Industry Structure and Pricing Assignment Sample

Principles of Economics

1. Generally, a soft drink that is, sugar-sweetened refreshments are related to negative externality. Overutilization of these sweetened refreshments is a significant cause of well-being issues like diabetes, obesity, and tooth rot. Consequently, a tax levied on goods with negative externality can raise government assistance by diminishing utilization and consumption toward the social proficient level at which the negligible social expense is equivalent to the marginal social benefit. Tax and duty levied diminish the producer surplus and consumer surplus yet builds the general society government assistance (Galetic, 2015). Truly, I back such an expense since the levied tax rate helps in expanding the welfare of society.
2. The soft drink consumption lessens to a great extent.
3. Lessening medical issues related with sugar consumption in the body.
4. It urges the makers to upgrade their items and goods that they produce with less sugar content.
5. Assists with raising the administration income which can be used for wellbeing and training programs.

Let us assume that without the tax levied the country consumes the Q quantity with P as the price level to it. At this level the demand and supply are in equilibrium and is both equal. Consumer is relishing and is contended at the consumer surplus with the area APE as shown above in the diagram. Whereas, on the other hand, the producer surplus is being enjoyed by the producer with the area PEO. The levied tax will enable to decrease the externalities and thereby increase the entire total welfare by deviating and creating a shift in the supply curve toward the marginal social cost. It will thus decrease the output and quantity from Q to the level of Q* as shown in the diagram and also the price will as a result of this increment from P to the level of P*. Furthermore, consumer will now be satisfied with the level of consumer surplus which is represented in the area of AP*E' only and on the contrary the producer will be satisfied with the level of the producer surplus which is represented in the area of P'FO. Now, the tax will also increment revenue generated from the taxes for of government by the area P*P'CE' as shown in the figure above. The welfare of the society will also rise as after the imposed tax, the society is not further manufacturing the negative surplus as shown by the area E'EF in the figure above (Marshall, 2013). This was ultimately decreasing the welfare of the society at a very competitive level. Hence, the net social welfare will increase by the area E'EF.

Soft drink is a significant source of sugar in the diet and its utilization is extremely high in many nations among the kids which make the medical conditions worse in a person, for example, heftiness, heart diseases, and so forth. Expense raises the costs of the soft drink savors which turns the decline of the utilization of such kind of beverages (Taylor and Mankiw, 2006). Likewise, tax urges the producers to modify and innovate the beverage which has low sugar substance or no sugar substance. In the event that utilization will diminish, it will improve the ailments related to sugar utilization. The government can raise income by imposing a tax on a soft drink and can utilize this asset to advance wellbeing, instruction programs, and government assistance programs.

2.Average Fixed Cost is given at first at 10 Output = 120 So the Total fixed Cost will be 1200 and because it remains constant at all output level it will remain 1200 at each output level which means at 20 Output the fixed cost will betotal cost/output= 1200 / 20 = 60 ( A) and the Average Total Cost is given as 150 at 20 output so it will become 20 * 150 = 3000 so the Total variable cost will be 3000 - 1200 = 1800 which means Average Variable Cost will become 1800 / 20 = 90 ( B ) . At Output 40 Marginal Cost is given as Change in Variable Cost / Change in Output So Change in Variable Cost = Marginal Cost * Change in Output = 130 * 10 = 1300 Which means the variable cost at the level of 30 output i.e. 2700 + 1300 = 4000 will be total variable cost for the output 40 which makes it 4000 / 40 = 100 ( C ) which makes ATC = 100 + 30 = 130 ( D ) and Marginal cost at the output level 50 = E = (output*ATC - output*ATC at previous point)/(Output-output at previous point) = (50*132-40*130)/ (40-30)= 140

1. First, it is a great idea to fathom what actually a niche item is. These items are the items that serve a particular client base and goods category. For instance, sound nourishment in the food business is a niche item. Despite the fact that niche items might be having a superior value, clients may at present purchase in view of the extra worth that they bring to the market (Pettinger, 2017). Something else to see in this respect is the inquiry that there has been a great deal of niche items on the Australian market. Accordingly, as increasingly more niche items enter the market, there will be a rivalry in the niche items space. That is one reason the idea of perfect competition comes in.

• Free entry and exit:Numerous organizations will enter in the market of Macadamia. They may choose to leave later on if another item offers hardened rivalry to Macadamia nuts, for example, cashew nuts.
• Homogeneity of the product: Numerous organizations will go about as intermediaries who will get the macadamia from the Bundaberg locale in Australia. In this way, all organizations will sell macadamia and they may choose to improve their supply chain to make themselves more appealing to clients.
• Justifying the perfect competition model: Perfect competition is a market framework that is characterized by a huge number of purchasers and manufacturers. The qualities of the perfect competition model obviously characterize the niche market space (Jamison, 2013). We will take a gander at every trademark and legitimize how it characterizes the niche market item space (for our situation we are taking a gander at the manufacturing of macadamia).
• Large number of buyers and sellers: The manufacturing of macadamia will draw in numerous vendors who will need to profit from the offer of Macadamia. The solid advantages of macadamia will draw in numerous purchasers who will need to have a sample of the nourishing advantages of Macadamia.
• Long term prospects: As an ever-increasing number of firms enter the market, the vendors will turn out to be so numerous to the point that numerous organizations won't make enough benefits. For instance, if an organization had a share of the market to 42%, then the share of the overall industry may diminish to 21% in view of the passage of numerous organizations over a long period. The interest may increment to 16 ounces where it gets steady. In this manner, numerous organizations that enter the market will wind up selling surplus produce in a previously immersed industry. Numerous organizations will begin to leave the market since it would be simple for them to do as such (Taylor et al., 2017). Subsequent to understanding that benefits are decreasing, the organizations will leave the market as they attempt to exploit another market. Also, the presentation of another substitute item may offer solid rivalry to Macadamia nuts. The substitute item will additionally lessen the piece of the overall industry of firms. The selling of macadamia nuts will be provoking firms to shut down their business tasks and activities.
• Perfect knowledge of the market: The purchasers and vendors will have total information about the costs of Macadamia. In this way, firms selling Macadamia may choose to make costs uniform.
• Short-run prospects: Numerous organizations will acknowledge huge net revenues from the offers of Macadamia during the underlying events. As a niche item, macadamia will incite numerous clients to get it as they try to experience the solid advantages they got from Macadamia. There will be consistent increment sought after as more clients relocate towards devouring nourished items, for example, Macadamia nuts. Numerous organizations will think that it’s simple to enter the new market of Macadamia. There will be no obstructions to passage and exit to the Macadamia market. As the Bundaberg locale builds its yearly profitability, numerous organizations will be pulled in to purchase the Macadamia legitimately from the farmer and offer it to buyers (Jhinghan, 2016). The expanding demand will make it simple for companies to set foot in the industry. They may get advances in the expectations that they will repay from the benefits acknowledged in the offers of Macadamia.

References for Industry Structure and Pricing

Galetic, F. 2015. Consumer And Producer Surplus Changes After Taxation. Economy & Business Journal, Vol. 9, No.1, pp. 322-328.

Jamison, M. A. 2013. Industry Structure and Pricing: The New Rivalry in Infrastructure. United States: Springer US.

Jhinghan, M. L. 2016. Microeconomic Theory. New Delhi: Vrinda Publications

Marshall, A. 2013. Principles of Economics. United Kingdom: Palgrave Macmillan.

Pettinger, T. 2017. Cracking Economics. United Kingdom: Octopus Books.

Taylor, M. P. and Mankiw, N. G. 2006. Microeconomics. United Kingdom: Thomson.

Taylor, T., Shapiro, D., Greenlaw and S. A. 2017. Principles of Economics 2e. United States: OpenStax.

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