differences existing inthe inherent attractiveness W r i t i n g

differences existing inthe inherent attractiveness W r i t i n g

Reflection and Discussion – Week6

I need someone to assist me with repling to this in 150 words only. Need it ASAP

From chapter 9,

I thought that the most important concepts, methods, and terms include

the following; competitive firms, indifference principle, compensating wage differentials,

finance: risk vs. return, stock volatility and returns, historical equity risk premium, monopoly

and mean reversion of profit.

A competitive firm is one that in any situation cannot affect the prices of goods and

services. Such firms are characterized by the production of products or services with a very close

substitute. As a result, firms like that have very elastic demand. A firm that is said to be

competitive doesn’t have control over the prices charged in the market but they can only control

how much they produce at any time. For a firm that is competitive, the competitive firm price is

equivalent to the marginal revenue. Competitive firms are known to earn positive or negative

profits in the short run.

Mean reversion of profit is a phenomenon wherewith the existing demand and supply of

goods and services in the short run, the prices are seen to either increase or decrease.

Products tend to adopt the indifference principle where products tend to make the same

profit not considering where it is sold at. It can also be summed as the ability of a product or an

asset to move from a lower to higher-valued use as it tried to achieve a long-run equilibrium.

Compensating wage differentials is a phenomenon that shows the differences existing in

the inherent attractiveness of the various professions. It is evident that different careers attract

different remunerations. The difference in wages is as a result of the difference in the attraction


Risk and return are the tools used to establish the viability of a venture. Generally,

investors will always prefer those investments that promise high returns unlike those that have

high chances of stalling. Investments with higher risk give a higher return. Investors are therefore

advised to adopt the right risk mitigation strategies.

Monopoly is a situation where one producer or manufacturer produces a product that

doesn’t have close substitutes hence the customers don’t have the freedom to choose but to buy

the only available product. Entry into such industries is either restricted by law or requires a huge

initial outlay.

I felt that the discussed terms, concepts, and methods were important since they provide a

wide scope of the relationship between industries. In addition to that the terms, concepts, and

methods provided a vivid description of the market structures and how prices are affected by the

forces of demand and supply.

I will use these concepts to analyze any market structure and different industries. Having

known how they work, I will apply my skills adequately whenever I want to invest or buy any


The concepts, terms, and methods are important in managerial economics since they give

the managers a glimpse of the market condition and how to charge their products to achieve the

main objective of economics which dictates that an entity should endeavor to minimize cost and

maximize profit.


Brooks, C. (2019). Introductory econometrics for finance. Cambridge university press.

Pilbeam, K. (2018). Finance & financial markets. Macmillan International Higher Education.

Lo, A. W. (2019). Adaptive markets: Financial evolution at the speed of thought. Princeton