Management Economics TABLE OF CONTENTS INTRODUCTION 3 PART A
Added on 2020-01-07
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ManagementEconomics1
TABLE OF CONTENTSINTRODUCTION ..........................................................................................................................3PART A ..........................................................................................................................................3a. Assessing the changes which take place in the predicted sales level ......................................3b. Evaluating the changes if elasticity level is -1.1 .....................................................................4c. Identifying the level to which information regarding income elasticity is important formanagement ............................................................................................................................6d. Calculating cost and profit level according to the concepts of economics .............................7e. Assessing price / output combination .....................................................................................8f. Determining profit-maximizing and average cost-minimizing combinations .........................9TASK B.........................................................................................................................................10Company's background..............................................................................................................10Market structure of Sainsbury....................................................................................................11Past market structure of Sainsbury............................................................................................12Consideration of the nature of Sainsbury in retail sector...........................................................14CONCLUSION..............................................................................................................................16REFERENCE.................................................................................................................................182
INTRODUCTION In the present scenario, there are several business organizations which make use ofeconomic theories and concepts with an aim to make suitable decisions. Now, economic theoriesand practices are highly significant which in turn helps in developing competent and effectualframework in the near future. Demand and supply are the major elements whose appropriateestimation is highly required for getting the desired level of outcome or success. The present report is based on TSG pharma which offers caplets and antibiotic productsto the customers. In this, report will develop an understanding about the concepts related toelasticity of sales and demand aspect. Further, it will also shed light on the extent to whichinformation in relation to income elasticity is highly required for ensuring high management.Report will also present the combination through which cost can be minimized and profit will bemaximized. Along with this, it will describe the characteristics of different market structures.This assignment will also provide deeper insight about the factors due to which market structuregets affected. PART A a. Assessing the changes which take place in predicted sales level In the pharmacy sector, sales aspect of firm is highly influenced with the level ofpopulation rather than price factor. The rationale behind pharmacy products is related to thehealth aspect of people (Askari and et.al., 2015). Thus, customers give more priority to thequality of product in comparison to price factor. However, company is required to offer highquality pharmacy products at affordable prices. Moreover, income level is the biggest factor thatinfluences decision making of customers. Thus, by taking into consideration such aspect, it canbe said that population is one of the main elements which influences the sales and profit marginof firm. Thus, manager of TSG pharmacy must have ability in relation to make proper predictionof sales revenue. Along with this, company also needs to make focus on employing effectualstrategies which may result into reduction in the cost level. In this way, by making control oncost business unit can enhance its sales revenue and profit margin. Elasticity showcases the sensitivity of variables which occur due to the changes takeplace in other factors (Naoum and Egbu, 2015). In this regard, by making evaluation of the3
factors such as revenue and population, company can assess the extent to which change willoccur in sales in terms of percentage. Hence, by evaluating the elasticity aspect, business unit cantake suitable decision in relation to the products or services offered. Hence, it clearly presents thequantitative expression of business issue and thereby, aids in decision making to a large extent.By making assessment of the level of elasticity, business unit can assess the impact of price levelon unit sales. Through the means of elasticity, prices can be easily altered. On the basis of cited case situation, TSG pharmacy is required to evaluate the changestake place in sales level with regard to the level of population (Meara and et.al., 2015). Thus, byapplying the economic theories and concepts, manager of the firm can take suitable decisionwhich in turn helps in achieving success. Computation of changes in sales revenue:ParticularsFormulaOutcomeChanges in population (%)New population – old *100=(140000-130000)/130000*100=7.69%Elasticity of sales% change in sales / % changein population0.80= %change in sales/7.69%% change in sales= 7.69*0.80= 6.15%From the above table, it has been assessed that both the variables are highly associatedwith each other. On the basis of this aspect, it can be said that population has high level ofimpact on the sales revenue (Coale and Hoover, 2015). As per the calculation, it has beenidentified that sales revenue will be inclined by 6.15% in the near future with rise in populationlevel such as 7.69%. Thus, with an aim to enhance the customer base and profitability level, TSGpharmacy needs to make focus on satisfying the needs, wants and expectation level of customers.In this regard, business unit needs to place emphasis on offering a wide range of pharmacyproducts that overcome issues which are being faced facing by the people. b. Evaluating the changes if elasticity level is -1.1Price elasticity exhibits the relationship that takes place between changes take place inprice and quantity demanded (Ashraf and Galor, 2013). Through this, sensitivity of the pricelevel can be measured effectually. Price can be said to elastic only when large quantity is4
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