Discussion Board #2
Discussion Board Requirements (please review the syllabus for a more detailed explanation)
- Initial post: 3-4 paragraphs, must have at least an in-text citation and reference in APA formatting, answer the question, focus on your content development, and application of economic terms
Question:
Why is it important that prices are flexible in our economy? Do you think the government should control the level of prices? How do you explain the law of demand to a recent purchase that you have made? Analyze the role of a shortage that might be present in a store and how would you solve it as the manager.
Week 2 Discussion
Importance of flexibility of prices in the economy:
The flexibility of the price of a good or service is said to be present in the economy if in a situation of excess supply of a good or service, the price decreases, and in the situation of excess demand of a good or service, the price increases. The major importance of price flexibility in the economy is the potential of the marketplace to be more efficient as it is made much more attainable. The buyers can find the price which matches their willingness to pay and ability to buy if the prices are flexible and hence varies continuously with the changes in demand and supply. In a free market, when some goods are of a fixed price, artificial shortages take place since people cannot afford to buy the goods or avail of the service at that price. If the price is flexible, it can adjust accordingly with the demand and supply of the good or service. This is another reason why the price in the economy needs to be flexible (Flexible Pricing, n.d.).
Whether the level of prices should be controlled by the government or not:
The level of prices whether to be controlled by the government or not is debatable as the views regarding this vary among Economists. For example, to make goods specifically staple foods more affordable, to avert the extortion of price during situations of shortages, to ensure a minimum wage rate, to ensure a minimum income for providers, and to slow down inflation., the control of the prices is necessary for the government to do. The setting of the price ceiling (the price which can be charged at maximum) and price floor (the price that can be charged at minimum) are the two methods through which the government controls the price in the market (Rockoff, n.d.).
Explaining the law of demand from the recent purchase I made:
The law of demand states that if all other factors (income of the consumers, price of complements or substitutes, taste and preferences of the consumers, etc.) remain unchanged, as the price of a good or service increases quantity demanded of that good or service decreases and vice versa. Hence, the law of demand depicts an inverse relationship between the price and quantity demanded of a good or service and this is why the demand curve slopes downward conventionally (Klingensmith, 2019). The reason behind this is that the opportunity cost for the consumer to obtain the commodity increases and hence more tradeoffs have to be made by the consumer to obtain the high-priced commodity. Recently, I bought pizza from the pizzeria in my neighborhood. I buy pizza from this pizzeria often. The normal price of a pizza I buy regularly is $7. Recently, there was a 50% discount offer given for the pizza and as a result, the price of the pizza dropped to $3.5. I bought 2 pizzas that day because of the fall in the price of the pizza. Hence, this explains the law of demand as the fall in the price of pizza increased the quantity demanded of pizza by me.
Analyzing the role of a shortage that might be present in a store and the way of solving it as the manager:
The manager has an important role to play when it comes to solving shortages present in the store and those are as follows:
1. The manager needs to assess the situation first, that is, how much shortage is there and how bad the situation is and hence how important it is to take necessary steps to overcome the situation of shortage.
2. The manager needs to efficiently allocate the resources available currently so that there is as less wastage of resources as possible.
3. The employees in the store need to make understand the situation and should be managed and supervised by the manager to get over the situation of shortage (Nicasio, 2018).
4. Another step that can be taken by the manager to solve a situation of shortage is organizing the store appropriately.
5. Last but not least, time is an essential resource and is vital in every aspect hence the management of time needs to be done by the manager (Nicasio, 2018).
References:
Flexible Pricing. (n.d.). Living Economics. Retrieved March 29, 2022, from https://livingeconomics.org/article.asp
Klingensmith, J. Z. (2019). Supply and Demand. Introduction to Microeconomics.
Nicasio, F. (2018, September 26). 10 Time Management Tips For Retailers: How to Get the Important Things Done in Your Store. Vend. Retrieved March 29, 2022, from https://www.vendhq.com/blog/retail-time-management/
Rockoff, H. (n.d.). Price Controls. Econlib. Retrieved March 29, 2022, from https://www.econlib.org/library/Enc/PriceControls.html
