A Market Economy is the most efficient way of organizing Millions ofsuppliers (firm) and consumers(buyers) make the markets. Thesuppliers and consumers sell andpurchase goods that satisfy thewants of consumers and suppliers.Suppliers and consumers makerational decisions, respond toincentives and make tradeoffs. Overall trade makes everyone betteroff. (Mankiw) If one firm does notmeet the wants of the consumer thenthey will lose their place in themarket.Sales for most major retailers haverisen this quarter, while othershave fallen. The over all salesgain equals 7.9%. (Chandler) Salesrose because consumers are notbothered by threats of war. Also,they feel confident in current andfuture stability of the economy.The reason some retailers lost andmost gained could be a number ofpossibilities: Prices might be toohigh for the consumer's taste.Marketing strategies appealed toconsumer's tastes. Consumer'sexpectation of future prices andeconomic stability.Consumer purchasing goods from somefirms dropped. This could have beenbecause of price increase of goodssold by retailers. Prices of goodsrose because of cost increase dueto the rise in Average Total Cost.Average Total Cost is Total Cost(everything that is given up to payfor good) divided by Quantity (howmany goods the firm produces). Thiswill be driven up by the VariableCost (costs that vary with thequantity of output produced)because of inflation; wage increaseand cost of goods needed to producethe final good. With some firms rising having theirAverage Total Cost going up and notincreasing price, they will loseprofit. Profit is attained by[Total Revenue (the amount a firmreceives for sales of it's output)divided by Quantity minus TotalCost divided by Quantity]multiplied by Quantity. Or, Profitwill equal (Price minus AverageTotal Cost) multiplied by Quantity.If the Average Total Cost is largerthan the price than the firm willface either raising price or with ashort-term profit loss-shutdown. ...
