Managerial Economics

Question Number One

A large majority of people experience hearing loss in the United States. However, most of the people do not go for the hearing aid. There are many reasons due to which the people do not prefer the hearing aids. However, the biggest reason is that the prices of the hearing aid are very expensive. Most of the people in spite of facing a hearing loss do not go for the hearing aids. On the average most of the hearing aids come in the range of $2000 to $4000. This scenario has adversely affected the sales of many firms, which are unable to sell their hearing aids. It is also unfortunate for the firms that neither the government nor the other insurance related companies are helping the people to buy these hearing aids. Some of the experts believe that if the firms that manufacture these hearing aids lower the prices than most of the people suffering from the hearing loss will buy these. The firms that make these hearing aids are dubious about selling of this hearing aid and opine that even if they lower the prices of the hearing aid, many people will not buy these due to the stigma attached to it. The economic law, however, confirm that if the prices of a certain things are lowered the people will but in it more quantity. Furthermore, it is also believed that it is not the luxury product instead; the it is the greatest need of the people. If they will not buy it, they will continue to face hearing loss. Similarly, if there will be decrease in the prices than they will have an extra motivation for buying these.

Most of the firms have much hearing aid in their stocks, if they will not sell it than they will experience a lot of loss. Therefore, one way in which they can minimize the losses can be this that they should offer the discounts on some of the stock of hearing aid. If this stock is not sold which was manufactured in anticipation of the public demand than then most of the hearing aid will become obsolete. Therefore, it is very important to sell this stock and the best way in which it can be sold is that the firms should offer discounts on this. However, after this stock is sold than the company might plan the things in an effective way. They should decide that what would be their long run strategy. If the firms think that, they can attract more customers by lowering down the hearing aid prices than they should go for this strategy. On the other hand, if they think that they cannot lower the prices than they should not lower down the prices. Similarly, they can also decide that whether they want to offer the discounts or not. F they decide to offer to discounts in some months of the year and continue the higher prices in the end than it will also ...