Introduction
Microeconomics is a system or branch of economics that studies the functioning of firms and markets. The discipline compares and shows the arrangements of these economic agents and how they are influenced by external and internal factors. This memorandum aims to identify and reveal key points in macroeconomics-based business using simulation games for visual explanation. The challenge is to explain to someone new to doing business based on the principles of microeconomics and applying them to real situations. The report is an overview of the games and their results in the process of understanding the topic. It includes the main provisions and their significance for starting a business.
Comparative Advantage
By considering all possible opportunity costs and making a decision to estimate them, such modeling shows people business decisions. It indicates that in order to take a certain path, a person must consider any of the possible options presented in the plan. This means that the person needs to be prepared to face any consequences, including negative experiences. This simulation shows how many fries they have to reduce to make more burgers.
The detailed report considers the number of combinations that can be sold in total and, accordingly, explains the relationship between them. In addition, the individual must make an assessment as to which combination of products have the most optimal sales and produce the most effective result. Moreover, these simulations are aimed at making a person pay close attention to the obvious and implicit costs. This allows you to understand whether you take them into account at the time of doing business and making decisions. Considering the Production Decisions graph, we see the diversity in the amount of French fries and hamburgers that can or should be produced. At the same time, a person is aware that their release depends on the limitedness of certain resources (Besanko & Braeutigam, 2020). In addition, the simulation provides insight into each individual outcome of two product releases. This makes it possible to improve visualization and lead to the formation of a more successful business solution.
When addressing the topic of whether a firm should trade, it is important to understand the benefits. The surest way for this is to carry out a comparative analysis, where all the possibilities and consequences are clearly described. The definition of comparative advantage is that it reflects a firm’s ability to produce goods or services with fewer options than its competitors. Such an assessment, which considers the resources of your company and the firm of competitors, allows you to use the time and money of the company most efficiently. This helps to extract the greatest benefit from relatively small opportunities for organization. The business can make and be responsible for specific decisions for the most efficient operation and performance (Besanko & Braeutigam, 2020). In addition, engaging in trade will allow the firm to open up new ways of producing and distributing that may not have existed before, due to suboptimal resource allocation.
Competitive Markets and Externalities
In political intervention in balancing supply and demand for a product or service, there are several determinants that must be considered for successful finance. The state can set a specific price for a certain product or impose a tax on it. Now in the simulation it is important to see how to set the price ceiling correctly for the product. When imposing a price ceiling on certain products that exceeds the established market value, a person will not notice a significant difference in the price change.
However, when a price ceiling is set below market value, a dramatic change is immediately noticeable, including a shortage of available goods. Thus, it can be concluded that under conditions of prices below the market, the business will not have enough space for the required number of supplies. This means that when determining the dominant points in a price range, it is important to take into account some factors. The determining factor is the number of available substitutes for particular goods and services. The consumer may prefer the brand of a particular product to any other brand of products on the market. However, at one point, this product may not be on the store shelf or the price will increase dramatically. In this case, the customer prefers another brand in order to save money and time.
Another factor determines whether the item is a necessity or a luxury for people. The need for a position allows a business to raise or lower its pricing policy without fear of losing customers. This is due to the constant need to have some goods or services. On the other hand, there are things that can be regarded as a luxury and are not essentials (Besanko & Braeutigam, 2020). The determinant of price elasticity can be the definition of the time horizon within which people evaluate and research the products they want to purchase. Comparison influences the customer’s decision to buy a product of one brand or another. At the same time, political intervention can cause the market to fill with consumer surplus due to the impact on price elasticity. Price elasticity allows businesses to infer what will happen to the organization’s total revenue. By imposing taxes on a product, firms will be forced to increase their cost, which will affect the purchasing power of customers.
Production, Entry, and Exit
At some point, the company may decide to enter the market soon or terminate its activities on it. In this case, the main thing is to understand how clearly the enterprise has worked out and established a possible result in which it loses all its products. It is important to note that this includes factors such as variable and fixed costs associated with the production of a product.
At the same time, it is extremely necessary for the company to determine long-term goals and strive to achieve them. Moreover, the firm must find out the total costs of production as a whole and the final income that it can count on if the product is successfully sold. For example, if a firm sells a unique product for which it is very difficult or impossible to find a suitable analogue in the market, then the firm takes into account the relevant price that can be set for the product and the impact of the established range on production. In addition, when deciding to exit the market, the enterprise will select the best and most effective solution, where the management will take on the possible loss of sales revenue and reimburse all calculated costs.
In conclusion, it should be said that the consideration of macroeconomics with the help of game simulations contributes to a better understanding of it. In this case, a person is able to visually see the difference in sales and costs. Moreover, they are convinced of the great influence that microeconomics has on the conduct of business and the distribution of enterprise finances. Thus, a strong connection is established between a person’s vision of actual products and their subsequent implementation on the food and service market.
Reference
Besanko, D., & Braeutigam, R. (2020). Microeconomics. John Wiley & Sons.