Primary Task: 600–800 words
Compare and contrast how production analysis is carried out and be able to evaluate production situations using economy of scale, elasticity and other analytic tools.
Demonstrate the ability to assess market structures ranging from pure competition to monopoly/monopsony
Elasticities and Market Structure
Introduction
In
economics, outsourcing is purchasing goods and services from an outside
supplier that could have been provided in house. Most companies prefer
outsourcing because it is an effective cost-saving strategy compared to
producing the goods within the company. There are many factors considered when
outsourcing namely production costs, regulations, major competitors and the
transportation costs (McConnell & Brue, 2002).
Auto Edge decided to outsource their products from a company in South Korea
because its operations in the United States were not profitable. In addition,
the production costs, regulations, increased competitors and supplier costs in
America were not favorable. However, soon after taking the step, Auto Edge
faced serious charges due to product quality and its market share dropped
drastically. To improve its production crisis, an analysis using economies of
scale, elasticity and market structure of both South Korea and the United
States is important.
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