms costs include: the machines, business permit and eventually the building hopefully. Short term costs include: child day care activities like toys, movies. T.V.'s for the workout area, water bottles and small amount of merchandise for re-sale such as t-shirts and shorts, and a computer for imputing customer information etc... The fixed costs are where the real expense hits, costs like: Salaries for personal trainers, physio therapist, and basic gym employees (such as the babysitting area employee(s). Rent, utilities, cable and Internet are also a fixed (monthly) cost.

There are many costs to cover, but with a fair and clear-cut pricing strategy, I believe the gym could be successful. I've resorted to a home gym myself, it's not as good for sure, but I prefer it to the big expensive gyms that have things I really don't need.

http://www.worldhealth.ca/

The site I chose to explore is World Health. It's a big one but more similar to my gym as it doesn't offer as many unnecessary things as Golds Gym does. One thing I like about the site is it posts about challenges the gym offers as well as success stories. It mentions group workouts, personal trainers and registered programs (programs that offer personal training, massage and a dietitian) these are all salaries that need to be paid. The site does not offer what the gym itself includes like number of machines or amount of free weights so it's tough to judge those costs. Also the site does not offer photo's of any locations to determine if they have T.V.'s or a child care area. The site also does not include prices- which tells me they have hidden costs somewhere and can't commit to a simple price. I ended up contacting a store to ask for their student price. They charge more at the beginning and ask for a down payment; however the price per month does drop (as to protect integrity of this company I won't tell the prices) but let's say my equipment I own costs me less than 1 year here. Having been in a World Health I can say a strength is their employee's (they're very knowledgeable and helpful) and their free weights are great and there's plenty of them! I don't like that they can't just offer a fixed cost and post it online, that's a weakness (as too are the hidden costs).


References:
http://blogs.laweekly.com/arts/2012/05/best_gyms_equinox_crunch.php 24 hr fitness photo

http://www.worldhealth.ca/locations.aspx World Health Logo

http://forums.musculardevelopment.com/showthread.php/73206-Does-anybody-here-go-to-fancy-gym click this link for an interesting chatroom about "fancy" gyms and perhaps unnecessary equipment.

Blogging about Diminishing Returns

As a non smoker, I still found this debate to be quite interesting. Is it possible that too many warning on the dangers of cigarette packaging could be a bad thing? I think yes. The article states that most improvements on consumer awareness (of the dangers) have already been achieved. The article has merit when it mentions that most of those who could have been persuaded not to smoke, already have been and often choose to quit early on. However, those "die hard" smokers who simply are addicted just won't quit, no matter how many warnings appear on the packages. I also agree that too many words or pictures on the package just get ignored anyways. Nowadays we all know we shouldn't smoke, but those that do, do-it's fact! What should be done is more high impact ads on T.V. or phone apps, radio or even YouTube cites. Rather than less impactful ads on the packages.

Where the article loses merit I believe is when it talks about taxation. Higher taxes on cigarettes may have worked back in 90's but now, it really doesn't matter. Taxes are pretty high as it is. Sin taxes, or taxes levied on certain goods perceived as "not good" just won't work in this day in age. It's just another dollar spent. I drink pop. I know I like it, if it's taxed higher, I'll still most likely drink it. Companies like tobacco and soft drink company's are so powerful in the market they can reduce their price by a very slight margin to encourage more people to buy it.

Cigarette packs with warnings

The point of diminishing returns for government are government employees. It seems things go so slowly in government. It's because for something to happen, it has to be voted upon and agreed to by so many people, it just makes things too difficult. Like the "Sweet Spot" article says too many cooks spoil the broth. If laws or bills or proposals were seen and voted on by fewer, but more powerful people then things would get done quicker and we'd see results. It's like a school, we had a small school government in my high school. We took our problems to the administration (5 people) and things got done! The government can reduce costs and be more successful by having fewer people who vote for bills to become laws, or to which building projects get done.



The demand of cigarettes may never change. People will always want to smoke, it's so easy to try it and it's highly addictive. The supply could change; smokes could be sold in fewer places or tougher to get a hold of (perhaps by showing more than 1 piece of ID when purchasing). If it seems like cigarettes are tougher to come by (purchase) then, possibly it could become less demanded. As like the article alludes to, to simply try and make cigarettes undesireable (with price) could start a "war on drugs" sort of and encourage people to smuggle them in and sell them to others'. Everything effects the supply and demand, the article says (it seems) no matter what, those that want to smoke, will smoke, demand will be high within the smoking community of course, but with better ads more of the population may not want to smoke and demand would be lower.

http://www.youtube.com/watch?v=CO0qwl5k9R4 "Anti smoking ad"


References
http://www.google.ca/imgres?hl=en&biw=1366&bih=685&tbm=isch&tbnid=I6FNqWV_Pqw02M:&imgrefurl=http://www.thai-blogs.com/2005/03/09/thai-cigarette-packs/&docid=DeMcgXFHOeVYwM&imgurl=http://www.thai-blogs.com/media/cigarettes_03.jpg&w=410&h=296&ei=Yn5jUJLRHeOMygHdu4CwCg&zoom=1&iact=hc&vpx=690&vpy=396&dur=1183&hovh=191&hovw=264&tx=136&ty=191&sig=110826988698318660708&page=1&tbnh=148&tbnw=195&start=0&ndsp=19&ved=1t:429,r:15,s:0,i:181

Blogging About Income and Cross Elasticity

Canadian Oil Sands

For this excersize I wanted to research Canada's oil and gas industry. Like many of you I'm sure, just looking at the gas prices here right now makes you think that all those oil and gas wallets just get a little thicker. Daniel Tencer's article "Canada Oil And Gas Industry: Shrinking Profits May Be A Sign Of Things To Come" tells me differently. The article, which was written in July of this year reports losses to Canada's largest oil company's Suncor, Encana and Cenovus in the past quarter.


So surprise! The Oil and Gas industry here may not be as lucrative as we all thought. According to Tencer things may only get worse. The U.S. is starting to find new and better ways to extract oil at home in places like Texas. Canada's best bet is the Asian markets. Asia is now the largest consumer of oil and gas in the world. Canada muct find a way to get our oil to other ports so we can get our oil to Asian markets to save itself.  We could improve the industry, but first we must diversify!

Source: Kent Marketing Services

One thing about oil and gas is it's so necessary all the time. We always need it everyday. Yet, it's still quite elastic. As Canadians, we'll always have to buy oil and gas, but (I know I do anyways) we'll wait to fill our tanks one day when we see gas at $1.22 a litre and wait to see if it will drop. So demand for oil and gas is always high but gets significantly higher when we see that gas is suddenly $1.10 at the pumps.



References:
http://www.huffingtonpost.ca/2012/07/25/canada-oil-gas-shrinking-profits_n_1702807.html
link to the article I used.

http://www.google.ca/imgresum=1&hl=en&biw=1366&bih=685&tbm=isch&tbnid=h5n_WYnSC7v7qM:&imgrefurl=http://www.cppi.ca/index_e.php%3Fp%3D57&docid=neX_hiyIt_D4GM&imgurl=http://www.cppi.ca/userfiles//image/Chart2525201%252520-%252520GPQA%252520components%252520of%252520gasoline%252520pricing%2525202010%252520(eng).jpg&w=528&h=411&ei=Qp5gUKHnKqLlyAGXqIGYDA&zoom=1&iact=hc&vpx=745&vpy=156&dur=2596&hovh=198&hovw=255&tx=79&ty=76&sig=110826988698318660708&page=1&tbnh=156&tbnw=169&start=0&ndsp=16&ved=1t:429,r:3,s:0,i:77
link to the price of a litre of gas chart.

http://s.ngm.com/2009/03/canadian-oil-sands/img/candian-oil-sands-615.jpg
Oil sands picture

Blogging about Demand & Supply: Interactive Graphs

After completing the excersizes of the interactive graphs, I could physically see what happens to demand and supply. I though the graphs were very neat and helpful.

I noted that what seems to get demand to change is all related to world events and the economy. Also popularity of an item or service effects demeand. I'll use an example from my life. When Lance Armstrong won the Tour de France for the 5th time in a row, these "Live Strong" bracelets came out. They became so popular so fast that it became almost impossible to find them for some time (I remember this because I even really wanted one) The shear popularity of a trend and a celebrity endoursement because so strong that demand for these little bracelets went up so much that people had began buying many when they could and try and sell them privately for a profit.

source: http://ingrimayne.com/econ/DemandSupply/SupEtDemand.html

The change in demand is represented in a graph by either a positive or negative shift in the demand curve. Or by this graph.

This is a cool link I found that teaches you how to properly graph demand (from a google image)
http://www.google.ca/imgres?hl=en&biw=1366&bih=685&tbm=isch&tbnid=e70QbpmpOc7KtM:&imgrefurl=http://randi2489.edu.glogster.com/supply-and-demand/&docid=iCAKyRf4Ss_e3M&imgurl=http://edu.glogster.com/media/5/22/35/46/22354642.png&w=300&h=300&ei=_CNaUIetKYbkywH82YCgAw&zoom=1&iact=hc&vpx=179&vpy=328&dur=1137&hovh=225&hovw=225&tx=128&ty=119&sig=110826988698318660708&page=1&tbnh=140&tbnw=146&start=0&ndsp=18&ved=1t:429,r:6,s:0,i:103

Blogging about unit 2-Game On!

I found this unit to be very challenging, fun and creative. I like the ability to play games to better understand things rather than just reading from a book. The first game I tried was a game where I was a farmer way back when. Very little money to spend, but the challenge is to grow still. This really made each decision I have to make very crucial. Not every time is a good time to buy more land, or bid on cows. It's about buying when the price is right (if possible). If the price is too high, or the profit margin is small, it really forces you to think. The price of everything effects how you can make each decison. It's a very real life situation in this game. Maybe the price of a new outfit you want is just too high, but you need it for an everning out very soon; you have to decide will the price you pay be worth your while. Price effects every decision.


In this game, money is very tight at first. As too are some resources throughout the game; it's a farm. Sometimes crops, land or cows are scarce. That's your money source. You have to mangage... you have very little money and very few cows to sell. You have to choose; it's better to spend the little bit of money I have now since it will be better in the long run. I found the tutorial very helpful; I went through a new tutuorial game a few times. It literally tells you what to do the first couple turns, but more importantly it explains why. This gets your brain thinking and you find yourself totally into the game! Go through the tutorial, remember that cows and crops are an investment... you may not get an immediate return, but eventually you will. Don't bid too high for things either no matter how bad you think you need them. Remember always that the goal is to expand the WORTH of your farm, not the size. Remember these and you could be running a pretty successful farm.

http://www.youtube.com/watch?v=sdn3jvZaPDU

click the link to see what happens when you cross a popular video game with a farming simulator

Blogging about "Production Possibilities"

Welcome to Econ Blogging about excersize  1.2 with Christian.

 These graphs are essentially representing how each choice we make impacts something else. Whether it be opportunity cost between tonnes of wheat versus amount of cars produced; or even quantity versus quality. Also these graphs represent how technology has effected production so greatly, which adversely shows how production and or lack there of effects growth. What the graphs can show us is that when we make a choice to purchase something, one good instead of another it effects something else. When we all choose to buy say fresh water at one time incase of emergency, then water can become scarce; price goes up and somehow another firm must start to produce bottles of water. The opportunity cost of this company now producing bottled water instead of say wheat is now effected. The graphs show us how our choices effect each curve.

source: http://www.eia.gov/oiaf/servicerpt/eppats/ppusm.html

Stocking up on bottled water could effect the product possibilites curve

I myself recently have been incharge of taking care of myself in every way, paying bills, cooking cleaning, groceries etc. I've found that when you're on your own, each decision you make is more and more crucial and takes more and more time to make. At the grocery store I find each decision to be difficult; should I stock up on this now while it's on sale? How long can I go without something? Whether or not to eat out for a meal, go out with friends for a night out, getting some new clothes. I've come to realize now that I'm on my own, every choice I make is a big one.


     

When I chose to return to school my biggest opportunity cost decsions was travel. The money and time it would take to go visit my family in Bermuda. Paying for school meant less money for flights, and being in school means less time to be able to be away from school and with them. I'm lucky to be online so it is a cheaper decision as well as one that makes it easier to visit them more frequently. I certainly am not over in Bermuda as much as I'd like to be; but I do realize it's very difficult to mange school and travel. The ability to understand opportunity cost is important; I know that returning to school is a good decison, though the cost of school means less money for travel I know that in the long run an education and better job can mean much more income and money for later travels.