Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Menu Costs
Why do firms not change their prices very frequently? Obviously, the costs of changing prices at frequent intervals and in small amounts must be more than the benefits obtained from such a change. Firms prefer to wait before they make price changes in relatively large amounts and in the mean time absorb the losses that they would suffer by not changing prices. This of course presumes that the firms have some monopolistic price setting power and the losses referred to above include lower profits than would have been possible if prices had been raised, and not necessarily actual out-of-pocket losses.
It is easy to understand this behaviour of monopolistically competitive firms through the example of restaurants competing with each other. The term 'menu costs' immediately becomes meaningful as the costs that would be incurred in changing the menu cards every time there is a change in the prices of items on the menu. These printing costs are surely negligible, but the more important costs are in terms of the loss of customers that a firm would face if it subjects its clientele to the 'irritability' of continuous, small changes in prices. The concept of menu costs in a modem economy is indeed broad. It is also widely applicable, given the proliferation of automatic dispensers (e.g., coffee machines) and pay telephones that operate on coins.
It is easy to imagine the cost that would be incurred by the suppliers if these ubiquitous machines were to be adjusted every time a price change is effected. The firms would rather not change their prices. It is this idea of weighing the costs of changing prices against the benefits obtained from changing prices that is formalised in the Mankiw model that we consider below.
measurement and scaling techniques in business research
gap between economic theory and business practice
Mrs John Robinson- 'Oligopoly is market situation in between monopoly and perfect competition in which the number of sellers is more than one but is not so large that the market pr
NORMAL AND SUPERNORMAL PROFITS Normal profit refers to the payment necessary to keep an entrepreneur in a particular line of production. In economics, it is generally belie
Model Specification We proceed with the model specification in the following steps. 1) The economy is composed of competitive firms (F in number) and identical workers
Q. Causes for diseconomies of scale? The most significant cause for diseconomies of scale is the diminishing returns to management. As the output grows beyond certain level the
Determine the Market demand curve Market demand curve is the horizontal summation of individual demand curves. The individual demand schedules plotted graphically and summed up
The Microeconomic objectives of government These are the policies which are concerned with the allocation and distribution of resources to maximize social welfare. 1. Allo
For Oliver E. Williamson, existence of firms derives from 'asset specificity' in production, where assets are specific to each other such that their value is much less in a second-
The neo-classical view The neo-classical view is that market forces are the best directors of the economy. Positive attempts by the government it is argued inevitably make th
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd