Apply the Ten Principles of Economics (basic economic axioms) to real-world situations.

Ten Principles of Economics

Introduction

In this paper, you will apply what you have learned in Chapter 16 to the firm or business you selected in order to see how the concepts can be applied to a business situation.

Keep in mind that throughout this course, papers are intended to bring real-world situations to the course material that we are covering each week. Part of your grade will depend on the connections you make between your chosen firm (which could include the economic environment of your chosen firm, the markets in which your chosen firm interacts with outside actors, the decisions your chosen firm makes, etc., depending on the particular question), the material from the chapters we covered in the week, and, when applicable, your own experience.

Activity Instructions

For the particular firm/business you selected,* describe the markets in which your firm participates that are monopolistically competitive.  Consider the possibility of inputs to the firm as well as your chosen firm’s output.  What differences are there between the monopolistically competitive firm’s  product and other firms’ output? What causes those differences?

Are there actions that the monopolistically competitive firm is taking to differentiate its products from other firms’ products in that market?  Are those actions effective?  What are the goals of those particular actions—how does it affect the situation the firm is facing?  How and why are consumers’ behaviors affected?  Are there other actions that the firm could use to differentiate its product from the products of other firms? Do you think these actions would be effective? Why or why not?

*Note: Most firms chosen by students have some aspects of Monopolistic Competition in their output markets. For this week’s paper focus on those aspects. However, it is possible the firm you originally chose in week 1 is not a participant in any monopolistically competitive markets.  In that case, you may choose another firm to discuss this week.  If you are in this situation, please consult with the instructor.

Writing Requirements (APA format)

  • 1.5-2 pages (approx. 300 words per page), not including title page or references page
  • 1-inch margins
  • Double spaced
  • 12-point Times New Roman font
  • Title page with topic and name of student

Grading and Assessment

This activity will be graded based on academic content, integration of resources, and college-level writing and grammar. Refer to the Written Analysis Grading Rubric (in Course Documents)

Course Learning Outcome(s): 1, 2, 3, 5
1.   Apply the Ten Principles of Economics (basic economic axioms) to real-world situations.
2.   Predict market outcomes using simple Microeconomic models.
3.   Illustrate how markets serve to allocate goods and services.
5.   Apply the simple Microeconomic models to real-world situations and determine how the assumptions or predictions of a model may need to be modified to apply to the real-world situations.

 HINT FROM THE TEACHER

I wanted to emphasize the instruction for the paper this week to consider the input markets for the firm.  In all likelihood, the output for your product will NOT be a perfectly competitive market, or anything close to it.  In the remaining weeks of the course, we will study models that are actually closer to the markets for your firms’ goods.

So this week, you can still discuss your firms, but the markets closer to perfectly competitive markets would be for the goods and/or services that your firm purchases in order to make its outputs.  To make the papers as close as possible to discussing perfectly competitive markets, I’d ask that you follow the above.  I do know that it does mention (and I do want you to do this!) to discuss how close your market is to filling the assumptions of perfect competition.

In other words, something I’ve seen done wrong in the past is to claim that something like Coca-Cola is in a perfectly competitive market. (nobody has chosen that firm or anything close to it, so I feel pretty good using that as an example).  They’d go through and say that Coca-Cola has filled the assumptions of PC–but it really doesn’t (obviously for the output good).  They may claim that there are many firms, but in reality there are only a few (PC number of firms is “many”–in the hundreds to thousands).  Also, while the student may claim that the products are the same, there is a definite (if slight) difference between Coke and Pepsi and RC Cola.  Again, thinking about an input, say corn syrup, would lead to something that could be a more PC market–especially if one goes back to the growers of corn–there are lots of farms and one ear of corn isn’t really different than any other (at least in trying to determine who the particular farmer was who produced it).  I’m not sure about the manufacturers of the corn syrup itself.  But there are other inputs to Coca-Cola that are probably even closer to a perfectly competitive market.