Business Analysis : Shoe Industry

1229 WordsJan 8, 20175 Pages
3.firms offer products that are similar, but not perfect substitutes. In shoe industry firms producing similar products but it has separate qualities and brand images because of that products are not perfect substitutes. The shape, trademarks and the pattern of shoe is differ from one brand to another brand this would lead the product more precious for its buyers. 4.Price Makers Firms that operating in shoe industry are price makers alternatively than price takers due to the fact that each and every product is unique from different product. As for an example Nike Company doesn’t have a price set that given by government because they have the right to set the price themselves and this will lead to firms will face a down ward sloping demand…show more content…
According to the law of demand, there is an inverse relationship between price and quantity demanded. As the number of products increases, the demand for the products will fall and this will likely to cause a diminish profits. As a result, when a firm is making losses, then the firm will automatically exit the market. When a firm exits from market, this will allow other firms to earn more profits as there will be less choice of products for consumer to choose. In addition, the demand curve for firm will shift to the right which the profit is lowering. As free entry and exit continues, Nike and other substitute’s good will earn zero profit accurately. However, monopolies will earn profits in the long run. Moreover, Nike will still produce where the marginal cost and revenue are equal. In this case, the demand curve will shift to other firms and increase the competition. Lastly, the firm will stop selling the goods above the average cost. One of the disadvantage associated with the monopolistic competition is consumer spend more money due to the perceived prestige of the shoe brands. This means the importance of the name associated with the
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