Operation Decision 9 Operation Decision Operation Decision Stanley Pierre-Charles ECO 550: Managerial Economics and Globalization Mohammad Sumadi Strayer University 14th Feb, 2016 Introduction Managers have the responsibility of making decisions and the decisions that they make reflect on the different aspects of the organization. A wrong/improper decision means that the organization will be affected negatively and the vice versa is true when they make the right decision. The effect of the decision can be felt to not only the organization but also the profile of the decision maker who happens to be the manager. Plan to determine effectiveness To determine the effectiveness of the market structure of low calorie foods, a study needs to be done on the target audience for the specific products. The major factors that usually determine the revenue in a given company usually have demand on the list plus the needs of the society. The analysis based on these aspects will thus assist in determine how the plan will fair. Casting a blind eye on the same means that the company will be ignoring a huge aspect that requires attention. In addition to that, it vital to consider the trend of the target market. By effective prediction of the trend, it will possible for the company to know what products will be favored by the market. It follows that the company will drop the production of products that will not be favored by the market. It is further possible to know which product should be served to international markets and which should be served to the local markets. The company will as thus have to adopt a market structure that will suit their products after realization of how the market operates. Moreover, inflation trends should be examined as they will influence how the business will survive revenue wise. Employment trends are also key since human resource is a key department in the company since labor is a basic factor of production (Best, 2000). By having a look at all the aforementioned aspects, the business will be in a position to come up with an effective market structure. A study on factors such as demand of the market, the needs it has, inflation levels in the economic environment among others will assist in coming up with a tailor made structure for the market. Factors that might have caused the change The two factors that might have caused the change are income and tastes. The income of a consumer is what dictates the kind of spending that the consumer will have. A consumer with a relatively higher income that a different one will go for more products since there is spending power. A consumer will thus be able to tell those products that are favored by the amount of earning that they have. The vice versa is true which means when the same customer earns less, the customer will buy less. The revenue of a company.

1. Operation Decision
9
Operation Decision
Operation Decision
Stanley Pierre-Charles
ECO 550: Managerial Economics and Globalization
Mohammad Sumadi
Strayer University
14th Feb, 2016
Introduction
Managers have the responsibility of making decisions and the
decisions that they make reflect on the different aspects of the
organization. A wrong/improper decision means that the
organization will be affected negatively and the vice versa is
true when they make the right decision. The effect of the
decision can be felt to not only the organization but also the
profile of the decision maker who happens to be the manager.
Plan to determine effectiveness
To determine the effectiveness of the market structure of low
calorie foods, a study needs to be done on the target audience
for the specific products. The major factors that usually
determine the revenue in a given company usually have demand

2. on the list plus the needs of the society. The analysis based on
these aspects will thus assist in determine how the plan will
fair. Casting a blind eye on the same means that the company
will be ignoring a huge aspect that requires attention. In
addition to that, it vital to consider the trend of the target
market. By effective prediction of the trend, it will possible for
the company to know what products will be favored by the
market. It follows that the company will drop the production of
products that will not be favored by the market. It is further
possible to know which product should be served to
international markets and which should be served to the local
markets. The company will as thus have to adopt a market
structure that will suit their products after realization of how
the market operates. Moreover, inflation trends should be
examined as they will influence how the business will survive
revenue wise. Employment trends are also key since human
resource is a key department in the company since labor is a
basic factor of production (Best, 2000). By having a look at all
the aforementioned aspects, the business will be in a position to
come up with an effective market structure. A study on factors
such as demand of the market, the needs it has, inflation levels
in the economic environment among others will assist in coming
up with a tailor made structure for the market.
Factors that might have caused the change
The two factors that might have caused the change are income
and tastes. The income of a consumer is what dictates the kind
of spending that the consumer will have. A consumer with a
relatively higher income that a different one will go for more
products since there is spending power. A consumer will thus be
able to tell those products that are favored by the amount of
earning that they have. The vice versa is true which means when
the same customer earns less, the customer will buy less. The
revenue of a company will thus be determined by the income of
the consumer such that as consumer buys more, there is more
accruing revenue for a company. Tastes on the other hand tells
what a given consumer will go for. A consumer will go for the

3. taste that he/she mostly prefers. If a given product is possessing
the taste that the consumer has, the consumer will go for it
(Perloff, 2004). The factors can be linked to the needs and
demands in the market. Demand is a reflection of the
availability of disposable income of the consumers. The more
income there is, the more demand that is made by the
consumers. On the other hand, the relation between needs and
taste is depicted by a consumer going for the product that they
like. If one likes a given product, then that is taste of that
consumer which means the that is the product one needs at the
time. A consumer taste helps avoid the twist that can be brought
about by cheap products. One may hold the view that cheap
products are what the consumers will got for. That can only
happen if the consumer has the taste for the given product. No
consumer will purchase a product that one does not like even if
such a product happens to be cheap. The change will result a
relatively increased market share. Given that the firm can now
make the optimal price, it is possible to evaluate and determine
the price that will favor the market and at the same time, it will
favor the business per se. The firm will thus be able to capture a
huge market share hence leading to more revenue.
Cost Functions
The following functions will help in determination the short as
well as long run cost functions:
TC= 160,000,000 + 100Q+0.0063212Q2
VC= 100Q+ 0.0063212Q2
MC= 100+ 0.012624Q
To come up with the functions, it’s vital to determine average
total cost which is equal to TC/Q
ATC= 160,000,000/q+100Q+0.0063212Q2/Q which gives
= 160,000,000/Q+ 100Q+0.006321Q
Next its average total cost
AVC= TVC/Q therefore, 100Q/Q+ 0.0063212Q2
=100+0.0063212Q
TO Get Q, ATC=MC
Hence; 160,000,000/Q+0.0063212Q= 100+ 0.0126424

4. 160,000,000/Q+ 0.0063212Q= 0.0126424Q… when 100 is
deducted on both sides then
160,000,000= 0.0063212Q2
A subtraction of 0.0063212Q from both sides and then
multiplication of each side by Q gives
Q2= 25,311,649,686.786. After, the square root on both sides
gives
Q= 159,096.353
The company thus needs to produce the quantity above in order
to reduce the average total cost. The information regarding
break-even point is vital for the purpose of determining how the
company fairing in both long and short run
Circumstances that can lead discontinued operations
There are number of circumstances that can lead to discontinued
operations. The aspect includes the issue of obsoleteness of the
product and loss of taste by the market (McGuigan, 2014).
When it becomes obsolete, it is not deriving any merit to the
consumers. That means the product is not been bought by any
consumer. On the aspect of loss of appeal, that means no
consumer likes the product anymore hence it is not bought in
the market. That means the product is not having any market
share hence requires to be withdrawn. Such an aspect can thus
lead to termination of operations. The two circumstances
combined means a business is either or both of the
circumstances is standing at a loss. All the costs that such a
business is incurring are all not going to be footed by the same
product hence a need to discontinue such operations to stop
further losses from occurring. The possible solution for the
management is evaluating on the possibility of producing a
different product with same infrastructure. That means the
management will not be losing in the long run since a new
product is being introduced.
Policy
From ASSIGNMENT 1, P is equal to $5 and Q is 26,560

5. TR= P*Q= 5*26,250= 131,250
MR=MC
MR= 100+0.0126424Q
= 100+ 0.0126424(26,560)
= 435.782
The best pricing for the product should thus be multi-unit
policy. Under the policy, the business will come with a price
which related to the units sold. In this case, the price per unit
will be varied depending on the units that have been sold in the
market (McCannon, 2009). The company thus varies the price as
the acceptability of the product in the market is shown. If a
product has been sold less, there is a fair chance that increasing
the price of the product does not make it favorable for the
market and vice versa is true. The price should thus vary with
the output.
Financial Performance
To evaluate financial performance effectively, the short and
long run functions will be of much help in order to realize
profitability. In the short run,
Total revenue = P*Q
= 5*2650
= 131,250
TC= ATC *Q
= 2294.523 * 2650
=6080504.5
TR-TC
=5,949,254.5/100
=59,492.545
That profit accounts for short run. It is not really good figure
for a company to work with. In the long run, there is fair chance
that the market will have already had other companies come in
thus weakening the performance of the business market wise.
The total and total revenue is thus a good formula that can be
employed in order to determine the financial performance.
recommendations
To improve profitability, the company can concentrate on the

6. sellers. The sellers are the outlet of the company’s product to
the outside world. Concentrating on the seller the company is
maximizing its availability in the market. Sellers will help
expand the market share hence assuring more revenue is being
derived which will lead to more profitability. The next aspect to
take care of is the cost one. The company should make sure that
its cost of production is lower thus assuring more profit is
derived from the sales (Daly, 2002). The costs can be lowered
by aspects such as re-negotiating the deals with suppliers, re-
examine the process of production in order to eliminate waste
and equipping all the staffs with required skills of production.
Wastes can be reduced by adopting current efficient methods
such as the one that is technologically advanced ones. As a
result, the business will be having less wastes derived from its
processes hence less costs.
Conclusion
In summary, a company is always supposed to be vigilant on the
aspects of profitability. Investing in a certain field should
guarantee maximum output in either short or long run or both.
That will assure a continuous existence of a company (Best,
2000). In prefect competition type of market structure, all
businesses happen to be sharing equal merit of exemplary
performance in the market, however such perfection is
impossible to attain in the market. At one point or other, one
business will be having an upper hand over the others hence
imperfect. Businesses thus have to employ all their effort in
order to make sure that their effort is of vital input. As a result,
such a company will be able to attain its desired levels of
profitability. It has to make sure that it observes all the
standards that ensure efficient production in order to have
maximized profit. It further needs to have the consumers of the
product in mind while carrying out any activity related to the
product.

7. References
Best, R. (2000). Market-based Management. Upsaddle River,
NJ: Prentice Hall
Daly, J. (2002). Pricing for Profitability. New York: Wiley
McCannon, B. (2009). Multi-Unit Pricing Managerial &
Decision Economics vol. 30(2)
McGuigan, J et al. (2014). Managerial Economics: Applications,
Strategies and Tactics. OH: Cengage Learning.
Perloff, J. (2004). Microeconomics. Boston: Pearson Addison
Wesley

8. 1
Running Head: Assignment 1: Demand Estimation
Assignment 1: Demand Estimation
Student Name
Course Number
Professor Name
University
Date
1) QD = - 5200 - 42P + 20PX + 5.2I + .20A + .25M
First we will convert all price values into dollars. Then, putting
the values of P, A, Px, I and M in the above equation, we get,
QD = -5200 – (42×5) + (20×6) + (5.2×5500) + (0.20×10000) +
(0.25×5000)
= 26560
· Now, own price elasticity (ep) = ×
= -42, P = 5, Q = 26560
Own Price elasticity (ep) = - 42× = - 0.008 (approx.)
· Cross price elasticity (exy) = ×

9. = 20, Px = 6, Q = 26560
Cross price elasticity (exy) = 20 × = 0.005 (approx.)
· Income elasticity (eI) = ×
= 5.2, I = 5500, Q = 26560
Income elasticity (eI) = 5.2 × = 1.08 (approx.)
· Advertisement elasticity (eA) = ×
= 0.2, A = 10000, Q = 26560
Advertisement elasticity (eA) = 0.2 × = 0.08 (approx.)
· Microwave ovens elasticity (eM) = ×
= 0.25, M = 5000, Q = 26560
Microwave ovens elasticity (eM) = 0.25 × = 0.05 (approx.)
2) From the above results, we can see that the own price
elasticity is - 0.008. Thus the demand for the low-calorie
microwavable food is inelastic in nature. This implies that an
increase in the price of the food leads to the fall of the quantity
demanded by less than proportionate amount.
Income elasticity of the good calculated is 1.08. This implies
that the good selected is a luxury good.
The cross price elasticity is 0.005. Therefore the two goods can
be considered as neutral goods.
Now, coming to the advertisement elasticity, we can see that the
advertisement elasticity is 0.08. Thus advertisement has an
important impact on the sales of the product.
Finally let us come to the microwave ovens elasticity. We can
see that the microwave ovens elasticity is 0.05. Thu, as sales of
microwave ovens increase, demand for of low-calorie
microwavable food also increases.
3) Since price elasticity is less than 1, total revenue will fall if
price falls. Moreover the cross price elasticity of the product is
almost close to zero. So, if the firm will never lower its price to

10. increase its market share.
The cross price elasticity of the product is positive (0.005).
Since the value is too low, the goods can be considered as
almost neutral goods. But own price elasticity is less than 1.
Therefore total revenue test states that total revenue will fall if
price falls. So, the firm will never lower its price to increase its
market share.
4)
i) The demand curve s drawn below:
ii)
iii) At equilibrium, market demand = market supply. Equating
them we get,
P = 247.93 ≈ 248 and Q = 16356.9 ≈ 16357
iv) The factors can influence demand and supply are:
Demand – Advertisement, Income, price of the competitor’s
product, etc.
Supply – technological improvement, supply shocks, etc.
5) Increase in income of the individual can increase the demand
this will shift the demand curve rightward.
Similarly fall in the income of the consumer will shift the
demand curve leftward.
Besides this, a rise in advertisement expenditure will shift the
demand curve rightward and viceversa.
Now, the supply curve can shift rightward if there is any

11. improvement in the technology. On the other hand any supply
shock can shift the supply curve leftward.
References:
Varian, H. R. (2011). Intermediate Microeconomics: A Modern
Approach (8th ed.). NY: Norton
Walter Nicholson, Christopher Snyder (2012). Microeconomic
Theory: Basic Principles and Extensions (11th ed.). USA:
Cengage Learning
TR Jain, VK Ohri (2010). Introductory Microeconomics and
Macroeconomics (7th ed.). India: V.K.Publications
Demand 26560.0 22570.0 18370.0 14170.0 9970.0
5770.0 1570.0 5.0 100.0 200.0 300.0
400.0 500.0 600.0 New demand 31760.0
27770.0 23570.0 19370.0 15170.0 10970.0 6770.0
5.0 100.0 200.0 300.0 400.0 500.0
600.0
Quantity
Price
Demand 26560.0 22570.0 18370.0 14170.0 9970.0
5770.0 1570.0 5.0 100.0 200.0 300.0
400.0 500.0 600.0
Quantity
Price
Demand and Supply
Demand 26560.0 22570.0 18370.0 14170.0 9970.0
5770.0 1570.0 5.0 100.0 200.0 300.0
400.0 500.0 600.0 Supply 5425.0 9700.0
14200.0 18700.0 23200.0 27700.0 32200.0 5.0
100.0 200.0 300.0 400.0 500.0 600.0
Quantity
Price