I
illustrate competitive manufacturing with a simple numerical model of
manufacturers and buyers of
carsoverabusinesscyclewithoff-peakandpeakdemandperiods.
Mymodelhastwotypesofplants manufacturing cars, plantK and plantL, each having
linear total costs with absolute capacity limits. PlantK operates with low VC
and high FC. PlantK, because of its low VC, produces continuously at capacity
in off-peak and in peak periods. PlantL, because of its high VC, shut-downs in
off-peak periods and produces at capacity in peak periods. I show results under
perfect competition SRMC pricing. I prove mathematically two propositions with
this model. Proposition I shows mathematically the conditions of investor
indifference to choose between PlantsK and PlantsL. The significance is to show
a positive aspect of PlantsL, its output-rate flexibility, that some may
overlook. Proposition II shows mathematically the conditions that shifting
consumption of car purchases from off-peak to peak necessarily adds to consumer
surplus. The significance is to show the importance of increasing consumer
purchases in peak periods. These two propositions are intuitive and common
sense.
Author(s) Details
Gerald Aranoff
Professor of Accounting, Bnei Brak, Israel.
View Book :- http://bp.bookpi.org/index.php/bpi/catalog/book/185
Author(s) Details
Gerald Aranoff
Professor of Accounting, Bnei Brak, Israel.
View Book :- http://bp.bookpi.org/index.php/bpi/catalog/book/185
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