Economics Market Advantage

Questions: 1. You are the only supplier of a product and you are seeking to increase your revenue. Under what conditions would you (a) take the decision to lower the price of your product or (b) take the decision to raise the price of your product in order to achieve your goal of increased revenue.2.A country that can produce all goods more efficiently than any other country has no need to engage in trade. Discuss. Answers: 1. A single supplier will employ the price discrimination with an aim of acquiring market advantage. Decreasing the price upsurges demand but downscale supply whereas upscaling the prices decrease the demand. Increasing price, nevertheless, will hike supply on the basis of economic forces of demand and supply. Consequently, in case a single supplier wishes to hike the demand for a product, she might downscale the price to discriminatively charge dissimilar price say on the basis of persons, locations and usage of a product (Ricci, 1999). Conversely, the single supplier will hike the price by providing fewer of the product but still get hiked revenue as a result of the high prices charged. An example in which price personal discrimination is applied is whereby the seller charges different price for the same product to individuals with dissimilar degree of wealth endowment. The single seller will downscale the price for individual perceived as underprivileged. In so doing, the single supplier will sell more product at lower price (Weder, 2015). However, the single supplier will hike the price to the wealthier individuals and still achieve hiked revenue goal. 2. An economy is well placed to specialize in the production of a product it can efficiently produce and trade to get other goods. Economies have fluctuating levels of natural, human, and capital resources. They also have different strategies of resources combination in production of goods and services. In a nutshell, economies are never equally efficient at the production of products required by their respective residents (Brecher, Chen Choudhri, 2002). There is constantly an opportunity committed to every decision a country makes to produce a good. It explains that amount of alternative good forgone. Given a choice of producing one product or another, specialization holds that a nation is more efficient to produce that product with the downscale opportunity cost. The country should produce that product to trade for the commodity with the greater opportunity cost. In case an economy can produce more of product with the same resources that another economy can, it is said to have an absolute advantage in the production of that specific product. Conversely, where the second nation has absolute advantage in the production of a product which the first economy wishes to import, the two economies will be both better placed specializing and trading. Trade remains advantageous to both economies even when one enjoys absolute advantage in producing both products for trade (Bain, 2011). Given any two products, an economy has a comparative advantage in the good that has inferior opportunity cost. The two economies need to ensure that the terms of trade are designed in a manner that both economies decrease the opportunity cost of the commodities being drawn from the exchange. References Bain, J. S. (2011). A note on pricing in monopoly and oligopoly. The American Economic Review, 448-464. Brecher, R. A., Chen, Z., Choudhri, E. U. (2002). Absolute and comparative advantage, reconsidered: the pattern of international trade with optimal saving. Review of International Economics, 10(4), 645-656. Ricci, L. A. (1999). Economic geography and comparative advantage:: Agglomeration versus specialization. European Economic Review, 43(2), 357-377. Weder, R. (2015). Linking Absolute and Comparative Advantage to Intra?Industry Trade Theory. Review of International Economics, 3(3), pp.342-354.