Operations in hilti company Essay Example for Free

Operations in hilti company EssayYou ar the manager of a tauten selling product X in a competitive grocery store. You intend writing a market report on X. Due to some economic changes, there is authoritative increase in the wages of workers. Please write a report about the expected cause on the market equilibrium expense and equilibrium quantity of product X. the following points help you spring your report 1. Indicate the effect of this event on go forth and / or on demand. 2. Analyse what allow happen to market equilibrium legal injury and equilibrium quantity in the short run. 3.If wages be expected to continue at higher levels, analyse what provide happen to market equilibrium price and equilibrium quantity in the long run. The competitive market is one of the type of economic market structure. In a competitive market the price is determined through the forces of demand and publish. The following bear witness the effects of increase on wages on product price, quantity traded, and the show and demand. The demand is the require or need of the person with the willingness to purchase the good at a particular price. The demand is negatively correlated to price.As the price increases the quantity demanded decreases. The supply is the desire and willingness of the supplier to sell the product at a particular price. The downward sloping curve represents demand. Supply is positively correlated to price. As the price increases the quantity supplied increases. Hence, the positive sloping curve represents supply. In the competitive market the point where demand and supply meets is the equilibrium point, which shows the equilibrium price and quantity traded. This is illustrated in the following graph. The increase in wages, increases the make ups of the product.This therefore will decrease the supply bringing a shift in the supply curve. The shift of the supply curve occurs when any factor except price changes bringing an effect on supply. The i ncrease in cost of production will bring low the supply at level of the price because now it has sour to a greater extent costly to produce the supply. The supply curve will shift towards left. The following diagram shows that the supply curve S1 has shifted to S2. This has increased the market equilibrium price in the short run from P1 to P2. The quantity traded has reduced from Q1 to Q2. Long?Run market supply curve. The short? run market supply curve is fairish the horizontal summation of all the individual firms supply curves. The long? run market supply curve is found by examining the responsiveness of short? run market supply to a change in market demand. As the wages will increase, in the long run the price will reduce and the quantity traded will increase because there will be more entrants into the market and the competition will reduce the price of the product. However, the profit levels will also decreases due to the increase in the wages.Question 2 Youve been hired by a firm to determine whether it should shut down its operation. The firm currently uses 70 workers to produce 300 units of output per day. The daily wage (per worker) is $40, and the price of the firms output is $20. The cost of other variable inputs is $500 per day. The firms fixed cost is $3000 per day. You know that the borderline cost of the last unit is $30. 1. Calculate the firms daily losses 2. Should the firm continue to operate at a loss? Carefully explain your answer. sum total daily losses are the following Description address / Revenue Total cost Total daily sales 300 x 20 6000 insouciant total wages 70 x 40 2800 Variable inputs 500 Fixed costs 3000 Total Cost 6300 Daily losses 300 According to the profit maximization theory, each unit sold, peripheral profit (M? ) equals borderline tax revenue (MR) minus fringy cost (MC). Then, if peripheral revenue is greater than fringy cost at some level of output, marginal profit is positive and thus a greater quantity sho uld be produced, and if marginal revenue is less than marginal cost, marginal profit is negative and a lesser quantity should be produced.At the output level at which marginal revenue equals marginal cost, marginal profit is zero and this quantity is the one that maximizes profit. In this case, the marginal profit is negative as according in competitive market marginal revenue is equal to price hence, it is $20 and marginal cost being $30, this equals to -$10. The company should not operate at a loss. Question 3 condition the data of the last question (2), the owner of the firm suggested that losses can be reduced by firing some workers.If you found that the marginal product of the 70th worker was 4units of output per day, do you have got with the owner to reduce employment in order to reduce losses? Please explain carefully. The marginal product of outwear is the change in the output compared to the change in the number of repel. Hence, the 70th labour is producing 4 units per d ay according to the data given in the question. The marginal product of labour is 4. In order to determine the demand of labour, the value of marginal product will be calculated.The value of marginal product should equal to price of the product which is the marginal revenue (MR) with the marginal product of labour (MRP). As long as a workers value of marginal product exceeds the wage, the worker is hired. but because the marginal product is diminishing, eventually so many workers will have been hired that the value of the marginal product of an additional worker would be less than the wage. At this point the hiring will stop. A firm hires labour up to the point at which the value of marginal product equals the wage rate.If the value of marginal product of labour exceeds the wage rate, a firm can increase its profit by employing more workers. This can be summed in the following way Where TR = total revenue Q = quantity MR x MPL = (? TR/? Q) x (? Q/? L) = ? TR/? L Hence, in this case the value of marginal product is MR X MPL = 20 x 4 = 80 Wage rate = ? TR/? L = 40 The company should continue to hire more labour as the marginal product will diminish which will eventually bring the marginal revenue product of labour down until the wage rate is equal to the marginal revenue product of labour.