International Seminar on Macroeconomics

Questions: 1. Rationale aspects of plan that is taken up by the manager of a low calorie frozen microwaveable food company in the verge of rising prices for changes in price less elasticity?2. Examine the major effects that government policies have on production and employment. Predict the potential affect of government policies on the company?3. Need for government regulation for fairness in the low calorie, frozen microwavable food industry and supporting reasons?4. Two examples on government involvement in the market economy for supporting reference?5. The major complexity that emerges under expansion of capital projects and key actions taken up by the company to address the complexities?6. Ways company uses for creating convergence of interest between the stockholder and managers and supporting examples related to it? Answers: Introduction In this assignment, the importance of the government policies, complexities that arise from the expansion through capital projects and convergence of the stockholders and managers interests have been analyzed (Abel, Bernanke Croushore, 2011). The pricing strategy is important for the low calorie frozen microwaveable food company. The company faces a tough competition in the market, as there are many competitors in the market. The customers would be moving to that product which is cheaper. The difference that was noticed between the investors and managers is that one is interested in profit while the latter is interested in income. 1. Rationale aspects of plan that is taken up by the manager of a low calorie frozen microwaveable food company in the verge of rising prices for changes in price less elasticity An immense craze for healthy food options or low calorie food concept has gained an interest among all the individuals in the recent times. The healthier options are now available in schools and restaurants. There is increasing number of people who want to stay healthy and enjoy healthier life style. The paper will outline the plan that is taken by the manager like examining the major effects that the government has on employment and production, determination of whether the regulation by the government ensures fairness, examining of major complexities, which is under the expansion like the capital projects and convergence of managers and interest of managers and the stakeholders. The main aim of the company is to make the quoted price of the product as much as inelastic as possible. The strategy in which the prices are charged should have no impact on the way that is perceived by the consumers and the way they purchase the products (Abel, Bernanke Croushore, 2014). The demand of thi s type is only seen in circumstances in which the services and goods are indispensible and the consumers cannot sustain without the product. However, this aspect is not noticed for the food products that are microwavable. The demand for such products depends upon the price of the product, substitute, advertisement and income. The market that is suited for low calorie microwavable food items is monopolistically competitive (Blanchard, 2011). There is product differentiation followed. The different prices by the firms will lead to moving of consumers towards lower price of products. The first order condition for profit maximization is fulfilled i.e. MR=MC. As per the elasticity, that was stated in the assignments before it can be seen that the demand for the manufactured low calorie goods is not elastic in nature. To maintain the product as inelastic feasible, the firm has the attempt to segregate the products from the other products of the firms (Blanchard Johnson, 2013). The dissimilarity in the product will help the firm to sell more products. There is a vigorous product differentiation to make profit. 2. Examine the major effects that government policies have on production and employment. Predict the potential affect of government policies on the company. Government involvement in the market economy Many people hold a belief that the regime should be able to regulate the market. There are mainly two forms of market i.e. regulated or unregulated form of market. There should be some extent of intervention or regulation regime. Thus, regulation by the government is very important (Dornbusch, Fischer Startz, 2014). There are opinions that suggest denouncing government as it is waste or pointless. Apart from that, the government can perform better than that of the private sector. Handling of the externalities, provision of public goods (like the public roads, national defence), providing medium of exchange and enforcement of the contracts are the things that make the government a better performer than the private individuals. The main reason for this is that the government works for the people. A lot of discussion can be made so that a limit can be drawn for the government and the specific things that are to be there within their limits. The argument is that it is better off with no government or short sightedness that the government is in charge of all the economic activities (Frankel Pissarides, 2012). The two main reasons for the involvement of the government is the establishing of the exchange rules in the market and using that power to enforce. This would help in reducing the uncertainty of the people who are unfortunate. These people are deprived in the form of poor health, job losses and bad luck. In the market economy, there are many opportunities but there is also presence of risk. The government policies are designed in such a way that it increases the employment of the economy. It will be providing unemployment benefits like quality training to the workers so that the unemployment level improves (Giavazzi West, 2012). The company will be benefitted from the government policies through the tax reduction, the public goods like roads and defence. These features will help in providing a conducive environment for the company. 3. Need for government regulation for fairness in the low calorie,frozen microwavable food industry and supporting reasons Main aims for intervention of the government is basically for use of the public and the private goods. The individuals they cannot judge their own interest and are not able to figure out its benefit. The government must be able to fund things that serve the best for the entire society. The intervention of the government in the market is required as without this the market would be inefficient (Gottfries, 2012). There is a high possibility of monopoly and merger in the market economy as this creates an opportunity for exploitation of the customers through the substandard goods and high prices. The role of the government in this particular situation is to oversee the control and the mergers in the market so that the monopoly growth in the market is restricted (Hubbard, Garnett, Lewis O'Brien, 2012). The main aspect of the market economy is to achieve the optimal capacity in production but this is not fulfilled due to the existence of monopoly. 4. Two examples on government involvement in the market economy for supporting reference The first example in this case is the intervention of the government when there are too much negative externalities that are created by the firms like producing of smog from the manufacturing plants that causes some harmful effect. If this externality does not produce any type of harm to the producer then the action is going to continue, as there will be no risk of consequence (Hubbard O'Brien, 2013). The Chinese economy has witnessed such thick smog that it made the citizens to wear masks and reduced their outdoor goods activity. The majority of the goods were headed to the United States who environmental laws are much stricter. The other example for this case is the involvement of the government to regulate the banking structure and the natural monopolies. The United States government is enforcing the laws so the rights of the average Americans are protected from the harmful business practices (Hubbard, O'Brien Sharma, 2012). The government used these rights for prosecuting Dennis Kozloski after he looted Tyco for an amount of 600 million dollars. 5. The major complexity that emerges under expansion of capital projects and key actions taken up by the company to address the complexities Before the company thinks of expansion and mergers regarding its operation, it will have to make reasonable steps regarding the decision making of the budget. The main reason for a merger by the company is to make sure risk; cost and the benefits of the investment are analyzed (Jones, 2012). The challenge faced to raise capital to get the perfect source for it. This will cause emergence of a struggle between the shareholders and company managers. The easy way for the manager to raise the capital would be the shareholders reserves. The raising of the capital is a very difficult task that has to be undertaken. There is an evaluation of many things that is needed. The requirements are cost of capital, the ease at which the capital can be obtained and expected return that is possible from capital (Williamson, 2014). The company can think of mergers so that there is share of technology and resources, which would help in generating higher profit levels (Krugman Wells, 2013). The resources, financial commitments are strengthened and losses are minimized. The merger would be a viable option for the company rather than self-expansion through the capital projects. 6. Ways company uses for creating convergence of interest between the stockholder and managers and supporting examples related to it There are mainly three forces that together help in creating a convergence of interest of the managers and the stockholders. This would include the decision making of the managers, directors, organizational integration and financial commitment. The managers are able to control the interest over the affairs of the company (Mankiw, 2012). There is limited control of the stockholders over the managers action despite being the owner. The conflict between the two occurs when the parties seek for maximizing individual benefit. The stockholder helps in maximizing the individual profit. The stockholders are eager is maximizing profit while managers seek for high level of profits. The managers are also against mergers, as this would affect job security (Mankiw Taylor, 2012). The earnings of the managers need to be pegged so that higher profit will be raised. This would be help in guaranteeing the interest of the shareholders as this would help in increasing dividends (Rossana, 2011). Economic growth was envisioned by the private and public enterprises but the growth was slowed down as the unethical leader was who were interested in satisfying their personal needs instead satisfying the employees and the customers needs (McTaggart, Findlay Parkin, 2012). The commitment financially requires manager to have internal knowledge about the revenues and the outside finances. The stockholders will not be in a problem whether to believe in financial statement of the organization or not (Parkin, 2012). The Securities and Exchange Commission requires the organization provides continuing information on the financial position. There is a need for quarterly, half-yearly and annual basis so those shareholders are better. Conclusion There is need for a strong involvement of the government in the market economy. The advantages in this perspective are many. The government intervention will help the economy to avail the public goods that will help the economy to gain positive effects. An organization when it considers expansion through the capital project is like lose while it gains from the mergers. There are forces that help in converge of the interest of managers and the shareholders in the organization. Reference List Abel, A., Bernanke, B., Croushore, D. (2011).Macroeconomics. Boston: Addison-Wesley. Abel, A., Bernanke, B., Croushore, D. (2014).Macroeconomics. 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