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Economic Naturalist Essay, Research Paper

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UNIVERSITI UTARA MALAYSIA

MANAGERIAL ECONOMICS

( EG 5013 )

PROJECT PAPER

ON

Economic Naturalist:

WHY COMPANY GIVES OUT COMPLIMENTARY CALENDARS?

MASTER IN BUSINESS ADMINISTRATION

OCTOBER 1999/2000 Session

Prepared BY:

SUKRI B RADZALI ( MATRIX NO. 81420 )

PREPARED FOR:

EN. SHAMSUL BAHRAIN RAWI

SCHOOLOF ECONOMICS, UUM

Date:

24TH DEC. 1999

Introduction

We ever associate the month of December with inundation season particularly in Kelantan & A ; Terengganu. December besides usually go a holiday period for most of Malaysians as this clip of the twelvemonth coincide with school vacation and people are completing off their one-year foliages to be with their household. You might be inquiring what December has to make with the economic system? How about calendar? Peoples are usually looking for calendar for incoming twelvemonth in December. Many companies in Malaysia are bring forthing calendars to be given out to their clients, official contacts and providers. We can happen so many types of calendars form little and simple to large and colourful and rather expensive excessively. Why companies are bring forthing calendars? Why they have to incur an extra unneeded disbursals? Is it portion of the advertisement disbursals? What are the expected benefits? They do non sell the calendars! ! Of class, they are non traveling to acquire some income out of this activity. These are some of the issues that we are seeking to research and reply. We will associate the issues into some of the economic theories. There must be some economic grounds for companies to give out complementary calendars every terminal of the twelvemonth.

Theory of the Firm

A house is an organisation that combines resources for the intents of bring forthing goods and/or services for sale. Firms exist because it would be really inefficient and dearly-won for enterprisers to come in into and implement contracts with workers and proprietors of capital, land, and other resources for each separate measure of the production and procedure.

Calendars play some functions in any house. By and large, houses produce calendars as portion of their publicity for its merchandises and the company itself. Normally, the calendars are printed with company & # 8217 ; s specifics such as company & # 8217 ; s logo, name, reference, and contact Numberss. It besides has the information and images of merchandises the company green goods. The images are usually in full colour and really attractive. These elements are really of import in projection the good image and can be one of the selling schemes for the company.

The calendars will play a function as portion of the company & # 8217 ; s advertisement attempt in advancing its merchandises and services. Normally, calendars are given out as a complimentary to company & # 8217 ; s client, providers, concern contacts and authorities governments. Sometime, people need to purchase something from the shop in order to acquire a calendar. Believe it or non that there are people who buy goods and merchandises merely to acquire the calendar. These consumers are influenced by the twelvemonth terminal price reductions and the merely for the interest of calendar that the company offers. But every bit far as the company is concerned, the above will increase public consciousness of its company and merchandises which will subsequently hold a positive consequence on its sale and net income. Of class, the company will incur some extra disbursals in bring forthing calendars in short term but they will derive in long term. As such, companies are willing to give short-run net incomes for the interest of increasing future or long-run net incomes. The same goes to other outgos such as research & A ; development, and new capital equipment. These require a really high initial investing and the return may be realized in five or ten old ages.

Originally, the theory of the house was based on the premise that the end or aim of the house was to maximise current or short-run net incomes but, the theory of the house now postulates that the primary end or aim of the house is to maximise the wealth or value of the house. This is given by the present value of all expected future net incomes of the house. Future net incomes must be discounted to the present because a ringgit of net income in the hereafter is worth less than a ringgit of net income today. As such, companies are willing to put in bring forthing calendars as they know that they will derive net income in long-run.

Talking about, there are two types of net income which are concern net income and economic net income. Business net income refers to the gross of the house minus the explicit cost or accounting cost of the house. The explicits cost are the existent out-of-pocket outgos of the house to buy or engage the inputs it requires in production. While the economic net income equals the gross of the house minus its explicit costs and inexplicit costs. Implicit cost refers to the value of the inputs owned and used by the house in its ain production procedures.

Law of Demand

As ment

ioned earlier, calendars act as a portion of advertisement channel for a company. With the right combination of distribution schemes, design, and constructs ; the message on the company and its merchandises will make the consumer and it stick to their head as calendars are hanged in our life room for the whole twelvemonth. In long term, the demand for the merchandise is increased. It is shown by a rightward displacement of the demand curve for a merchandise.

Before, we explain farther on displacement of the demand curve, allow & # 8217 ; s expression at the basic jurisprudence of the demand. The jurisprudence says that as the monetary value of the trade good addition, the measure demanded lessening and as the monetary value of the trade good lessening, the measure demanded addition. This opposite relationship between the monetary value of the trade good and the measure demanded per clip period is referred to as the jurisprudence of demand. The demand map faced by the house is the relationship that identifies the determiners of the demands for a trade good faced by the house. These include the monetary value of the trade good, consumer & # 8217 ; s income, the monetary value of related trade goods, gustatory sensations, advertisement, and other forces that are specific to the peculiar industry and house. The consumer demand theory postulates that the measure demanded of a trade good per clip period addition with the decrease in its monetary value, addition in consumer & # 8217 ; s income, addition in the monetary value of replacements and a decrease in the monetary value of complementary trade goods, and increased gustatory sensation for the trade good. On the other manus, the measure demanded diminutions with the opposite alterations.

Now, allow & # 8217 ; s travel back the issue of rightward move of a demand curve. If any of the things held changeless in pulling the demand curve alteration, the full demand curve displacements to the right so that the consumer demands more of the trade good at each trade good monetary value if the consumer & # 8217 ; s income addition, the monetary value of utility trade good addition or the monetary value of a complementary trade good falls, and if the consumer & # 8217 ; s gustatory sensation for the trade good addition. An addition in outgos on calendars could besides take to an addition in demand of the merchandise of the company and contribute to the rightward displacement of the demand curve.

Arrested development Analysis

In other words, we could state that the outgos on calendars could besides lend to the addition in the demand of the merchandise or there is a relationship between the ringgit spent on calendars and the measure demanded of peculiar merchandise. How significance is the relationship is truly depending on some expression and informations to come up with t value of the hypothesis.

The above can be shown as a arrested development theoretical account as follows: –

Q = a & # 8211 ; b1 P + b2Y + b3S + b4T + b5C

( 5.12 ) ( 3.24 ) ( 4.56 ) ( 3.96 ) ( 4.25 )

R2 = 0.85

The T values which are in parentheses below the estimated incline coefficient and the R2 value are the premise figures for the intent of treatment. The value of a is the perpendicular intercept and b1, b2, b3, b4, and b5 are the values of the incline coefficient of the arrested development line. The above values can be determined by utilizing some expressions and past informations on Q, P, Y, T, and C.

Where Q = Quantity merchandise demanded

P = Price of the merchandise

Y = Consumer & # 8217 ; s income

S = Price of replacement & # 8217 ; s merchandise

T = Consumer & # 8217 ; s gustatory sensation

A = Outgo on calendars

From the above arrested development theoretical account, we can see that the measure demanded ( Q ) will increase as the is a decrease in monetary value of the merchandise ( P ) , addition in consumer & # 8217 ; s income ( Y ) , addition in monetary value of replacement & # 8217 ; s merchandise, addition in consumer & # 8217 ; s gustatory sensation, and increase in outgo on calendars. Using the given T values, we can compare it with table T values at certain per centum degree, usually at 5 percent degree of significance. If the given ( calculated ) T values are higher than the tabular array values, we can accept the hypothesis that there are statistically some important relationship between Q ( measure demanded ) and other determiners of Q which are P, Y, S, T, and A. The coefficient of finding ( R2 ) of 0.85 shows that 85 per centum of the entire fluctuation or scattering in measure demanded ( Q ) is explained by the fluctuation in the mugwumps variables which are the monetary value of merchandise, consumer & # 8217 ; s income, monetary value of replacement & # 8217 ; s merchandise, consumer & # 8217 ; s gustatory sensation, and the entire outgo on calendars.

Supply and Production Theory

We have mentioned on the relationship on the entire disbursement on calendars which have a positive consequence on the measure demanded for a peculiar merchandise. The more sum put on bring forthing the calendar, we could anticipate that there will be more merchandise demanded. As a consequence, company should response by bring forthing more of their merchandise. There will be more merchandises supplied to the market. Theory of supply shows the sum of trade good that Sellerss would offer for sale at assorted monetary values. As the monetary value of the merchandise increased, the measure supplied addition. With the addition in efficiency, decrease in resource monetary value, and betterment in engineering could do the supply curve to the right.

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