Economics Of Satellite Dish Providers Essay

3084 words - 12 pages

Executive SummaryThe satellite dish industry follows the laws of supply and demand. Demand is associated with product pricing. Satellite dishes are considered to be price elastic because the demand varies with price. The following items will be discussed in terms of demand and product pricing.* Utility* The Law of Diminishing Marginal Utility* Determinants of Demand* Substitutes and Complements* ElasticityCosts of production are a basis for product pricing. A company cannot make a profit by selling a product below production costs. Costs also affect the supply of a given product or service. The following will be discussed in relation to costs and supply.* Costs* The Law of Diminishing Returns* Determinants of SupplyThe market structure in which a firm operates affects both price and non-price competition. The following components of market structure will be discussed.* Defining Characteristics* Implications* Non-price StrategiesEconomic forecasts affect all determinants of supply and demand. Being an elastic product, satellite dishes are vulnerable to economic forecasts. The following will be discussed about economic forecasts.* Supply Indicator* Demand Indicator* ImplicationsTable of ContentsProduct Pricing....................................................................5-8Costs.................................................................................8-11Market Structure...................................................................11-15Economic Forecast................................................................15-16References..........................................................................17Product PricingDemand is a curve that shows the amount of a product consumers are willing to purchase at a variety of different prices during a specific period of time. There is an inverse relationship between product price and demand. All else equal, as price falls, the quantity demanded increase, and as price rises, the quantity demanded decreases (McConnell, 40). All else equal is important in this statement. There are several determinants of demand other than price which are discussed below.UtilityUtility is a measure of satisfaction or happiness from buying goods or services. The more utility there is the happier the person is. In this situation, the utility is the satisfaction which the consumer gets by watching television using his satellite dish.Law of Diminishing Marginal UtilityMarginal utility is additional utility derived from each unit of goods acquired. According to the law of diminishing marginal utility, as consumption of a product increases there is a decrease in the marginal utility that person receives from each additional unit of that product. Since most consumers will only purchase one satellite dish, let's look at this in terms of number of channels. One channel is great. Two channels are twice as good as one, but the satisfaction gained from each additional channel diminishes as the number of channels...

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