Instructions
Listed below are possible discussion topics for this module, but if you have personal experiences or examples that relate to the topics presented in the assigned readings, please feel free to add those to this discussion as well. In developing your thoughts and opinions here, please look to incorporate citations and statistics both from the textbook and other outside sources. Lastly, let’s always remember to keep these discussions civilized and respectful, even when we disagree on certain topics.
Module 2:
1.Do you always buy the brand name product? Why? Are you willing to substitute lower price generic products?
2.As consumers do you feel that the law of demand holds true? In what cases might there be exceptions and how does this tie in with the ideas of elastic and inelastic demand?
3.In our mixed economic system, who really establishes prices? Producers or Consumers?
4.In what markets do you see the need for price controls? Better yet, what markets do you wish there were price controls?
Answer
Module 2 Discussion
Many companies have a brand name for their products. Over 80% of products that I purchase have a brand name. Brand name enables me to identify the product and its producer in the market. The brand name helps me to know if the product is generic or original. Given the availability of a substitute that has a lower price, I would be willing to purchase it. However, the products must be able to meet my requirements. The substitute product should maximize my level of utility.
The law of demand states that when the price of a product increase, its demand decrease and vice versa (Mankiw, 2012). This law holds for normal goods and when all other determinants affecting demand are held constant. However, there exist exceptions to the law of demand for Veblen and Giffen goods. Veblen goods are associated with rich people whereby an increase in the price of a commodity leads to an increase in quantity demanded. Luxury automobiles such as Rolls Royce are an example of Veblen goods. On the other hand, Giffen goods are associated with poor people in the society, and its demand is directly attributable to the increase in price. For a commodity with perfect elastic demand, a slight change in price causes change in the quantity demanded. There is no significant change in quantity demanded in a perfectly inelastic good when the price changes.
A mixed economic system exists where there are a strong controlling oversight and governmental provision of public goods. Mankiw (2012) explains that the level of the government oversight in the market varies from one country to another. In a mixed economy, both producers and consumers influence the level of prices of goods.
In a monopoly and oligopoly market system, there is a need for price controls. Producers are the price-makers in the two market system and. Therefore, the government should intervene to protect the consumers (Mankiw, 2012). Better yet, the government should concentrate on controlling the prices set by monopolists.
Reference
Mankiw, N. (2012). Principles of economics. Mason, OH: South-Western Cengage Learning.
