Paper

 

Select a new, realistic good or service for an existing industry.

 

Write the economic analysis section of a business proposal. This will include statements about the market structure and the elasticity of demand for the good or service, based on text book principles. You need to create hypothetical data, based on similar real world products to estimate fixed and variable costs.

 

Required Elements: You must address each question in a separate section and use appropriate section headings, otherwise, 5 points will be deducted if you do not follow this.

 

·        

Identify market structure

 

·         Identify elasticity of the product

 

·         Include rationale for the following questions:

 

1.   
How will pricing relate to elasticity of your product? (Hint: you should base your argument on the Total Revenue Test.)

 

2.   
How will changes in the quantity supplied as a result of your pricing decisions affect marginal cost and marginal revenue?

 

3.   
Besides your pricing decisions, what are your suggested non-pricing strategies? What non-pricing strategies will you use to increase barriers to entry?

 

4.   
How could changes in your business operations alter the mix of fixed and variable costs in line with your strategy?

 

No more than 1000 – 1200 words your proposal is consistent with APA guidelines.

 

 

Monday, August 19, 2013

6:48 PM

 

RunningHead:

Business Proposal

1

Business Proposal

2

Business Proposal

Student Name

August 10, 2013

The service chosen for this proposal is the refurbishing of old furniture that is are bought at garage sales, public auctions, off of the internet. Then converting the refurbished furniture into whatever the existing market trends and demand are. The new pieces of furniture are marketed on a new website, that additionally includes the beforehand and afterwards photos which may be a suitable explanation for the advertising

price

as it defines to the customers the amount of work that was done. There are a lot of individuals who cannot afford to invest in newer furniture to keep up with the ever varying trends in material and designs. To furnish one’s home can be very expensive, and locating the right piece for yourself at a reasonable price can take a time. In conducting some investigations on this specific market, it is a fact that there are different websites that advertise alike business undertakings, and the responses to feedback seems to be a very positive. Creating furniture to be suitable for any budget seems like it works.

The market structure in this situation is deemed monopolistic competition because in the refurbished furniture business, there are many manufacturers and consumers in the market, and no business has absolute control over the market pricing. Likewise, non-price variations amongst products are obvious, only a few barriers of entry and exit exemplify this market, and the producers do have selected control over prices. In this particular market, elasticity, which is represented by the change in demand or supply as price differs, is distinguished by a favorably, but not flawless, elastic demand curve, because many competitors are manufacturing closely interchangeable products. This type of demand curve depends on the total number of sellers in the market industry and the extent of product assimilation.

In the marketing world, pricing products includes two of many most essentials aspects of business. For the refurbished furniture I would focus on setting a price that brings value to my customers and business both are essential for the permanency and profitability in business. There are several factors go into determining the right prices for the refurbished furniture. One must ensure the price reflects a certain value to the customers. The pricing of the refurbished furniture my

financial reward

creating the new creative product; the worth is what the customer believes the product is priced at. I would run a test on my product offers to customers and observe how pricing affects their overall buying decisions. Taking into account both variable and fixed costs that come with the production of the product. Fixed costs, such as retail space or insurance, remain constant no matter what you produce or sell. Variable costs such as wages and materials rise with the amount you produce or sell. When setting my prices I would use the odd-value pricing, for instance 

selling

something for $19.99 rather than $20.00, and starting a new product off at a low price, and as the product gains popularity slowly increase it.

The most favorable strategy for a monopolist in a precise topographical and product market will be dependent on whether owners want to maximize short-term profit or is essentially involved in protecting its territory. It will also vary upon the barriers to entry that could make life harder for probable competitors. There are a few items that a refurbished furniture vendor can do for non-pricing strategies such as advertising, control of resources, and customer network effect.

They can make it difficult for new competitors by increased advertising promotions so that new businesses find it hard to compete in. Consequently, label loyalties can be created through promotions and other marketing strategies. These strategies help gain market influence that act as barriers to entry for competitors and make it difficult for them to gain consumer approval

If this created company has control of a sources essential for this market, then other businesses are not able to rival within the industry. For example, control over raw materials or other inputs in production process

Obtaining private contracts with key suppliers and and distributors can in addition make it difficult for competition to enter the industry

Network effect is another prime example way to stop competitors from entering the industry. For instance, when a product has a value that is pending on the number of current consumers, then other key players have hard time entering a market where the company has already apprehended a considerable customer loyalty to the particular products. A niche strategy focuses on a small segment of the population and offers a product to fit the needs of those consumers. By making it a point to understand the consumer, we will be able to make a more aware of which decisions as to which strategy to use.