Why Government Regulation Has On Production And Employment

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Investing is one of the most important decisions for a business. Investment is the purchase or creation of assets with the objective of making gains in the future. In this paper we will begin with outlining a plan that managers can take in the case for low-calorie froze microwaveable foods in anticipation of raising prices when selecting pricing strategies for making their products to a change in price less elastic. Then the paper will examine the major effects that government policies have on production and employment. Predictions will be made based on the potential effects that government policies could have on the low calorie microwavable food company. The paper will then introduce whether or not government regulation is necessary to…show more content…
If the elasticity of demand is greater than one, then the demand is elastic, and if it is less than one the demand is inelastic. If demand is equal to one then the demand is unit elastic. Therefore, inelasticity implies that the product is a necessity to the consumer. With this in mind, a company must make the appropriate decisions based on analysis of the market, and a plan must be made in order to follow the anticipation of price changes. First, the company should review the substitute goods in the market and their pricing strategy. The more the number of substitutes are in the market, the higher the elasticity of low calorie microwavable foods will be. Consumers should not have he choice of multiple substitutes in the market because this raises the risk for the company and its demand is lessened due to the any choices consumers will then have. However, if there are only few substitutes available, then the producers may keep the price high in the market for their product. Market power is a huge factor when considering price change for a company. Market power is determined by the elasticity of demand of the product. The firm can set higher mark-up prices over their marginal cost if they know that customers will not shift to another product in case of price increase. Hence, the firm or the producer should consider the cross price elasticity of demand of their product. Second, when considering the expected changes in price the
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