Question

ECO 2013. Imagine that you are famous for putting on the most incredible firework and light shows in the world. People love seeing your work and you enjoy putting on a great show. (answer using an economic standpoint)

a. Sketch out / elaborate on a plan that would allow you to make some money off your skill.

b. Explain what obstacles might you run into when it comes to people’s willingness to pay for your show?

Answer 1

QUESTION-A

the statement itself reveals that there is huge demand of the services of our light shows.

• it means with nominal advertisement costs,exhibitions and demo shows would be enough to win a large consumer base.
• we can then charge relatively higher price for our services due to increased market share and most important we would be able to operate at large scale which would also allow us to enjoy the economy of scale.
• we would also get the advantage of strong goodwill and can establish the concept of franchise.

QUESTION-B

obstacles-

• with the passage of time our company would face the problem of imitation and competition where the rivals would provide their services at lower price and so our company would have to do the same,which would result in decline in profit level.
• expanding business would lead to adapt the concept of decentralization,which would result in lack of administrative control and lack of uniformity in services.
• due to increasing competition our company would have to increase the expenses concerned with advertisement and marketing which would adversely impact the profitability of the company.

due to above points the firm would be struggling to become a price maker in the economy at full capacity.