Are John M. Clark Business Cycles Insights Still Relevant Today? | Chapter 2 | An Overview on Business, Management and Economics Research Vol. 6

 The object concerning this study is to equate numerical results for a thought experiment of the commerce of business phases with pictorial demand and cost curves. This is a pure theoretical model stimulated by the manuscripts of John M. Clark (1884-1963). This study models a hypothetic cement industry, product Q. The plant property are assumed long-lasting, to last for 50 years, and distinguishing to manufacturing only one device, Q The model, with allure rigid acceptances, shows that industry composed of only up-to-date low established-cost Plants K will increase the amplitude of implausible story cycle, the range of industry outputs middle from two points peak and off-peak, versus an manufacturing composed of only traditional high fixed-cost Plants L. The model shows a certain aspect of established costs: that one can wish that industry with extreme fixed costs to have diminished amplitude of killing cycle. Some can find this a surprising result.

Author(s) Details:

Gerald Aranoff,
Ariel University, Ariel 40700, Israel.

Please see the link here: https://stm.bookpi.org/AOBMER-V6/article/view/12671

A Numerical Example Illustrating Cost of Idle Capacity in Manufacturing: Advanced Study | Chapter 5 | Current Strategies in Economics and Management Vol. 2

I illustrate cost of idle capacity in manufacturing with a simple numerical model of manufacturers and buyers of cement over a business cycle with off-peak and peak demand periods. Given demand fluctuations, such as the business cycle, significant cost of idle capacity is ordinary, necessary, and desirable. My model has two types of plants manufacturing cement, 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 and LR equilibrium requirement for all plants E(π) = 0. Only plantL incurs idle capacity costs. This shows a positive aspect of plantsK that they have no idle capacity costs. PlantsK are modern and make extensive use of outsourcing. Outsourcing is rising in recent years with advances in internet, computers, and telephone. Manufacturers today can depend on getting needed parts “just-in-time” from outside suppliers without maintaining inventories of parts or capacity to produce parts.

Author(s) Details

Gerald Aranoff
Professor of Accounting, Bnei Brak, Israel.

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