The Mechanics of Profit Maximization Essay Example | Topics and Well Written Essays - 750 words

The Mechanics of Profit Maximization - Essay Example Marginal Revenue Q = 100 – 0.5P 0.5P = 100 – Q P = (100/0.5) – (Q/0.5) P = 200 – 0.5Q TR = P*Q = (200 - 0.5Q) Q TR = 200Q - 0.5Q^2 MR = dTR/dQ = 200 – Q Marginal Cost TC = 100 + 60 (Q) + (Q) 2 AC = TC/Q = 100/Q + 60 + Q MC = dTC/Dq = 60 + 2Q B) Demonstrate that profit is maximized at the quantity where MR = MC. MR = MC MR = dTR/dQ = 200 – Q MC = dTC/Dq = 60 + 2Q 200 – Q = 60 + 2Q 140 = 3Q Q = 46.67 C) Derive the relationship between marginal revenue and the price elasticity of demand, and show that the profit-maximizing price and quantity will never be the unit-elastic point on the demand curve. The relationship between marginal revenue and the price elasticity of demand can be summed as the percentage change in revenue equaling total percentage changes in quantity and price. R = PQ dR = PdQ + QdP dR/R = PdQ/PQ + QdP/PQ dR/R =dQ/Q + dP/p D) Using the information in (B), demonstrate that the profit-maximizing price and quantity will nev er be in the inelastic portion of the demand curve. ... 8) Explain the difference between firms in monopolistic competition and firms in oligopoly. What does this difference mean for prices and quantities and for economic profit? Firms in monopolistic competition contain large number of small firms, while in an oligopoly contain a small number of large firms (Amosweb, 2013). Also, monopolistic firms are price takers, while oligopolistic firms are price setters. Since oligopolies set the prices of quantities rather than take the prices, they can affect the outcome of the economic profit, where if they set the price high, they earn more profit. The monopolistic firms cannot afford to set the prices high because they cannot compete with oligopoly firms in terms of setting prices (Varun, 2013). With the small number of large firms in oligopoly, it is easier for one firm’s action to influence the action of other firms (Brunelle, 2006). For instance, if one oligopoly firm reduces its price because of increased quantities it will affect t he entire market because it would imply other monopolistic firms would have to reduce their prices and may reduce their profit. 9) A firm has estimated the following demand function for it products: Q = 8 – 2P + 0.10I + A Where Q is quantity demanded per month in thousands, P is product price, I is an index of consumer income, and A is advertising expenditures per month thousands. Assume that P = $10, I = 100, and A = $20. Based on this information, calculate values for: Quantity Demand Q = 8 – 2P + 0.10I + A Q = 8 – 2 (10) + 0.10(100) + 20 Q = 18 Price Elasticity of Demand ed = dQ/dA ed = 1 Advertising Elasticity ae = dQ/dA x A/Q ae = (1) x (20/18) ae = 1.11 % meaning 1 percent

Banyan Tree Case Study Essay Example | Topics and Well Written Essays - 2250 words

Banyan Tree Case Study - Essay Example That said, these factors are important, but the main factor which contributes to Banyan Tree's success is the way that they treat their employees. Banyan Tree allows its employees to vary service delivery according to the local customs and practices, and this gives the employees investment and ownership in the company. The same goes for the fact that employees are able to be creative with bed decoration. Staff welfare is paramount to the company – they provide luxurious amenities, as well as prosaic, but necessary, amenities, such as child care facilities. Therefore, the employees have ownership, in that they really care about the facilities. This fits in with the concept of shared vision. A shared vision is one in which the leader, and all the followers, have the same vision for the company. Every person cares about this vision, and everybody has the desire to carry out this vision. Every member of the organization has the same vision, therefore will be truly committed to mak e the vision happen (Senge, 1990, p. 206). What Banyan Tree is doing right is that it has created the shared vision by acknowledging the strengths of the employees. This acknowledgment of each individual member is a powerful factor in creating a shared vision. Having a shared vision enables the employees to know that they own a piece of this vision, and that they are a part of the vision (Senge, 1990, p. 212). ... After all, a resort with all the amenities possible, but a disengaged and disinterested staff will ruin this resort. 2. Can Banyan Tree maintain its unique positioning in an increasingly overcrowded resort market? The communication strategy and brand positioning for the company focuses around high end clientele. They offer luxurious amenities, such as private pools, jacuzzi and spa treatment rooms. Their villas are individualized to the clientele. Their accommodations are private and intimate, which sets them apart from their rivals, who do not offer the same accommodations. Moreover, they are unique in that they emphasize their environmentally friendly designs. They are socially responsible in everything they do, from procurement to hiring natives for their positions. As for their marketing, they advertise in high-end travel magazines and cultivated relationships with travel editors and writers. They have also chosen to work with only agents which specialize in high-end travel arran gement with wealthy customers. Banyan Tree can maintain its brand and its positioning, because they are apparently the only resort which has the amenities which are offered there. For instance, they have total privacy for their guests. Guests may skinny dip in their private pool and hot tubs if they want to, because it is totally private and secluded. They emphasize this in their marketing materials, so this is a big plus and it sets them apart from their competitors. Wirtz (2009) states that the competitors in the market, Hilton and Shangri-La, do not offer the same privacy that Banyan offers. Moreover, as indicated in other areas of this essay, Banyan is unique in that it gives ownership to its employees, in