Introduction
In Will Bury’s case scenario, Will is an enterprising inventor, who made a decision to make a business of selling audio digitized copies of books using his patented technology. Being an engineer in mind, Will has little knowledge of business concepts, and in that regard, the first attempt of providing older books with lapsed copyright and newer books at higher prices, resulted in low sales with proportions contradicting his expectations. In order to outline the main areas of weaknesses in Will’s decision, this paper provides a brief overview of the basic concept of economics, which Will might have missed due to his lack of knowledge.
Analysis
The first principle that should be mentioned is the marginal analysis. This concept is related to weighing the costs and the benefits of a particular decision (McConnell, 2009, p. 5). In that regard, prior to taking vital decisions, such as raising the price of the book, Will should establish the marginal costs and the marginal benefit of such decision, and compare them in order to establish the reasonability of taking such move. Such basic concept can be applied to all the decisions presented in the scenario, such as digitizing older books, using CD copies of the books, or hiring employees to do the job.
Another important concept is related to demand and supply, where for the first part, the law of demand states that with other things equal, there is an inverse relationship between price and quantity demanded (47). Applying this concept to Will pricing decisions, the demand can be increased by lowering the price of the product, and vice versa. This concept is applicable, providing that there is not any other confounding factor, such as the prices of other similar products in this category, as well as any other demand determinants, such as the taste of buyers, and their numbers in a specific market. Regarding supply, its law states that a supply increases with the increase in price, forming a positive relationship between the two (51). It should be noted that the same rule of all things equal apply in this case as well, where supply determinants, specific to the case, such as the loyalty fees, the prices of the CDs, prices of competing products, Will’s expectations, and the number of sellers, all can influence the supply of the product.
Following the aforementioned concepts, Will should be able to establish the equilibrium of price and quantity, i.e. a certain scale in equilibrium, where the supply and demand matches. In that regard, knowing these aspects, the changes in demand and supply can adjust the equilibrium price and the equilibrium quantity (54). Additionally, another concept applicable and specifically related to setting the price dilemma in the scenario is the elasticity concept, which is the responsiveness of the consumers to price changes (114). In that regard, the elasticity of the price would indicate the response of the customers’ buying behavior and accordingly the amount of the sales.
Conclusion
Putting all or some of the aforementioned concepts will help Will to have the reasonable justification he needs in order to make critical decisions, supporting such justification with a theoretical framework. In that regard, following the advice given by Elsa Budley cannot be justified, as the correlation between prices and demand in her case might be confounded buy different factors and different determinants, which are not applicable to Will case, and Will’s market.
References
McConnell, C. R. (2009). Economics: principles, problems, and policies: McGraw-Hill.