Price discrimination

The definition is where a monopolist charges different prices for the same product in different market.

It has 3 degree :

1. when each customer is charged a different price for
2. When the same customer is charged different prices depending on volume bought
3. when the market is divided into groups and each group is charged a different prices

The supplier has information showing that different groups of customers have different elasticity they may do the price discrimination .Because different customers are prepared to pay different prices it really depends on customers' income or other factors .By the way the discrimination can only work if the different customers can not exchange the product.For example the flight ticket.

The market can be divided by Ages which is student or elder people can get some discount sometimes E.G. bus tickets . And can be divided by nationality and time for example Rush hour prices for train tickets are higher because demand is inelastic at these time .And the market can divided by income so if people who income is higher is able to pay more the suppliers know that .

Many people think price discrimination is not fair .But there is a argument that say this can help people who have low income .People who has low income can benefit from it .Which means low income people can have some services or products by a lower price .Which is a welfare for the society.But why richer people have to pay more ... so there is a argument .

Talk about Economies of scale

Economies of scale are the cost advantages that a business can exploit by expanding their scale of production in the long- run. The effect is to reduce the long run average cost of production over a range of output .These lower costs are an improvement in productive efficiency and can feed through to consumers in the form of lower market price .But they can also give a business a competitive advantage in the market. They lead to a lower prices but also higher profits,consumers and producers will both benefit. The definition in our text book is a reduction in long run average costs resulting from an increase in the scale of the production.

And economies of scale divide into two types Internal and External economies of scale . And Internal Economies of scale include :

• Technical economies of scale .Means that the business is large enough can afford to invest in expensive and specialist capital machinery.And the specialisation of the workforce (the division of labour)when the business is bigger usually the organisation is better so the efficiency is higher.


• Marketing economies of scale and only buyer power.A large firm can spread its advertising and marketing budget over a large output and it can purchase its factor inputs in bulk at negotiated discounted price if it has buying power in the market.


• Financial economies of scale .Larger firms are usually rated by the financial market to be more credit worthy and have access to credit facilities, with favourable rates of borrowing.

External Economies of scale : They are occur outside of a firm within an industry .Thus when an scope of operations expend due to for example the creation of a better transportation network,resulting in a subsequent decrease in cost for a company working within that industry ,external economies of scale are said to have been achieved. And the other one is research and development facilities in local universities that several business in an area can benefit from .

There are some disadvantages of economies of scale:

• Standardization of products .Limiting the amount of effective consumer choice in the market .
• lack of market demand .Market demand maybe insufficient for economies of scale to be fully exploited .
• Developing monopoly power.it is may lead to a loss of allocate inefficiency.
• Protecting monopoly power .Sets barrier to entry for the new business.

DAILY -- blog !

It is a convenient and the design is special which as I said above .So the stroller has all the function that people usually need .It considered all the situation for the babies .And the material for make the stroller is organic cotton and wool which are really comfortable for babies.But there are too many competitors in the market so it must has it own USP so i think features 360 degree rotation that allows the child to face forward, back or even sideways is quite well design.And it is very easy to use.As the article said :

Priced at USD 900, the Orbit Baby Infant System includes infant car seat, base and rotating stroller that work together in modular fashion. The foldable stroller—priced separately at USD 485—features 360 degree rotation that allows the child to face forward, back or even sideways. An exclusive twist-and-lift mechanism permits one-handed folding, while a patent-pending, removable Cargo Pod makes getting to all of baby's stuff a breeze. The stroller is compatible not just with Orbit Baby's infant car seat, but also with its bassinet, toddler car seat and toddler stroller seat. Perhaps best of all, Orbit Baby uses micro-fiber upholstery fabric certified by the International Oeko-Tex Association, which limits more than 100 potentially harmful substances and chemicals. Its flame retardants, for example, meet all applicable standards without the use of many of the commonly used—and potentially harmful—chemicals. Its rain shields, similarly, are PVC-free, and its Green Edition foot muffs and car seat upholsterers—coming soon, and made of organic cotton and wool—will feature what the company says is the industry’s first fabric to be naturally flame retardant without any harsh chemicals. Orbit Baby is also working on a product recycling program for when families outgrow its products.

Therefore I think this is a good business idea ,And I think the market for product for babies is quite essential .

Interactive piggy bank teaches kids about money

This is a quite smart idea I suppose.The most reason I said that is the product is target children.And it able to teach children some skill about the finance ,money ...Well I can say it just like a toy so it will attract most of children and its can help kids to gain some general knowledge besides playing so the parents will likely to buy it for their children as well .And it can teach kids how to plan for purchases by setting goals, completing tasks and comparing prices.These are all important skill for the future life.So which I think the demand will not be low .It is a good Christmas gift for young children.

But it is really for certain ages of children as well for example 3-12 ,I think should be children before middle school otherwise the piggy bank system will be too easy for them then nothing for them to learn .And the other problem is there will be a comparison between them I mean like if one child has it, he will show it to his friends and his friends are going to want to have it ,then they will ask their parents to buy it, no matter the parents are willing to buy it or not .So what i mean is the children will have comparison with each other.I think anything for playing children will waste time on it .But the good thing for this product is it can provide some skills for children.

So I think it is a good business idea.

Farmers use vending machines to sell local products

The ides is good and very practical.To sell the products like fresh milk,eggs ,butter,cheese, potatoes and sausage in a vending machine is quite interesting and the farmers will feel happy because they don't have to send the products to the retailers instead of that they are able to sell the goods directly to the customers .So the farmers have no cost on delivery.And the customers can easily buy the good that the need . Therefore both customers and farmers will satisfy.
And the advantages of using a vending machine is obvious for example the cost will be lower for farmers the delivery cost and the labour cost must be reduced and for customers the cost of transport to the shops will be reduced.So that's the cost .And the machines is convenient it can be set in everywhere .And people buy fresh products from it the feeling is very natural.(hahaha)And it is easy to manage.So I think it is good . And about finance the cash flow for farmers wont be a problem and the profitability is high

But the drawback of that is people cant know the quality of food in the machine so the demand may suffer.And also using a vending machine the communication between customers and the sellers will be less.

Homework

Watch this and say whether Christian was right to accept the offer.

I think he was right .
He asked 80,000 pounds for his manufacturing,marketing and development.And it seems his business is running very well he just wants to expend his business .As he said he has good market and has 2 main retailers WH Smith and the other one(I cant remember) they have ordered his products .And he do imports and exports as well and one factory is in China .Which is in a very good situation. And according his expectation he can get 450,000 turnover in the 1st year and 425,000 profit .The profit is really high and he said the costs is low for each foldio which is just 0.5pound. So we can see there is a high profitability.So I suppose this is a investable business .
And first he wants 80,000 pounds and give 15% shares .So which is more than 5000 pounds for each share.But at the last the offer was 80,000 pounds for 35% shares so one share is equal more than 2000 pounds each .There is more than 3000 's difference.And he said he invested 10,000 pounds already so the share now is 100 pounds for each . So in my own view he really wants to develop his business this is a really good way to do it because the dragon could help him to achieve his goal and to cooperate with famous business person who has many experiences and knowledge is good for his business as well .And the dragon has promised he will put this product in the market very soon .
Well anyway I think 80,000 35% is worth to have this partnership.And it is the way to help his product develop.And I think he actually can accept 35% of shares off.

Practice Exercise 2 on page 26 of the test book

1.Non-current assets(fixed assets): Intangible assets +Vehicles+land and buildings +plant and machinery = 68+11+88+24=191

2.Current assets:(is include cash ,stock ,debtors)4+19+34=57

3.Current liability:(which is creditors)23+3=26

4.Net current assets:(working capital)=Current assets -current liability=57-26=31

5.Non-current liabilities :(over 1 year)So just 16

6.Net assets (total net assets)= non- current assets + current assets-current liabilities -non-current liabilities =191+57-26-16 =206

7.Total equity:(capital)Reserves+share capital= 132+74=206