Describe and apply the economic perspectives of scarcity and opportunity costs.
Analyze current news events and apply basic economic concepts to everyday problems and situations.
Utilize the tools of economics for decision making for a firm operating in a market economy
Cite examples of the various forms of market structure: pure competition, monopolistic competition, oligopoly and monopoly
Discuss the impact of current economic trends and realities on politics, the workplace and the quality of individual lives.
You are starting your own Internet business. You decide to form a company that will sell cookbooks online. Justcookbooks.com is scheduled to launch 6 months from today. You estimate that the annual cost of this business will be as follows:
Technology (Web design and maintenance)
Postage and handling
Inventory of cookbooks
Deliverable Length: 1 graph plus calculations
You must give up your full-time job, which paid $50,000 per year, and you worked part-time for half of the year.
The average retail price of the cookbooks will be $30, and their average cost will be $20.
Assume that the equation for demand is Q = 40,000 – 500P, where
Q = the number of cookbooks sold per month
P = the retail price of books.
Show what the demand curve would look like for price between $25 and $35.
Address the following questions in 600-800 words:
- Suppose that you expect to sell about 22,000 cookbooks per month online, and assume your overhead, technology, and equipment costs are fixed. What are your total costs?
- Is the business worth pursuing so far?
- What market structure have you entered, and why?
- What can you do to guarantee success in this market?
- What pricing strategy might you use?