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.
Determine the studies of Managerial economics Managerial economics studies the application of techniques, principles as well as concepts of economics to managerial problems of
Price Elasticity of Supply Price Elasticity of supply measures the degree of responsiveness of quantity supplied to changes in price. The co-efficient of the elasticity of s
1. The price of a U. S. produced hammer is $5. The exchange rate with Malaysia is 3 Ringgit/1$. What is the current price of the hammer in Malaysia? (Assume no transportation cost.
Rationing of Credit As an instrument of credit control credit rationing was first employment by the bank of England toward the end of the eighteenth century when it imposed a c
define scarcity and opportunity cost.Show how these concept are useful in managerial decision making
Electron Control, Inc., sells voltage regulators to other manufacturers, who then customize and distribute the products to quality assurance labs for their sensitive test equipment
What is the Permanent Income Hypothesis? What is the theory's potential relevance for assessing the effects of temporary tax cuts for the purpose of fiscal stimulus? If you were
Resource allocation in a free enterprise Although there are no central committees organising the allocation of resources, there is supposed to be no chaos but order. The major
CONTRACTING AND INSIDER-OUTSIDER MODELS OF UNEMPLOYMENT From the Walrasian assumption of a market-clearing wage on efficiency considerations - it was postulated th
A study of 86 savings and loan associations in six northwestern states yielded the following cost function. I''ve been given the following data; C=2.38- .006153Q1 + .000005359Q2 +
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: +91-977-207-8620
Phone: +91-977-207-8620
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd