business

Running empty coach services

Running empty coach services

Readers Question: Why may it still make economic sense for the company to put on a coach for just one or two passengers, rather than turning them away? Recently I again had to travel to London by coach and discovered that it was a good idea to book early in case the coach was full! Was the coach company being more sensible now? If a bus has a capacity of 80 seats. It might need an average of say 30 customers per…

Waterstones cafes and lessons in specialisation

Waterstones cafes and lessons in specialisation

I’m a big fan of Waterstones. It’s a good bookshop. It’s not Amazon; it even pays UK taxes. I like the atmosphere of bookshops and would be sad if they disappear from the High Street to be replaced by drones delivering books from anonymous warehouses somewhere off the M4. Even though Amazon is often cheaper, I do like to buy books from a proper bookshop like Waterstones because I enjoy browsing, and don’t like being a complete free-rider (enjoying the atmosphere of a bookshop to then go and…

Effect of the exchange rate on business

Effect of the exchange rate on business

Readers Question: What are the effects of the exchange rate on UK businesses? The exchange rate will play an important role for firms who export goods and import raw materials. Essentially A depreciation (devaluation) will make exports cheaper and exporting firms will benefit. An appreciation makes exports more expensive and reduces the competitiveness of exporting firms. Effect of depreciation in the exchange rate If there is a depreciation in the value of the Pound, it will make UK exports cheaper, and it will make imports into the UK more expensive. In this example:

Examples of Price Discrimination

Examples of Price Discrimination

Price discrimination occurs when firms sell the same good to different groups of consumers at different prices. There are often different types of price discrimination offered. Often they are categorised in the following way: 1st degree price discrimination – charging the maximum price consumers are willing to pay. 2nd degree price discrimination – charging different prices depending on the quantity consumed. 3rd degree price discrimination – charging different prices depending on a particular market segment, e.g. age profile, income group, time of use. 4th degree price discrimination – when prices to consumers are…

Pricing Strategies

Pricing Strategies

A look at different pricing strategies a firm may operate to try and increase profitability, market share and greater brand loyalty. Types of Pricing Strategies General strategies Profit Maximisation. One strategy is to ignore market share and try to work out the price for profit maximisation. In theory this occurs at a price where MR=MC. In practise it can be difficult to work this out precisely. Sales Maximisation. Aiming to maximise sales whilst making normal profit. This involves selling at a price equal…

Mobile Phone – Product Life Cycle

Mobile Phone – Product Life Cycle

When did you get your first mobile phone? I got mine in 1999, which it turns out was the year of most rapid growth in mobile phone use. Mobile phones looks to have the classic product life cycle of introduction, growth and maturity. Introduction A long slow period of introduction from 1985 to 1997. I remember in this time that a mobile phone was considered to be the preserve of fancy ‘yuppies’ (Young…

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Profit v Revenue Objectives for Firms

Readers Question: Is it better to sell more services/products with less profit, than sell less with high profits? What are the pros and cons to the employer, worker, and customer? i.e high revenue low profit, vs low revenue high profit. Classical economic theory suggests firms will seek to maximise profits. The benefits of maximising profit include: Profit can be used to pay higher wages to owners and workers. (though if firm has monopsony power, the profit may not be shared equally amongst workers) Profit can be used to invest in research &…