Assignment 1: Economic Brief
Due Week 5, worth 150 points
This assignment is aligned to these course outcomes:
Explain economic principles and their applications in the real world.
Summarize the different types of market structures and the role of government in economics.
In the workplace, we are often asked to create “briefs.” A brief provides a snapshot, or short, written summary, of a situation or event that has occurred. It is generally just a few pages long and may include additional visuals like a graph, chart, or table. In this assignment, write a brief about economic concepts in an industry that interests you.
An example economic brief, template, and resources are provided below.
Example Economic Brief, Assignment 1 Template, Strayer Writing Standards (SWS)
Review an example brief.
Use the optional template to help you get started.
Get familiar with the Strayer Writing Standards (SWS). (See Instructions below.)
Industry Selection
Use this resource to select an industry and learn about the products and services it provides:
NAICS (North American Industry Classification System)
Select the number next to the industry to see its subsectors, e.g., select 52 to see Finance and Insurance.
Select that same number again to read about the industry as a whole or select a sub-category. For example, Mining is 21, and Oil and Gas Extraction, a sub-category, is 211.
Instructions
Review your previous chapter readings and use the resource above to develop an economic brief that is two to three (2-3) pages long in which you:
Select an industry and describe the goods and/or services this industry produces. Use the NAICS resource above to help you select an industry (and/or subsector) for your brief.
Identify this industry’s market structure and at least two or more market characteristics that support this market structure. (Market structures are covered in Weeks 3 and 4.)
Describe any notable microeconomic relationships, market outcomes, and/or trends in this industry. Include a graph, chart, or table containing related data. (Microeconomic relationships and market outcomes are covered in Weeks 2 through 4.)
How might government impact this industry’s market prices, output, and/or market structure? (Government intervention through price controls, industry regulations, and antitrust enforcement is covered in Weeks 2 and 4.)
This course requires use of Strayer Writing Standards (SWS). The format is different compared to other Strayer University courses. Please take a moment to review the SWS documentation for details. (Note: You’ll be prompted to enter your Blackboard login credentials to view these standards.)
Your brief should include a cover page.
Your brief should be two to three (2-3) pages in length (not including the cover page), double-spaced, 12-point font.
Your brief should include a minimum of one (1) reference/citation in the text.
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Computer and Peripheral Equipment Manufacturing
Example Economic Brief
ECO100: Principles of Economics
Strayer University
Professor Jean Nzumgang Fonkoua
August 5, 2018
2
Computer and peripheral equipment manufacturing industry is one of the leading
industries in technology and innovation in the global economy, and the American companies in
this industry have a large market share. The main driving engines of the industry are innovations
and inventions (1). Smartphones, laptop and desktop computers, tablets, the internet of things
technologies, network technologies, and other information and communication tools are
produced in this industry. Digitalization of information and analysis of large data sets are some
important developments in this industry nowadays. Also, we observe that many companies are
spending effort on developing materials used in electronics. For instance, developments in the
field of energy storage and production might open new doors for improvement in the industry.
Subsequently, it is quite possible to claim that there is no upper limit of development in this
industry.
Considering that innovation has a very crucial role in competition in this market, this
market is a monopolistic competitive market. Rational customers in the market follow the
technological development, and they aim at purchasing the possible highest technology with the
possible lowest price; the companies operating in this market spend effort for differentiating their
products to make their customers believe that their products are superior to the others. The
companies heavily use advertisement and promotion campaigns, and creating loyalty among
their customers is very critical for them. In other words, they spend effort on gaining relatively
higher monopoly or competition power in the short-run, to be able to play around the prices of
their products to maximize their profits. However, it is not possible to continue this strategy in
the long-run because investing large financial resources in advertisement and promotion
campaigns, is not feasible for the companies in the long-run. Although the market structure is
monopolistic competitive, the number of companies operating in this market is limited.
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Therefore, it may not be an exaggeration to name this market as an oligopolistic competitive
market, at least in the short run (2). However, considering that there might be new entrances to
the market after the leading technologies are disseminated to the other companies, this market
structure might turn into a monopolistic competitive market in the long-run.
Graph 1: Labor Productivity
Source: US Bureau of Labor Statistics
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This industry uses a high-quality labor force in the market and pays one of the highest
annual mean wages to the workers, over USD 95,000 (2). That means, the labor productivity is
quite high in the industry. Also, the labor force is supported by high-technology machinery, and
that means, any new entrant needs to make a significant investment (2). However, on the other
side, some small-sized companies might develop critical technological innovations and sell it to
the large companies in this industry. We observe that the large technology companies purchase
some small technology developing companies, to enhance their innovation capacities. In other
words, there exists a high entry barrier for the small companies to enter the market, which
reinforce the idea of oligopolistic competition.
Apple, Microsoft, Google, Samsung, Google, and Huawei are among the most important
producers in this market (2). These companies have the leading position in the market, and all
these companies outsource their production activities to the developing nations for optimizing
their production costs. Also, these companies hire high-quality engineers and professionals to be
a leader in their markets. Consequently, these companies have a high power of competition in the
market. Therefore, entering this market as a small or medium sized company, is not possible and
feasible. In other words, the competition is quite limited in the market, and even it is possible to
say that government intervention is necessary for increasing the efficiency in the market. Google
has been sentenced to pay a sizeable financial bill in Europe recently, and we all know the case
of Microsoft’s monopoly in the last decade. It is possible to see similar cases shortly because
these companies are still leading the market, and their innovation capacity is very high.
Therefore, they might share the global market easily among them. In other words, we would
expect a monopolistic competition in this market because of the high innovation capacity, but we
observe that these companies are sharing the global market with a secret agreement or hidden,
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unknown way. For instance, while Apple sells its products to the customers with relatively higher
incomes, Samsung, Huawei, and other brands are preferred by the people with relatively lower
incomes. In some professions, only some specific brands or software is preferred to the others.
Also, we observe that each company has different advertisement companies. By only analyzing
the advertisement strategies of the companies, it is possible to understand how the global market
is shared.
Considering that using high-technology products does not provide only a direct utility,
but also a prestige to the users, this market will be lively in the future. This situation is expected
to increase the competition in the market. Also, the patents owned by the large companies
nowadays will expire in the next decade, and the other companies can easily develop some new
technologies built on the revealed patented technologies of the large companies. Consequently, it
is highly possible to expect the formation of a competitive industry in the future.
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Sources
1. Greenlaw, S. A., Shapiro, D., & Taylor, T. (2018). Principles of economics 2e (2nd ed.). Houston, TX: OpenStax College, Rice University.
2. Ju, J. (2002). Oligopolistic Competition, Technology Innovation, and Multiproduct Firms. Review Of International Economics, 11(2), 346-359. doi: 10.2139/ssrn.298722
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EDWIN NJERU
Thu, May 16, 2019, 8:20 AM
to Boaz
Template
Economic Brief
Title
By Your Name
ECO100
Professor’s Name
Date
Economic Brief
Title
(Enter your introduction text here. It should be no more than a paragraph or two. Please delete these instructions before submitting your paper.)
Industry Goods and Services
(In this section you should describe the goods and/or services produced by an industry that you pick from this list from the North American Industry Classification System. Please delete these instructions before submitting your paper.)
Market Structure and Characteristics
(Your text here should identify this industry’s market structure and two or more market characteristics. Please delete these instructions before submitting your paper.)
Microeconomic Relationships, Market Outcomes, and/or Trends
(In this section you should discuss ONE of these items as it relates to this industry: a notable microeconomic relationship, a market outcome, or a trend in the industry. Include a graph, table, or chart if possible. Delete these instructions before submitting your paper.)
How Government Intervention May Impact the Industry
(Your text here should explain how government intervention might impact this industry’s market prices, output, and / or market structure. Please delete these instructions before submitting your paper.)
Sources
1. List in order of use.
2. List a second source here.
3. Repeat for additional sources.
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Economic Brief
Student’s Name
Institutional Affiliation
Wholesale Trade Sector
The aim of this paper is to establish an economic brief of the wholesale trade sector in the United States. The paper examines the goods and services dealt in this sector as well as the market structure and characteristics of the industry. The essay further explores microeconomic relationships, market outcomes, and trends in the market about the wholesale trade sector. Also, the paper further evaluates how government intervention influences the entire wholesale trade sector.
Industry Goods and services
The industry offers both goods and services in the country. The wholesale trade industry and sector entirely plays an intermediate role in the distribution of goods and services in the country as well as to other parts of the world. The industry mainly focuses on wholesaling merchandise and providing services incidental to the sale of merchandise (Martel & Klibi, 2016). The sector does not improve nor transforms the merchandises, but they are responsible for providing the distributional services which aid in the sale of goods to the final consumer.
The goods or merchandise dealt in this sector ranges from industrial outputs such as agricultural produce, mining, information as well as manufacturing. The wholesalers are responsible for transferring goods from the original producer to the final consumers through other intermediaries in the industry. Therefore, this shows that the wholesalers are responsible for arranging goods for resale by selling to other wholesalers or retailers. The wholesaler also deals in the capital and durable non-consumer goods as well as the raw materials for industrial production.
Market Structure and Characteristics
The wholesale trade sector is a monopolistic market structure in the country. The wholesale sector exhibits monopolistic competition since firms are free to enter and exit the market, and consumers have the freedom to choose one product over the other. Also, wholesalers deal in differentiated products through which a specific retailer or consumer would be able to select from the varieties. These products are sold depending on the line of business of the wholesalers; for example, some may deal in general merchandise, whereas others may be specialized in a particular line of merchandise. Also, wholesalers are based in different regions to provide goods and services.
The wholesalers may be connected to a single manufacturer to sell goods to other wholesalers and retailers as well as they are linked to different retail chains. There are two types of wholesalers; merchant and business to business electronic markets. Merchant wholesalers sell goods on their account and operate through sales offices and sales branches, for example, drop shippers, jobbers, and import-export merchants. Merchant wholesalers do not transform the goods but may package, sort, and label for ease of customer identification. Business to business electronic markets are wholesalers whom sale goods owned by other wholesalers or purchase them for a commission.
Moreover, all firms in the wholesale market maximize profits. The prices are determined by the quantity of goods sold to retailers or other wholesalers. In this case, the wholesaler may obtain goods from a manufacturer at manufacturing cost then sell the product at a premium to make profits. Also, profits maximization may be achieved since the sellers enjoy some power in the market, which allows them to set prices marginally higher to maximize revenues.
Microeconomic Relationships, Market Outcomes and Trends
The wholesale trade sector has been on the rise form 2015. The average four-year growth rate from 2015 to 2019 is 4.70% ( US Census Bureau, 2019). Therefore this shows that the market is likely to grow in the coming years, as shown in the graph below. The graph shows the growth in wholesale inventories in the country.
5-Year Trend of the Wholesale Inventories
Figure1: Wholesale inventories market trend, source: US Census Bureau (2019)
The trend shows that the current wholesale inventories are 669816. However, the wholesale inventories fell in March 2019 by 0.1%, unlike a 0.4% that was experienced in February 2019, as shown in the quarterly graph below (Trading Economics, 2019).
Quarterly Change in Wholesale Inventories
Figure 2: Quarterly wholesale inventories change, Source Trading Economics (2019)
How Government Intervention May Impact the Industry
The wholesale sector is struck by the changing regulations introduced by the government in the export and import market. The government restrictions on imports have affected the wholesale industry since the level of imports have reduced, which makes it difficult for the wholesalers to receive merchandise from the international markets. In this case, wholesalers in the steel industry were greatly affected as the Trump administration restricted the importation of steel products in the United States.
Also, the level of taxation in the country is likely to impact on the wholesale taxes as increases in taxes may affect the level of products that are available for merchandise. Also, taxation increases the prices of goods and services, which therefore leads to a decreased demand for those products both in the local and foreign market. Moreover, this may reduce the level of goods and services in the market also may increase manufacturing costs, which make the prices to be high.
Conclusion
Conclusively this an economic brief of the wholesale trade sector in the United States. The wholesale sector comprises of a monopolistic competition market structure as well as deals in all products. The wholesale market acts as an intermediate between manufacturers and retailers as well as the industry projects an increase in wholesale inventories. Also, the government affects the wholesale market through taxation and restriction on imports.
References
Census Bureau, 2019. Wholesale Trade Inventories five year trend. Retrieved fromhttps://www.census.gov/retail/index.html
Martel, A., and Klibi, W., 2016. Supply chains: issues and opportunities. In Designing value-creating supply chain networks (pp. 1-43). Springer, Cham.
Trading Economics, 2019. Wholesale trade sector. Retrieved from https://tradingeconomics.com/united-states/wholesale-inventories
