Question

1. Analyze and examine the concepts of industrial economy such as types of business markets and models, pricing, and game theory.

2. Apply business economic analysis techniques in solving industrial organization issues regarding to prices, products and polices.

Answer 1

1. Industrial Economies: Industrial Economics is the field of study of firms, markets, industry, pricing of its products etc. The economics applies in this case here can be macro as well as micro.

Concepts of Industrial Economics are:

Types of business Market:

There are different types of business markets such are as follows:

1.Producer markets: The producer markets buy the raw materials or goods and services and convert them into sellable product and gets the profit from the selling the products. Examples- farmers, manufacturers and construction and mining companies.

2. Resellers- This type market buys the product from the producer market and sell into other market. Such as Food processing companies, book selling company etc.

3. Governments- The government buys the product from the other foreign market for the consumption purpose of public and store for the bad times. For example, purchase of Oil and Gas.

4. Institutions- Institution buy the products for the betterment of the social purposes. They don’t make profit from it.

Types of Markets:

1. Perfect Competition- There is infinite number of buyers and sellers in the market.

2. Monopoly- Only one seller or producer in the market. They have the pricing power.

3. Oligopoly- They have the handful number of producers in the market but they don’t have the same pricing power as monopolists.

4. Monopsony- Only one buyer for a particular good or service, giving that buyer significant power in determining the price of the products produced.

Pricing:

The main focus of pricing in the industry is on the overall economics which includes the supplier price and the customer demand price. The comparative study of the pricing also done before pricing the overall industry level. One of the model used for pricing are of the two-level framework for industrial goods pricing. The first level of pricing consists of four pricing situations:

1.New Product,

2.Competitive,

3. Product Line, and

4. Cost-based.

The second level consists of the pricing strategies appropriate for a given situation.

Game Theory:

Game theory is the theory as well as mathematical model which studies the models of conflict and cooperation between intelligent rational decision-makers. Game theory helps in the decision of minimization of losses and maximization of the profit of the organizations.

2.

Industrial Organization is the vast field of the organization. It consists of number of industries which needs the proper control of the organization. The vast field shows the conflicts or issues either in policies, rules, regulations, resources, qualities etc. The economic analysis techniques such as pricing models, game theory etc. are applied to resolve these issues.

The business economic analysis techniques such as

1. Economic Variables
2. Slope
3. Liner Programming
4. Game Theory

Economic Variables are either dependent and independent. It actually refers to the economic quantity whose value changes according to the determinant or change in its activities. Hence the control of the economic variable would alter the industrial productivity and effectiveness.

The slope of variables in the industrial organization gives the directional representation of the variation which effects the process of quality making of the product.

The liner programming solves the conflicts of the quantity used in the resolution process.

Game Theory is used for the business decision making process to prices, products and polices. As the theory is helpful in analyzing the decision that weather it is effective or less effective. The maximization and minimization of the profit is determined by the game theory. This actually helps in the decision making of the conflicts arises during the product sales, volume products, rules or policy making.