CSU Market Analysis and Decision Making Essay

Description

Unit I introduced the benefits of markets to improving outcomes for producers and consumers. Unit II examined the role of costs and prices in decision-making. For this assignment, you will answer a series of questions in the form of an essay. Support your answers with research from at least three peer-reviewed journal articles using the CSU Online Library (or other sources).

Research elasticity information for Utwo particular goods: one with an elastic demand and one with an inelastic demand. Using elasticity information you gather, predict changes in demand. The United States Department of Agriculture website has a good resource to help with this.
Describe how marginal analysis, by avoiding sunk costs, leads to better pricing decisions.
Explain the importance of opportunity costs to decision-making and how opportunity costs lead to trade.
Evaluate how better business decisions can benefit not just the producer but the consumer and society as a whole. In your evaluation, contrast the deontology and consequentialism approaches to ethics.UNIT I STUDY GUIDE
Problem Solving and Decision-Making
Course Learning Outcomes for Unit I
Upon completion of this unit, students should be able to:
1. Evaluate the ethical outcomes of free market outcomes using supply and demand models.
1.1 Differentiate the two main approaches to ethics.
1.2 Discuss how free markets create wealth.
6. Analyze the basis of trade.
6.1 Explain opportunity costs.
6.2 Differentiate costs important for decision-making and trade from costs unimportant for decisionmaking and trade.
Required Unit Resources
Chapter 1: Introduction: What This Book Is About
Chapter 2: The One Lesson of Business
Chapter 3: Benefits, Costs, and Decisions
Unit Lesson
Welcome MBA Students!
Students, the following welcome video introduces you to the Columbia Southern University Master of
Business Program with a summary of the program by Academic Program Director, John Hargadon, Ph.D. and
Lead Faculty, Dr. Darlene Jaffke.
APA Use in Academic Writing
Before getting into course content, here is some information on research, APA format, and other resources to
assist you with your academic progression in the program. Research and citing sources is very important in
an academic program. Academics is about learning and expanding knowledge. This is done through
research. That research also has to be of an appropriate and high quality. You probably would not want to ask
your baker for advice on fixing a leaky faucet. Likewise, you probably would not want to ask your plumber to
bake you a cake. Similarly, simply opening up an Internet search engine, typing in a question, and opening
the first couple of links that come up is not research. You need to ensure you are using trusted sources.
The best sources for conducting research are peer-reviewed journals. These are articles that have been
written by scholars and reviewed by other scholars for accuracy.
You might find that some assignments (in any of your courses) require information that does not fit in peerreviewed journals. Information about current events, for example, is not likely to be found in a journal article.
For these, you can use trusted periodicals, such as Forbes, The Economist, and The New York Times. Be
careful, however, as there is a lot more than just current event information. These sources often have
editorials and other opinion pieces. These articles get into the realm of theory, but they are not academic
articles and should not be used to support theory.
A final type of source that can have useful information is government websites. Government institutions often
produce important data on the economy that are important to business decision-making. As with news
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sources, government sources need to be used appropriately. When pulling data
or information
on government
UNIT
x STUDY GUIDE
actions, government websites are appropriate. When evaluating the effect of government
policies,
Title
government sources are not unbiased and, thus, are not an acceptable source of information.
An excellent source for learning more about research strategies specifically in the CSU Online Library is the
Database Search Strategies video (Transcript for Database Search Strategies video).
Now that you have your research, you need to cite it and reference it. Columbia Southern University uses
APA Style. Citing is important because it tells the reader where information came from and enables the reader
to look up the sources to evaluate them. The formatting of the references and citations is important because
consistency ensures the necessary information is provided and allows the reader to know exactly where to
look for the information on the source they need.
The CSU Writing Center has several examples within its Learning Resources page for writing in APA Style.
Below are a few highlights of the resources available from the Writing Center.
Essays, research papers, case studies, and other written assignments should have a few standard features: a
title page, running head, and page numbers. These are illustrated in the Title Page Example.
Research is an important part of academic work and how that research is cited is an important part of APA
writing. APA Style uses parenthetical in-text citations with the author’s last name and year of publication. For
example, an in-text citation of Adam Smith’s The Wealth of Nations would be (Smith, 1776). Some sources
have multiple authors or other different rules for citing. The Writing Center’s Citation Guide has specific
guidelines for different situations.
One other point to stress, in-text citations should be used whenever information from a source is used. This
does not just mean only for direct quotes but for paraphrased material as well. In fact, quoting should be
avoided. Information from sources should be paraphrased rather than quoted. Paraphrasing, rewording
content into your own words, demonstrates an understanding of the material. Quoting simply demonstrates
an ability to copy and paste. The Writing Center’s tutorial on Paraphrasing will show you how to (and how not
to) paraphrase.
One effective rule for paraphrasing and avoiding plagiarism is to research, read, reflect, and then write.
Reflecting on readings, then putting the research away, forces the writer to explain what they read rather
than copying it. If a writer cannot explain what he or she has read, then the writer does not actually
understand the material.
If a source is cited in a paper (any one of the example assignments listed above and more), the source should
appear in a reference page at the end of the paper (not a bibliography, not a works cited, but a references
page). A references page is specifically for sources referred to in a paper. If it is not referred to, it does not
belong within the list of references. The Writing Center provides many examples of references for a variety of
different sources under the APA Individual Reference Examples on the Learning Resources page in the
myCSU Student Portal. The most important reference to become familiar with as an academic writer is the
reference for a journal article. Here is an example of the proper way to reference a journal article:
Evans, C., & Evans, G. (2019). Adverse childhood experiences and public service motivation. Public
Personnel Management, 48(2), 123–146. Retrieved from http://dx.doi.org/
10.1177/0091026018801043
There is more detail in the Writing Center, but there are a few important points to make. References should
have enough information for the reader to evaluate the source and find it if they so desire. Links can be
unreliable and, by themselves, do not give enough information to evaluate the source. Notice how the second
line is indented. This is called a hanging indent. The first line of a reference should not be indented but
subsequent lines of that reference should be. Finally, references on a reference page must be listed in
alphabetical order by the last name of the first author of each source.
Another important part of APA Style is the proper formatting and use of headings. Headings can serve as a
good guide for a paper. When writing a paper, they keep the writer focused. When reading a paper, they give
the reader a roadmap for what they are reading.
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The most common heading is a Level 1 heading. A Level 1 heading should beUNIT
centered
and boldface
x STUDY
GUIDE with
uppercase and lowercase letters. For example:
Title
APA Formatting
A Level 2 heading should be left-aligned and boldface with uppercase and lowercase letters. For example:
Heading Levels
APA Style has five levels of headings. You can learn more about all the levels on this blog post, “How to Use
Five Levels of Heading in an APA Style Paper.”
The Formatting Formal Assignments tutorial covers most of the important APA Style formatting for
assignments at Columbia Southern University, such as the running head, abstracts, level headings, hanging
indent, and more. You can easily navigate to the desired APA element by selecting it in the table of contents
on the right side of the screen.
Also, it is a good idea to view a Sample Paper with Proper APA Formatting.
Finally, it is recommended that you read and print this CSU Library Resource and letter from MBA Lead
Faculty, Dr. Jaffke, before continuing on to the business content of this lesson.
Basis for Trade
When people hear the word trade, particularly in an economics context, they often think of it in an
international context. Certainly international trade is an important topic in economics, and one this course will
cover. But trade happens all around us, all the time, and on very small levels. A basic tenant of economics is
that trade is beneficial. Economists often show this with fairly complicated math, but it can be shown with
some fairly simple reasoning. A simple way to think about trade being beneficial is that if it was not, people
would not do it. Now, this does not mean that people do not get buyer’s remorse or sometimes regret
engaging in a trade, but they at least expected to benefit from the trade at the time of the trade. If they
regularly lost in a trade or regretted the trade, they would stop trading.
For another example of how people benefit from trade, consider the following example:
A person, call this Person A, buys a pack of Starburst and sits down on a park bench. There happens to be
another person, call this Person B, on the park bench who also just bought a pack of Starburst. The two strike
up a conversation and find out that Person A’s favorite flavor is cherry (also known as red), and Person B’s
favorite flavor is orange (also known as orange). Further, Person A’s least favorite flavor is orange, and
Person B’s least favorite flavor is cherry. The two decide they could trade their reds and oranges. Now Person
A has twice as many reds as before and no oranges, and Person B has twice as many oranges as before and
no reds.
Who wins in this trade? They both win. Both get more of what they like and have less of what they do not like.
Who wins more? Impossible to determine. Even if it was a lopsided trade (say 4 oranges for 2 reds), the
winner could not be determined. To know that, comparable values of the reds and the oranges to each person
would have to be known. It is possible that Person A really dislikes the oranges so getting rid of them is
almost costless, but Person B might kind of like the reds, so giving them up is a bit more of a burden.
This is an important point with trade. In this example, there are no winners and losers, there are only
winners. As stated previously, if they did not both win, then at least one of the parties would not have
engaged in the trade.
Here is a quick point on who loses from the trade because this is where the controversial nature of
international trade agreements originates. Assume Person B had a regular trading partner for the Starbursts.
Call this Person C. But in their regular trade, they traded four reds for four oranges. Now that Person B has
found Person A, Person B is able to trade only two reds for four oranges. This is certainly a better trade for
Person B. So now Person B trades with Person A and does not trade with Person C. Person C is left out of
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the trade and thus loses from the trade agreement. But their loss is not from participating
in trade,
it is from
UNIT x STUDY
GUIDE
not participating in trade.
Title
The idea of trade arises from opportunity costs. Opportunity costs are the value of what you give up to get
something else. In the case of the above trade, when Person B trades with Person C, Person B gives up four
reds to get four oranges. But when Person B trades with Person A, Person B only gives up two reds to get
four oranges. That is, Person B chooses to trade with Person A because doing so means Person B has a
lower opportunity cost to acquire the four oranges.
Every trade is based on opportunity cost, even if it is not obvious. When a working parent decides to grab fast
food dinner on the way home, it is, in part at least, because the time saved cooking (and potentially grocery
shopping) is worth more than the cost of the meal.
By paying attention to opportunity costs, workers are able to specialize in their production and be more
productive. This additional productivity means more production for society to consume, thus making
society better.
This is why capitalism and markets work so well at generating wealth. People are able to determine for
themselves where their lowest opportunity costs are. If they make mistakes, they can change what they do
until they figure it out. Other systems, based on government control and centralized planning, require the
planners to make correct choices, not just for themselves, but for everybody in the economy. Sometimes, the
planners might get things right, but often they will get things wrong. If the planners do not make correct
decisions, they have to recognize the errors and make changes. This can often be a slow process, if it is
undertaken at all.
The market approach will often lead to uneven results. This shows up in increasing income inequality,
but it also shows up in declining poverty rates. Much like the trade example above, some might nominally
win more than others, but everybody benefits.
Suggested Unit Resources
In order to access the following resource, click the link below.
In the following video, John Stossel speaks with economists as well as the attorney general of Mississippi
regarding price gouging after natural disasters, such as Hurricane Katrina.
StosselClassroomDVDs. (2017, November 6). SITC contests – price gouging [Video]. Retrieved from
https://stosselintheclassroom.org/2017/11/06/price-gouging/
Learning Activities (Nongraded)
Nongraded Learning Activities are provided to aid students in their course of study. You do not have to submit
them. If you have questions, contact your instructor for further guidance and information.
Two nongraded learning activities focused on the use of APA Style are provided for you in this unit.
1. In order to check your understanding of several of the APA concepts covered in this unit, complete
the Unit I APA Check For Understanding activity.
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UNIT x STUDY GUIDE
Title
Unit I Activity Alternate Format PDF
NOTE: Be sure to maximize your Internet browser so that no part of the presentation gets cut off.
2. To practice APA Style and library research, write a brief paper in APA Style summarizing the
arguments in two papers. To find these two papers, use the database search function in the library.
(Note that the following information does not constitute complete references.) This is just enough
information to help you find the articles.
Sorrentino, N. (2019) in Independent Review
Hodgson, G. (2019) in Independent Review
Be sure to use a title page, running head, page numbers, properly formatted in-text citations, properly
formatted reference page, and properly formatted headings. Two pages would be a good length, but
again, this is a nongraded activity. In order to receive feedback on this activity, you will need to email
your practice paper to your professor as there is nowhere to submit a nongraded activity to your
professor within Blackboard.
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UNIT III STUDY GUIDE
Market Structures and Profit
Course Learning Outcomes for Unit III
Upon completion of this unit, students should be able to:
1. Evaluate the ethical outcomes of free market outcomes using supply and demand models.
1.1 Compare and contrast the effect perfect competition and monopoly have on total welfare.
3. Analyze how price and output influence profit maximization under different market structures.
3.1 Compare and contrast the market outcomes for perfect competition, monopoly, oligopoly, and
monopolistic competition.
Required Unit Resources
Chapter 8: Understanding Markets and Industry Changes
Chapter 9: Market Structure and Long-Run Equilibrium
Chapter 10: Strategy: The Quest to Keep Profit from Eroding
In order to access the following resource, click the link below.
Reynolds, S. S., & Rietzke, D. (2018). Price caps, oligopoly, and entry. Economic Theory, 66(3), 707–745.
Retrieved from
https://libraryresources.columbiasouthern.edu/login?url=http://search.ebscohost.com/login.aspx?direc
t=true&db=bsu&AN=132338488&site=ehost-live&scope=site
Unit Lesson
This unit’s material focuses on different types of market structures and how firms in those markets seek profit.
Before getting into market structures, we will discuss a bit about markets in general. All markets are affected
by supply and demand. The type of market structure in question will primarily affect how supply behaves, but
important information for firms comes from demand.
Supply and Demand
In a market, supply and demand come together to determine the equilibrium price and quantity. When demand
increases, price and quantity increase. When supply increases price decreases and quantity increases.
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Factors Affecting Demand
UNIT x STUDY GUIDE
Title
There are several factors that can cause demand to change. Economists group these reasons into five
main factors:
Businesses need to know not just these factors but how these factors affect the industry of their business.
Changes in income, for example, do not affect all businesses the same. Economists categorize goods as
normal goods, which are goods whose demand increases as income increases, and inferior goods, which are
goods whose demand increases as income decreases. An example of a normal good would be eating out.
The more income a person has, the more likely they are to eat at restaurants rather than prepare meals at
home. Candy, possibly surprisingly, is an inferior good. When people experience lower incomes, they cannot
afford as much entertainment as before, so candy offers an inexpensive pleasure.
Changes in the price of related goods is another factor that can have different effects based on specific
circumstances. Some goods are related in consumption. These are called complements. Peanut butter and
jelly are an example of complements. If the price of a complement decreases (say, peanut butter), then the
demand for the good in question (say, jelly) will go up. After all, if you are buying more peanut butter, you are
going to need more jelly to go with it. Substitutes are goods that compete in consumption. Coke and Dr
Pepper, for example, are substitutes. If the price of Coke goes down, consumers are more likely to buy Coke,
and, thus, less likely to buy Dr Pepper. So if the price of a substitute good decreases, the demand for the
good in question goes down.
Most of the remaining factors work as might be expected. If the number of demands increases, demand for a
particular good will increase. Imagine sitting in a waiting room as your oil gets changed. There is a vending
machine there. You might be tempted to get something. If another person walks into the waiting room, they
will also be tempted to get something. As more and more people enter the waiting room, the likelihood that
somebody will purchase from the vending machine increases. Most likely, multiple people will make a
purchase from the vending machine. In other words, demand will increase.
Add in tastes and preferences. If a particular product becomes popular (perhaps because of positive press,
perhaps the product is seasonal, perhaps the product has experienced a change in quality), then more people
are likely to want the product. In other words, demand increases.
Finally, look at expectations. Expectations might be a little confusing. The important thing to remember is that
when looking at the effects of changes in demand, the time frame is immediate. That is, the expectation is for
some time in the future, but the analysis is what happens to demand right now. So, if consumers expect
prices to increase in the future, they will want to buy more before prices rise. That is, demand will increase.
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Factors Affecting Supply
UNIT x STUDY GUIDE
Title
There are also factors that can affect supply (as opposed to demand). Most of these factors are pretty straight
forward. As the price of inputs increase, costs to the producers go up, so naturally the supply will decrease.
For example, if the price of oranges goes up, the supply of orange juice will decrease.
If the price of a similarly produced product increases, then the supply of the good in question will decrease.
For example, if looking at the supply of vanilla ice cream and the price of chocolate ice cream increases, then
the supply of vanilla ice cream will decrease as the resources used to make vanilla ice cream will be shifted
over to make more chocolate ice cream to take advantage of the higher price.
As with demand, the number of suppliers matters to supply. The more suppliers there are, the more
production there is. This is fairly simple and straightforward.
Technology is also an important factor for supply. An improvement in technology that makes production
easier and cheaper will lead to an increase in the supply. It is unlikely that a firm would actually adopt new
technology unless it had the express purpose of making production easier or cheaper. For example, selfcheckout kiosks at grocery stores or fast food restaurants are technology that make the production process
(or service delivery process) cheaper for companies. They do require an upfront investment in technology, but
the payoff is lower operating costs in the future.
Finally, expectations are important for supply and the same caution that applied to expectations with demand
apply here. Firms respond now to expectations about the future. Another important note is that while it can
often be easy to think of supply as production, it is better defined as what producers bring to market. So, if
producers expect a price decrease in the future, they will want to rush to market what they can to take
advantage of the relatively higher price. That is, the expectation of a future price decrease will result in an
increase in supply right now.
Market Structure
As mentioned in the beginning of the lesson, underlying the supply curve is the market structure. Economists
differentiate market structures (identified by name later in the course) based on three characteristics. Those
three characteristics are:



the number of sellers in a market (The number of buyers matters too, but that does not change
among these four market structures.);
the homogeneity of production (This means how different the production is from one producer to the
next; another way to think about this is whether you can identify the producer based on the product.);
and
the existence, or not, of barriers to entry (also phrased free entry and exit).
At one extreme of the market structures is perfect competition. Perfect competition is characterized by:



lots of sellers,
selling identical products, and
no barriers to entry (free entry and exit).
At the other extreme of market structures is monopoly. Monopoly is characterized by:



one producer—and only one (If it is even two producers, it is a different market structure.),
selling a product that is unique in the market such that there are no close substitutes, and
impossible for competitors to enter.
As you can see from the characteristics, monopoly is the opposite of perfect competition. These differences
lead to some important outcomes for the different markets.
Since there are many producers producing exactly the same thing, perfectly competitive firms do not have
any influence on the overall market. They are very much a “drop in the bucket” relative to the market.
Perfectly competitive firms must accept whatever the market price is. Monopolies, on the other hand, are the
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only supplier in their market, so their decisions have a big influence on the market
UNIToutcome.
x STUDYMonopolists
GUIDE
cannot exactly set their price; they must be mindful of their consumers. When Title
deciding what price to set,
monopolists have to balance the revenue they would gain from raising their prices with the revenue they
would lose by selling a lower quantity (and vice versa if they are considering a price decrease).
Without barriers to entry, if a firm can make excessive profits (known as economic profit), then other firms will
enter the market, taking some of that profit away. Monopolies are protected by barriers to entry, so if they can
earn large economic profits, there will not be any competition to come along and take those profits away.
Perfectly competitive markets are the most efficient. They must be. If a firm is not as efficient as possible, it
will be run out of the market. Monopolies do not need to be efficient since they are protected by barriers to
entry. Monopolists, just like every firm, want to maximize profits. Maximizing profit for a monopolist, however,
means not producing as much as they could so that they can charge a higher price.
In between these extremes are monopolistic competition and oligopoly. Monopolistic competition is a lot like
perfect competition, except that rather than producing identical products, the firms produce slightly different
products. The difference might be slight, and they might even be just perceived, but they matter, at least
somewhat, to the consumer. Think about hair stylists and barbers, for example. Some people have certain
people they like to cut their hair. Some people do not care but might still base their purchasing decision on
proximity or availability. These differentiations introduce a slight amount of pricing power into the market. The
differentiations also give rise to the need for firms to advertise what it is about their product that sets them
apart from competitors. Differentiation can also be a feature of oligopolies.
Oligopolies are a lot like monopolies except there are some firms, not one, in the market. Think of it this way,
if you can name the firms that account for a strong majority of the market share off the top of your head, the
industry is an oligopoly. Oil/Gas companies, airlines, and automobile companies are examples of oligopoly
markets. The barriers to entry are high but not insurmountable. This feature leads to strategic behavior
between the firms as the action of one firm affects the outcomes of other firms in the market. Strategic
behavior will be an important topic explored in future units.
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