Descriptive Statistics, Probability, And Risk Assessment - 825 Words

Descriptive Statistics, Probability, And Risk Assessment (Essay Sample) Content: Descriptive Statistics, Probability, and Risk AssessmentAuthorInstitutionQ1.The pet shop business has many consumers and producers with differentiated substitutes; this is characteristic of imperfect competition and firms are free to enter the industry. Differentiation yields a sole seller for a particular pet in the entire market in a monopolistic competition. An increase in prices of pets by a firm is likely to lead to a loss of a substantial proportion of its customers; a decrease, on the other hand, may capture a proportion of customers from rivals in the industry. The level of consumer loyalty, however, influences the rate of substitution due to changes in prices. The figure below depicts the demand curve of the pet shop business.Product differentiation initiatives through advertising campaigns permit the pet shop business to increase prices without losing on turnover in the short-run. Due to brand loyalty, consumers will continue buying from this firm in spite o f increases in pricesCITATION Tab15 \l 1033 (Tabarrol Cowen, 2015). The strength of the advertisements influences the level of elasticity of the products; it creates a belief that commodities of the pet shop business are superior to competitors, and this complements both the high-pricing strategy and the volume of sales. Advertising increases the total quantity demanded in the market; this, in turn, causes the demand curve to shift to the right. The figure below explains the scenario.Prior to initiation of the advertising campaigns, the demand curve of the pet shop business was DD; afterwards, it shifted rightwards to a new position D2D2. As a result, the quantity of commodities demanded in the pet shop at price p1 increased from quantity q1 to q1 as predicted by the marketing consultant. Advertisements increases the quantity of pets demanded and shifts the curve to the right side.Q2.The offer from the large national retail chain will increase the quantity of furniture supplied by the factory from 100 to 200 units and increase their selling price by 50%.When the retailer increases the purchase price from p1 to p2, the quantity of furniture supplied increases from q1 to q2 CITATION Tab151 \l 1033 (Tabarrok Cowen, 2015). Movement along the supply curve due to an increase in output quantity is from point A to point B. However, the supply curve does not shift in any direction, as this condition does not affect the entire furniture industry but an individual firm. The change in output is due to an increase in selling price, which leads to movement along the supply curve from point A to point B. At the new price p2, the furniture factory will make a profit after offsetting accruing costs from the additional expenses in labor, raw materials, and shipping.Q3.The market structure for the marijuana business is characteristic of an oligopoly. Currently, investors are reluctant to open up a marijuana business to avoid stigma, thus limiting the number of firms in the i ndustry. Furthermore, the venture generates supernormal profits due to price leadership and consumer loyalty. The figure below indicates the demand curve for marijuana in the market.If the local government imposes a sales tax of 20%, the effect on quantity supplied will depend on where the demand curve for marijuana is, which may be on the elastic or on the inelastic part. If price after imposition of the 20% sales tax leaves the demand function in the inelastic part, the resulting loss in sales volume will be less than 20% due to consumer loyalty. However, if the levies imposed by the local government raise the price of marijuana beyond the kink point to the elastic part, the firm will lose more than 20% of their customers CITATION Ste12 \l 1033 (Stengel, 2012). Profit maximization occurs at the price p; raising the price beyond this limit implies a substantial loss of customers. Lowering the price below the kink point, in contrast, yields price wars, and this may act as a strate gy for kicking out potential entrants in the marijuana business.Part B: Quantitative ProblemQ1.Price Quantity Demanded (1000-1.5P) Quantity supplied (50+2P) Surplus or shortage 200 -200 450 Surplus 220 -230 490 Surplus 240 -260 530 Surplus 260 -290 570 Surplus 280 -320 610 Surplus 300 -350 650 Surplus 320 -380 690 Surplus 340 -410 730 Surplus At the equilibrium price, Quantity demanded = Quantity supplied CITATION Tay14 \l 1033 (Taylor, 2014)1000-1.5P...