ECONOMICS
In this essay, it gives a brief description on starting up an ice cream parlor and its relation to demand and supply. The ice cream parlor is called “You scream ice cream”. In Economics, supply and demand are one of the fundamental concepts. Market price for any commodity is determined by the outcome of demand and supply (Economics, 2010, Paul Anthony Samuelson).
A market is a group of buyers and sellers of a particular good or service. Quantity demanded is the amount of a good that buyers are willing and able to purchase. Demand is a full description of how the quantity demanded changes as the price of the good changes (Investopidea, 2011).
The demand of ice cream depends on various factors such as Price–the higher the price, the less you buy. Income–for normal goods, the higher your income, the more you buy. For inferior goods, the higher your income, the less you buy. Prices of related goods–frozen yogurt are a substitute for ice cream, so when its price goes up, more ice cream is demanded. Hot fudge is a complement for ice cream, so when its price goes up, less ice cream is demanded. Tastes–when tastes change, the quantity demanded changes. For example, our taste for ice cream might depend on the weather.
Expectations–expectations about future income or prices affect the quantity demanded today. The demand schedule and the demand curve show the relationship between the price of a good and quantity demanded of that good. Ceteris Paribus means “other things being equal”. All variables affecting demand other than price are assumed to be fixed when we are talking about a particular demand curve. A change in the price changes the quantity demanded, so we move along the demand curve. A change in income, prices of other goods, etc. increases or decreases demand, so the demand curve shifts. The market demand curve is the sum of the demand curves of all the buyers (Investopidea, 2011).
The Term Paper on Swot: Ice Cream and Jerry
... promotion for Ben & Jerry’s ice cream since everyone love to eat good desert with the cheaper price. The underlying mission of Ben ... in Singapore Udder’s ice cream which has grown rapidly fast and high demand from local customer in Singapore, Udder’s ice cream has some flavor ... worldwide. As well as, they should change the consumer perception of having the ice cream only in summers or spring time ...
Quantity supplied is the amount of a good that sellers are willing and able to sell. The various factors that affect supply are Price–the higher the price, the more firms want to supply. Input prices–less ice cream is supplied when workers must be paid more, ice cream machines cost more, or ingredients like cream and sugar become more expensive. Technology–the invention of better ice cream machines can lower a firm’s costs and raise the quantity of ice cream it supplies. Expectations–expectations about future prices of ice cream and inputs can affect the quantity supplied today. For example, if the price of ice cream will be higher tomorrow, you may want to sell less today and keep more in storage. The market supply curve is the sum of the supply curves of all the producers (Economics, 2010, Paul Anthony Samuelson).
“You scream ice cream” provides various flavours and different kinds of ice cream. If we look at the price elasticity of the product, it is relatively elastic. Relatively elastic demand has numerous close substitutes-in-consumption. Buyers can easily switch between this good and other goods and receive about the same satisfaction. It takes very little change in the price to convince buyers to switch to a substitute good. For example, Banana Mush Ice Cream Sundaes. While this product has several distinctive features (the Banana Mush add a hint of clove extract to their hot fudge topping), it provides similar satisfaction to that of many other ice cream dessert treats. Should the price of Banana Mush Ice Cream Sundaes rise a little, buyers will opt for Sunny Strawberry Sundae, Creamy Hot Caramel Yogurt Treat, or hundreds of other alternatives. These do not provide exactly the same satisfaction, but they are close, very close. As such, the demand for Banana Mush Ice Cream Sundaes is relatively elastic. Relatively small changes in the price of Banana Mush Ice Cream Sundaes induce big changes in quantity. If the price rises a little, Banana Mush Ice Cream Sundaes buyers switch to Creamy Caramel Yogurt Treat. If the price falls a little, Sunny Strawberry Sundae buyers switch to Banana Mush Ice Cream Sundaes. These alternatives are close substitutes; it does not take much of a price change to induce buyers to switch (Principal of Microeconomics).
The Essay on Cost of the Good Life
Overall wellbeing, an extravagant lifestyle, and wealth all come to mind when I ponder the good life but what does the good life actually cost? At first glance, this seems like a loaded question that requires multiple dissertations in order to answer. I even contemplated whether or not the good life had a cost at all. Breaking the good life into separate topics relieves much of the stress when it ...
The key for relatively elastic supply is that a good has several substitutes-in-production that use the same resources. It is very easy to switch resources between the production of this good and others using the same resources. In most cases the good uses very common, easy to find resources like unskilled or semi-skilled labour (Principal of Microeconomics).
The determinants price elasticity of demand for “you scream Ice cream” are Necessities versus luxuries, availability of close substitutes, definition of the market and time Horizon. Demand tends to be more inelastic if the good is a necessity, if the time period is shorter, the smaller the number of close substitutes, the more broadly defined the market. Likewise demand tends to be more elastic if the good is a luxury, the longer the time period, the larger the number of close substitutes, the more narrowly defined the market (Elasticity and its application).
Explicit costs are the payments to non-owners reported by accountants. Implicit costs are opportunity costs (forgone earnings) of using resources owned by the firm. Accounting profits are total revenues minus explicit costs, but economic profits are total revenue minus both explicit and implicit costs. Economic profits are important for a complete analysis of profits or losses of a firm.
Explicit Costs are paid directly in money – money costs. A firm experiences explicit costs when it pays for a factor of production at the same time it uses it. Explicit Cost = payments by a firm to purchase the service of productive resources (wages, interest, rent, capital) whereas Implicit Costs are measured in units of money, but are not paid for directly in money. The costs of non-purchased inputs, to which a cash value must be imputed because the inputs are not purchased in a market transaction. A firm incurs implicit costs when it uses capital, inventories or owner’s resources. Implicit Costs = opportunity costs associated with a firm’s use of resources that it owns (wages foregone by owner, interest rates loss through purchases) (Accounting coach 2004-2011).
The Term Paper on Cost Leader Firm Strategy Market
Business-level strategy can be defined as the strategy that is chosen by a company to hold a competitive advantage within the market that it is involved with. Such a strategy has to be chosen by firms because of the intense competition that exists within a certain industry and thus managers, see the need to formulate business-level strategies that are geared towards creating and maintaining a ...
There are four different market structures. They are perfect competition, monopoly, monopolistic competition and oligopoly. “You scream ice cream falls under monopolistic competition in which all firms produce similar yet not perfectly substitutable products, all firms are able to enter the industry if the profits are attractive, all firms are profit maximizers, all firms have some market power, which means none are price takers (Investopedia).
The company’s proposed budget is as given below;
Capital
Contribution | Debit | Credit | Proforma |
Assets |
Cash | 5,000 | 25,000 | | 30,000 |
Prepaid Expenses (Incl. architect Plans) | 10,000 | 12,000 | | 22,000 |
Grand Opening Contribution | 3,500 | | | 3,500 |
Inventory | | 12,000 | | 21,000 |
Total Current Assets | 18,500 | 49,000 | | 76,500 |
Equipment | | 91,000 | | 91,000 |
Equipment Installation | | | | |
Leasehold Improvements | | 110,000 | | 110,000 |
Signage (included in equipment) | | | | |
Franchise Fee | 35,000 | | | 35,000 |
TOTAL ASSETS | 53,500 | 250,000 | | 303,500 |
Liabilities &Net Worth | |
Loan (Current Portion) | | | 24,000 | 24,000 |
Total Current Liabilities | | | | 24,000 |
Long Term Debt | | | 226,000 | 226,000 |
Total Liabilities | | | 250,000 | 250,000 |
The Business plan on Swot B&B Ice Cream
SWOT analysis is a very useful technique for understanding internal and external environment of the business based on its strengths, weaknesses, opportunities and threats. SWOT analysis on Ben and Jerry’s, we can see the secrets of its success and what are areas for growth. Strengths: 1. Ben and Jerry’s has a well-funded and large-scale parent company. 2. Ben and Jerry’s has a good reputation of ...
Net Worth | | | | 53,500 |
Total Liabilities & Net Worth | | | | 303,500 |
Working Capital | | | | $52,500 |
Net Worth | | | | 53,500 |
Debt to Worth Ratio | | | | 4.8 :1 |
Current Ratio | | | | 3 |
Years 1-5 |
Assumptions | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
Revenue Rate Increases | | 4.00% | 4.00% | 4.00% | 4.00% |
Volume Increases | | 4.00% | 4.00% | 4.00% | 4.00% |
Inflation Increases | | 4.00% | 4.50% | 5.00% | 5.50% |
Revenue % | | | | | |
Ice Cream | | | | | |
Other | | | | | |
Cost of Sales as % of Revenue | | | | | |
Ice Cream | | | | | |
Other | | | | | |
Direct Expenses as % of Revenues | | | | | |
Salaries | 17.00% | 17.00% | 17.00% | 17.00% | 17.00% |
Salary Related | 3.40% | 3.40% | 3.40% | 3.40% | 3.40% |
Controllable Expense as % of Revenue | 12.00% | 12.00% | 12.00% | 12.00% | 12.00% |
Interest Rate on Borrowings | 10.50% | 10.50% | 10.50% | 10.50% | 10.50% |
Cash Receipts as % of Revenue | 99.50% | 99.50% | 99.50% | 99.50% | 99.50% |
Lease Expense/Sq. Ft. (incl. CAM chg.) | $6.27 | $6.52 | $6.78 | $7.05 | $7.34 |
Square Footage | 556 | 556 | 556 | 556 | 556 |
Advertising Fees/Year | 3048 | 3048 | 3048 | 3048 | 3048 |
Royalty Fees as % of Revenue | 2% | 2% | 2% | 2% | 2% |
In short run, fixed costs are any cost that does not depend on the firm’s level of output. These costs are incurred even if the firm is producing nothing. There are no fixed costs in the long run. A cost that depends on the level of production chosen is variable costs. In long run Lower Price – The Company compete for customers by cutting prices. Higher Average Cost -As more firms enter market, eventually move upward along negatively-sloped portion of average-cost curve to higher average cost (fewer ice cream sold).
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8
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300
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640
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Monopolist’s demand
(Market demand)
Monopolist’s demand
(Market demand)
Marginal Revenue
The Term Paper on Uncle Jack Father Cream Ice
My Own Personal Experience with the Horror of Sexual Harassment A Realistic Fictional Work Written in the First Person to Educate Others on What to Do It was a stormy night when I first came to grips with the horror that lay ahead. Everybody loved Uncle Jack, but not me, at least not since IT happened. And it was every since IT happened that I knew for certainty when this day came that I would be ...
Marginal Revenue
Ice cream sold
Ice cream sold
