Eco 550 Check Your Understanding Week One

“Whenever one party (the principal) hires someone else (the agent) to work for him or her, their interaction is called an agency relationship. The agent is always supposed to act in the principal’s best interests.” (Cornett, Adair, & Nofsinger, 2016, p. 15).

The primary objective of the manager is to please the stockholder by maximizing stockholder wealth.

The Supply and Demand simulation was reviewed on the student website demonstrated the concepts of the concepts of microeconomics and macroeconomics. The principles of microeconomics and macroeconomics were explained and applied throughout the simulation demonstrate the rationale for the shifts in the supply and demand curve. Each shift is analyzed showing the effects of the equilibrium price, quantity, and decision making process for the simulated company represented. The concepts encountered in the simulation provide an opportunity to better understand how each can be applied to my current workplace. The Scenario provides an

3.) If the companies sales are down, people that work for the company would suffer.

There are several factors that affect our economy, gross domestic product (GDP), real GDP, nominal GDP, unemployment rate, inflation rate, and interest rates. All of these factors have influences over how we purchase groceries, weather there will be massive layoffs of employees, and decrease in taxes.

Week 2 has been quite overwhelming. I did not have enough time to do my reading assignments over the weekend. I normally utilize Saturday and Sunday to do my research work and reading. Unfortunately, on Saturday morning, I attended a meeting that took half of the day, when I returned home my husband informed that he had invited our friends over for dinner as they will be leaving for Melbourne the following day. My house was a mess as it hadn't been cleaned the previous weekend when we were away. Thus, my whole Saturday was wasted on doing the trivial aspects of life. I missed church on Sunday so that I can catch up on my work and everything went well thereafter. I managed to complete my tasks. I found that a lot of students were divided when it came answering the forum discussion assignment on what would happen to bond prices if terrorism ended and countries adopted free trade. What's you take on this one?

Managers and shareholders are the utmost contributors of these conflicts, hence affecting the entire structural organization of a company, its managerial system and eventually to the company's societal responsibility. A corporation is well organized with stipulated division of responsibilities among the arms of the organizational structure, shareholders, directors, managers and corporate officers. However, conflicts between managers in most firms and shareholders have brought about agency problems. Shares and their trade have seen many companies rise to big investments. Shareholders keep the companies running

This creates a budget deficit because there is more being spent than what’s being brought it.

An enthusiastic teacher can easily motivate students to learn because of the passion and drive he/she brings to the class. Such a teacher is also warm and humorous, which students will find encouraging. That might make them want to go the extra mile because the teacher is supportive of them through the feedbacks and scaffoldings he/she gives. However, students often relate much better to their teachers when they believe that he/she is credible, is concerned about their success and has high expectations from them.

The Complete Idiot's Guide to Economics © 2003 by Tom Gorma Retrieved on February 27, 2012 http://www.infoplease.com/cig/economics/effect-imports-exports-gdp.html

For example, If you are selling a product that is a normal good with a high rate of competition in the market, raising the price could have negative effects on overall profits because users will simply find another substitute somewhere. Charles stated that market separation may come into play when firms realize there are differing elasticity curves for different consumers of the same product. Firms can maximize profits by evaluating consumer segments within a single market. If the firm notices different demand elasticity for different segments it may opt to engage in price discrimination to maximize profits. Charles gave Microsoft Office as an example; the same software is offered to students, casual users and business users at different price

The evaluation of a large firm leads to a principle agent problems when the agent has the tendency to act in his own best interests instead of the interests of the principal. It can prove to be difficult to supervise the agent in a direct manner. For instance, if the compensation of the agent is connected directly to the sales revenues of an organization, the agent may attempt to increase sales revenues even if the profits of the company are reduced. There are problems when there is a conflict of interest between shareholders and management and the principle agent.

As Persson said, “the principal-agent problem is the type of problem that arises when an agent is hired by a principal and the former has more information than the latter, and the parties do not share the same objectives. The

technological progress in the specific industry, technical efficiency, changes in output growth rate or changes in input use. Profitability can be influenced by various factors such as change in market dynamics, changes in input use or out production, and the degree of competition in the industry, or Market contestability which refers to the easiness on the part of a new firm’s entry in the market. Other factors that can have effect on profitability are the strength of demand or the state of the economy, Advertising, Substitutes, Relative costs, Economies of scale, Dynamically efficient, Price discrimination, Management, Objectives of firms etc.

Academics and industry experts have been debating over the absolute objective of organizations for decades. Economists argue that the pure aim of any organization should be to maximize shareholders value (Jensen, 2002). The conclusion that derive from such statement are quite straightforward. Nevertheless, the academic discussion that rise from such evidence is more complex. Shareholder value is a concept that could be easily stretched to include a wider focus group. Logically speaking, companies’ performance are affected by the business environment in which they operate. Therefore, shareholder value is indirectly influenced by the entire group of