Table of Contents Social enterprise
The impact of social enterprises on the society
Major achievements of social enterprises
Challenges faced by the social enterprises
The Social economy in relation to social enterprise
Critics associated with social enterprises
Social enterprise According to Price (2008, pp 1), “social enterprises are businesses with primary social objectives whose surpluses are principally reinvested for that purpose in business or in the community, rather that being driven by the need to maximize profit for shareholders and owners.”
Social enterprise is mainly associated with non-profit organizations, mainly privately owned, which sell goods and services with an aim of yielding a return on investments, with the accumulated profits being ploughed back into the business or they are directed to social purposes.
The profits of these organizations are not maximized to benefit the shareholders. In addition, social enterprises may be developed with an aim of fulfilling needs that are rare, such as providing employment to the less fortunate communities and the disadvantaged individuals. Such groups of people include the disabled, low education candidates, and ex-offenders, among others.
These social enterprises also operate in the less attractive locations for other businesses; such places include locations with low level of education, rural areas, and social housing areas among others.
Social enterprise activities mainly revolve around the developing of countries, and they include recycling, renewable energy, and fair trade. Social enterprise mainly aims at the social challenges of poverty, unemployment, disablement, and underdevelopment, which may occur in some locations and communities; they address such challenges via aid and social work (Kerlin, 2009, pp xiii).
Just like other businesses, social enterprises compete in the market, but the difference comes in where profits made are reinvested in social activities. Social enterprises are also viewed as a response that is innovative and is directed into funding socio activities by the non-profit organization (Nyssens, et al, 2006, pp 4).
According to Kerlin (2006, pp 249), social enterprises are characterized by the continuity of producing goods and services, the aim to benefit the community, low amount paid in terms of work, the initiative to take up risks, and the limitation of profit distribution.
Get your 100% original paper on any topic done in as little as 3 hours Learn More Kerlin (2009, pp 6) further explains these characteristics; first, the continuity of producing and selling of goods and services, with the social enterprises being known for their productivity of goods and services. Secondary, high degree of autonomy involves their creation by a group on individuals who govern these enterprises and they are not controlled by the government; hence, they make their own decision.
Thirdly, the important level of economic risk allows their employees to determine their financial stability by how well they secure sufficient resources. In addition, the minimum amount of work that is paid shows that most of their workers are volunteering while only a small portion of them are fully employed.
Their aim to benefit the community entails serving of specific people in a community and promoting social responsibility.
Moreover, these enterprises represent an initiative formed by a group of people with the same aims and objectives, while the decision-making process involves voting, thus incorporating all ideas of the stakeholders. Lastly, the limited issue of profit distribution requires that profits be distributed on limited basis with the aim of minimizing profit maximization motive.
The impact of social enterprises on the society Despite social enterprises playing a major role in the employment of the less-advantaged groups, in some countries like the United Kingdom, it lacks full control of this factor. According to survey, only 2% of the United Kingdom population is employed by the social enterprises. However, this could be due to the fact that the social enterprises pay less as compared to the public sectors.
Nevertheless, these enterprises contribute greatly to the marginalized communities and groups of people (Teasdale, 2010 pp. 95). Teasdale (2010, pp 101) further explains that social enterprises can be of various purposes including providing a social space for the marginalized groups of people such that they are able to develop bonds with others who have a similar situation as theirs.
An example of supported housing enterprise is in the United Kingdom whereby the enterprise accommodated those who suffered from bipolar, as one of the victim shared that he feels much safer at the center other than in the community as he is always harassed and he had no close friends.
We will write a custom Essay on Social Enterprise in Context specifically for you! Get your first paper with 15% OFF Learn More When he compares his life in the supported housing enterprise, where he is able to make friends and bond, he feels much safer since there are people with similar situation as his who love and understand him. Hence, this enterprise is a perfect example of a social enterprise from the marginalized groups of people.
Individuals are excluded from activities in the community but are included socially in a group. For instance, a person who has relied on the state’s benefit for some time and then he is finally excluded from such benefits, but within a community enterprise, he is not excluded and was involved even in decision making. Such a person will feel less isolated in the community enterprise as compared to his country.
These enterprises have an aim of creating a paying employment, this is evidence in the case of community times a social enterprise in the United Kingdom that provided employment with a salary to the management team of the organization. Social enterprises involve hierarchy decision-making, tending to fill in, in terms of goods and services, where the state has failed.
Therefore, it is evident that a social enterprise is business aimed at changing the society for the common good. An evident case is that of China, where, despite the social entrepreneurs investing in two projects, they never aimed at profit maximizing, but rather, on strategies that focused on the community (Gunn and Durkin, 2010, pp67).
Social enterprises mainly focus on social responsibility; this is evident when they take up the role of rehabilitating offenders, in which they change the lives of such people for the benefit of the society, since the rate of crime will reduce.
According to Myers and Stocks (2010 pp 267), “the social economy encompasses a range of non-profit and social enterprise organizations that put people before profits, by solving social needs rather than amassing financial profits.” This statement makes it clear that social enterprises sacrifice their private aims and objectives and focus on social needs of the communities.
According to newstatesman (2002, pp ii), social enterprises are seen as organizations that are neither answerable to the government nor have an aim of profit maximization.
This article further explains that the social enterprises are mainly concerned with quality of life of the common people, which involves health, conducive environment, and opportunities for a better education among others. This is summarized by newstatesman (2002, pp. vii) by stating that, “social enterprises are hybrids mixing social values and goals with commercial practices.”
Not sure if you can write a paper on Social Enterprise in Context by yourself? We can help you for only $16.05 $11/page Learn More This is evident as they prove to be unconstitutional, as their main driving force are social goals, which include provision of education, support to the incapable families and childcare support; however, to attain such goals, they have to participate and compete in the market through selling their goods and services.
An example can be extracted from the furniture resource centre located in Liverpool, which has a workforce of one hundred and fifty repairing and selling furniture. This business not only sells its products, but it creates a common good to the society by providing employment.
The main aim why the social enterprises make profits is to attain independence and avoid relying on government for support. They therefore focus on communities and customers who have been shunned away by the government.
According to Munoz (2010 pp 59), Tommy Hutchinson made an impact on the society and on social entrepreneurs when he implemented an online social network company named i-genius which operates in over 90 countries.
The network is involved in collaboration of social entrepreneurs and non-governmental organizations; this way, the social enterprises can make international impacts through this website. Using internet, social enterprise is deemed to grow, as the internet creates social collaboration.
According to Leadbeater (2007), the social entrepreneurs had no name ten years ago, but today they are recognized due to their effort to accommodate the written off and laid-off people from schools and workplaces. He further explains that this sector has provided over 40milion employment opportunities and 200 million volunteers worldwide.
For instance, in the United Kingdom, the government created a legal entity, which is the community interest company aimed at incorporating those enterprises that direct their profits to social activities. Social Corporation’s main role is to enhance social entrepreneurship, which entails smoothening the way for employment of the deprived groups and promote training and education (Thomas, 2004, pp 251).
It is evident that a social enterprise consists of corporate social responsibility in its operations, in which social responsibility is the commitment of an organization to improve the well-being of a deprived community via business and social practices; such practices may range from health care to education (Kotler and Lee, 2005, pp 3).
Organizations are expected to impact the society and the communities positively with their activities that are directed towards the welfare of the society and further assume responsibility (Sims, 2003 43).
Therefore, corporate social responsibility entitles one to being a steward of the society’s needs; therefore, it is clear that the social enterprises engage fully in social responsibility unlike other organization who engage partially to the community’s responsibilities.
According to Munoz (2010, pp 30), social enterprises are striving to reach out to the international communities; this is evident in regard to the green work organization which has aided countries like Sudan, Ghana and Sierra Leone among others.
This has left a positive effect worldwide and promoted social responsibility. Social entrepreneurship arise from social enterprise; its main aim being the provision of solutions and aid to social problems facing the society (OECD, 2010 pp 188).
Major achievements of social enterprises According to Kerlin (2009 pp 76), social enterprises in South Asia have been a major aid to the Asian poverty problem which affects approximately 50% of the Asian population. The corrupt government rarely focuses on eradicating poverty; rather, it enhances unequal distribution of resources.
However, social enterprises have focused on poverty eradication and creating jobs in Asia. One example of such an enterprise is the La Frutera Corporation whose operation involves a banana plantation and work with an aim of improving the quality of lives in the Philippines.
The Maireang farmer’s group involves the poor and landless farmers in Thailand and engages them in the processing of rubber, hence increasing the farmers’ income. According to Yunus (2007 pp, 3), poverty around the world is usually uneven, such that, some communities suffer more than others do.
Relying on the government can be frustrating sometimes; this is because it is slow in acting, hence leading to the emergence of non-profit organizations mainly concerned with the welfare of the needy and desperate. However, theses charitable organizations rely on donations and if the donations cease, they are incapable of assisting the needy.
The author adds that in countries like Bangladesh, where social needs are on high demand, when there are no sufficient donors, some social needs are not catered for at all.
According to Kerlin (2007, pp 77), some of the social enterprise like the entrepreneurs school of Asia promotes entrepreneurial education in which students are molded into becoming social entrepreneurs who focus on profit in business, as well as social impact to the needy communities. The mirror foundation in Thailand enhances education to the remote areas.
Challenges faced by the social enterprises According to Kerlin (2006, pp 259), social enterprises face challenges just like other organizations and businesses. For instance, in the United States, social enterprises challenges have been identified that include, “exclusion of specific groups, the weakening of civil society and lack of government involvement” (Kerlin, 2006, pp 259).
The author further explains that social enterprises may be leading to the rising rate of exclusion of the marginalized groups.
For instance, in the United States, members of the enterprise are required to pay a certain fee, however, some of the poor beneficiaries cannot afford to pay, hence being excluded from receiving any benefits. Secondly, some of the social enterprises generate a lot of profits, thus they concentrate more on their clients rather that on the social responsibility for the communities.
Thirdly, social enterprises are seen as a potential risk to the civil society in that, these organizations might abandon some programs such as the volunteer programs due to the demand in other practices. These enterprises may also stop relying on donations and volunteers, hence diminishing the aims of promoting social capital.
According to Kerlin (2006, pp259), Western Europe faces the challenge of limited number of services that are supported by the enterprises as compared to the United States, hence, these social enterprises end up being underutilized. According to Leadbeater (2007), many social entrepreneurs run small firms hence limiting the spread of such schemes. Some lack managerial skills, which are relevant in the growth of an organization.
According to Ducci et al (2002 pp 79), social enterprises faced a number of challenges in France, among them being the incapability of creating an organization with many stakeholders, the difficulty in engaging in economic activities for the social enterprises, and the impossibility of the social enterprise to acquire capital.
According to Marks and Hunter (N.d, pp 7), social firms aimed at reaching out to the needy such as education and health care face a range of queries when it comes to their stability, continuity and their sustainability due to the uncertainties that face them.
When a non-profit organization seeks to establish itself, it is faced by a major challenge of distraction from the charitable objective, such that the organization may end up operating like a normal business by loosing focus of its main mission, which is charity (Crutchfield and Grant, 2008, pp 74).
The Social economy in relation to social enterprise Social economy is referred to as a part of the economy that is not public or private; it consists of non-profitable organizations inclusive of volunteers whose activities are aimed at a community benefit, for instance, for the deprived groups in the society.
The social economy mainly consists of three sub-sectors; the voluntary sector which consists of organizations that govern themselves and do not rely on the government, operate without a profit maximization motive and involve in volunteer work mostly. Such organizations may include charities.
The second sector is the community sector in which these organizations depend on voluntary and do not pay for these efforts, as they are small support groups. Third is the social enterprise sector that involves businesses whose objectives are to support the community and not on maximizing profits for its shareholders (Social Economy, 2011).
In Northern Ireland, the social economy employs approximately 48,000 workers, while in the European Union, a total of 10 million people are employed. This sector can be differentiated from other sectors through its non-profit aim, the low wages and the voluntary services, its involvement with the community and its reinvestment in profits as opposed to sharing it out to the stakeholders.
Nevertheless, the social sector outweighs other organizations through the following advantages;
they are normally situated near their customers, and hence respond fast to their clients needs.
They have the capability of reaching out to the deprived groups in the society.
Due to their charitable work, they attract many charitable organization and volunteers who come to their aid in terms of money and labor.
Since their existence, they have contributed to social capital in the country (Social Economy, 2011).
The main aim of the social economy enterprises is to provide a quality life to individuals and the economy at large; hence, they aim at promoting mutuality, equal opportunities, worth employment opportunities, co-operation, and social benefits to the communities among others.
In addition, these social economy enterprises operate under the influence of social aims, which vary from training, job creation, and provision of services among others.
Secondly, they are involved in the production of goods and services in the competing market, hence benefiting the communities through the acquired profits. Therefore, social economy consists of the charitable sector, non-profit sector, and the voluntary sector (Uluorta, 2009, pp14).
Critics associated with social enterprises According to newstatesman (2002, pp iii), “social enterprises are seen as a government device to open avenues for local authorities to contract out services such a childcare, leisure and transport.”
However, social enterprises are a savior to many as they take up the “left overs” from the government, such as, the laid off employees, neglected citizens and the marginalized communities, thus remodeling them to being better off. According to Leadbeater (2007), social entrepreneurship is seen as a fake idea and that has developed to its capability to adapt and due to its ambiguous nature.
Recommendations Social enterprises that are successful should aim at promoting productivity and competition in the operating environment. They should also be able to create wealth socially and promote co-operation and cohesiveness in the community. Social enterprise should work towards developing a new way of operating in terms of delivering of goods and services.
Nevertheless, social entrepreneurs should ensure that their enterprise is leaving a positive impact on the community by enhancing their mode of living. A social enterprise should be aimed at developing the potential of the deprived groups, either by providing employment to them or training them into managing their own businesses.
In addition, an effective social enterprise should be competitive in order to enable its survival in the market by attracting several customers. Finally, social enterprises should enhance delivery of public services by collaborating with the government in areas such as health sector, recycling, adoption, and transportation among others; therefore, social entrepreneurship should be promoted in all countries.
Conclusion Social enterprises are key players to social responsibility worldwide; therefore, this sector should be supported by the government with no strings attached. This way, they can continue enjoying their independence and at the same time have enough funds to support the less fortunate in society. Social enterprises lead to social entrepreneurship, which aims at providing innovative solutions to unsolved problems in a society.
Hence, it is more concerned in alleviating problems other than maximizing profits. Therefore, with social entrepreneurship in place, deprived communities and marginalized groups are well catered for and have a place to call home.
The social enterprise topic seems like a narrow subject, but it has really challenged me due to its depth and content, hence leaving me thirsting for more knowledge. It is however, an important discussion with a variety of references and during my assignment, I have learnt also on matters that seemed confusing at first.
Having acquired this sufficient knowledge, I am in a better position to tackle and understand any matters related to social enterprises.
References Crutchfield, L. and Grant, H. (2008). Forces for good: the six practices of high-impact nonprofits. NJ: John Wiley and Sons Publishers.
Ducci, G. et al. (2002). The social enterprise in Europe. International journal of mental health, Vol. 31 Issue 3, p76, 16p. Web.
Gunn, R. and Durkin, C. (2010). Social Entrepreneurship: A Skills Approach. NY: The Policy Press Publisher.
Kerlin, J. (2006). Social Enterprise in the United States and Europe: Understanding and Learning from the Differences. Voluntas: International Journal of Voluntary
Critique of SRA Open Court Reading Curriculum for 3rd grade in light of Second Language Learners Essay (Critical Writing) a level english language essay help: a level english language essay help
Teachers need to understand that students, who are usually in their classrooms, come from different cultural backgrounds. Therefore, the learning process should cater for the different needs of the different students.
The SRA Open Court Reading curriculum for students in their third grades entails vocabulary, spelling, phonemic awareness, explicit phonics, writer’s craft, fluency, listening, grammar, usage and mechanics, writing process strategies, speaking and viewing skills, award-winning literature, text comprehension and penmanship.
Supplemental materials obtained online, encyclopedias and related sources are used when a theme calls for wider exploration. Science and social studies are also integrated throughout the curriculum.
This curriculum is adequately diversified but, there is need to bridge cultures by ensuring that each and every student is fully involved in the learning process. This paper aims at doing precisely that, describing how teachers can incorporate a multi-cultural approach into the SRA Open Court Reading curriculum to enhance the learning process.
The presence of students who are not within the mainstream of American culture and who speak English as their second language calls for a multi-cultural approach in learning. Those within the mainstream American culture are the Caucasians or the White who values American cultural traditions and values, and speaks English as the first language.
It is evident that the Open Court Reading Curriculum adopts the set-up of an American mainstream class. In addition, students are given the opportunity to practice what they have learned on an individual basis and this is only suitable for the American mainstream students.
The importance of integrating a multi-cultural approach in the Open Court Reading curriculum is to ensure that all students are exposed to the same educational opportunities. The OPC curriculum is associated with academic failure amongst certain ethnic minority groups hence the need to incorporate a multi-cultural approach.
Get your 100% original paper on any topic done in as little as 3 hours Learn More It is quite obvious that students from other cultures different from the American mainstream face certain kinds of learning handicaps where American mainstream values dominate. These learning handicaps prevail from the fact that students experience discordance between home and school values.
Subsequently, the learning capacity of the students is affected leading to poor performance (Gibson, 1984). The school should be a versatile place that can transform anytime in as far as the interests of the students are being catered for.
The notion of minority and majority groups with regard to cultural diversity in America is inevitable. Both educators and parents need to undergo some form of training with regard to diversity of cultures and associated values. Both the educators and parents need to understand each other’s cultural values and practices so as to avoid conflicts that may jeopardize the achievement of the concerned students.
Schools should ensure that they have training sessions to create awareness to their educators, who are mainly from the individualistic American mainstream. This helps the educators to adopt an integrated approach while teaching the students. Teachers therefore should embrace both the individualistic and collectivistic cultural approaches while teaching.
The understanding of the dominating American culture by parents leads to the development of more explicit discussions with teachers on school practices and policies, and the rationales for them in a cultural context.
The creation of awareness for both parents and teacher helps the students to acquire a dual cultural perspective, which enables them to accommodate school and home cultures. This enables the students to distinguish between the two cultures and develop a more open-minded approach to life in general (Trumbull et al. 2001).
Trumbull and others talk about bridging cultures in schools by using an individualism/ collectivism framework. Some students come from collectivistic cultures, whose values are inclined towards inter-dependence and sharing and helping one another.
We will write a custom Critical Writing on Critique of SRA Open Court Reading Curriculum for 3rd grade in light of Second Language Learners specifically for you! Get your first paper with 15% OFF Learn More On the other hand, the American mainstream students are from individualistic cultures that values personal autonomy, self-expression, self-determination, independence and personal achievement. It should however be noted that despite the fact that there are individualistic and collectivistic cultures, the converse of these cultures are also prevalent within these cultures.
This is to say that, an individualistic culture also values collectivism and the collectivistic culture also values individualism. The difference is in the prioritization of values within the different cultures. Therefore, an integration of both cultures would augur well for both of them since none would be imposing on the other (Trumbull, Rothstein-Fisch
Unemployment Essay cheap essay help
Introduction Unemployment can be defined as the condition where citizens of a country are jobless and have in the recent past been involved in searching work without a success. Unemployment rate can be defined as the prevalence of unemployment opportunities in a country. The unemployment index is calculated by dividing the number of unemployed individuals by the number of individuals in the labour force (Arestis
The Confederation of Ontario University Staff Associations and Union Essay college essay help online: college essay help online
Table of Contents Background information about COUSA
Legal issues and obstacles facing COUSA
Background information about COUSA The Confederation of Ontario University Staff Associations and Union (COUSA) is an umbrella union that was formed in 1974 by a group of unionized employees working at Ontario University in Canada. COUSA is made up of workers from clerical jobs, administrative, technical and professional occupations. There are different types of groups under the COUSA umbrella.
They include employees from Ontario University- from independent, non-unionized groups, provincial groups and international unions- are members of COUSA.
All member unions under COUSA shared a common aspiration: that all employees of Ontario University need a common platform to collect information and work together with the government. In addition, the umbrella organization does not rival other unionized organization; on the contrary, it is willing to collaborate with them to the benefit of workers (COUSA, 2011, p.1).
There are many benefits one can get by joining COUSA. For example, members of the Confederation attend three seminars organized by the umbrella body every year to network and share valuable information about emerging issues in labor unions.
COUSA offers avenues where non-academic employees at Ontario University can share knowledge and experience about trends or activities that touch on employment issues. In addition, COUSA organizes workshops where members discuss and share knowledge on crucial topics for example: pay equity; reforms on labor laws; lobbying approaches; negotiating skills; and benefits costing.
The Confederation also lobbies and advocates on behalf of Ontario University staff to the public and government. It also offers a platform that enable member groups to collaborate on a short term basis (COUSA, 2011, p.3).
Legal issues and obstacles facing COUSA There are a number of legislative reforms in Canada that are likely to impact on the way COUSA runs its affairs. For example, in 2004, the parliament enacted Labor Relations Bill 144 that altered a number of labor relations laws in Canada. COUSA has several trade unions that are registered under the Ontario Labor Relations Act.
Get your 100% original paper on any topic done in as little as 3 hours Learn More As a result, the introduction of Labor Relations Bill 144 is bound to have an effect on the activities of the trade unions under COUSA. In addition, the new regulation will have a negative impact on academic workers hired on a part-time basis by the Ontario University.
For example, the Bill requires unionized organizations to submit the income disclosure requirements. This is one of the new changes introduced by the law and contradicts the public view about the objectivity of labor law (Slinn, 2003, p.367).
The effectiveness of COUSA is also constrained by lack of a strong financial base. Labor unions are denied financial aid from the government under the new law. COUSA does not have enough financial resources to mange cases related to violation of the Labor Act. A swift decree is the only viable cure to the adverse effects of the Act on the union.
Also, lack of ample financial resources has limited the ability of COUSA member unions to access reconciliation services. This has severely limited the ability of the COUSA to bargain on behalf of its member unions (Slinn, 2003, p.369).
Bargaining process COUSA has a number of elected representatives that bargain on behalf of its members. For example, the COUSA Salaries and Benefits Committee is mandated to negotiate on behalf of staff at Ontario University on matters related to compensation (David
Substitute Goods Research Paper essay help site:edu
Substitute Goods; Pens and Pencils
Substitute goods can be defined as those goods that customers views as alternative. They can also be seen as those goods that give consumers similar benefits. In other words, these goods satisfy the same needs. In most cases, the buyer takes several things into consideration before making their final decisions on the choice of the goods to buy more so in the case of substitute goods.
In this case, pens and pencils can be considered as substitute goods. This is because they yield same benefits to the consumer. For instance, both pen and pencil are used for writing. They can be used interchangeably. Consumers may either decide to write using pen or using a pencil. Therefore, pens and pencils are perfect substitutes. This is because they are both used exactly for the same purpose, which is writing.
Impacts on supply of pens of a technological breakthrough which reduces the cost of producing pens
Substitute goods usually offer a high level of competition in the market. This is because buyers can easily substitute them any time. This aspect creates competition between these products.
In this case, if a technological breakthrough reduces the cost of producing pens, then the minimum price levels which pen producers can offer in the market will fall accordingly. This will lead to a fall in prices of pens. However, the prices of pencils will remain constant.
The quantity of a product supplied in the market is directly proportional to the prices of the product in the market (Forgang and Einolf 171). In other words, the higher the prices, the higher the quantities of a specific product that producers will be willing to provide in the market.
In this case, technological advancement has led to reduction in the cost of production of pens. This implies that the producer will be willing to supply a larger quantity of pens at the prevailing price levels. Therefore, the quantity of pens supplies in the market is more likely going to increase.
As a result of reduction in the production cost of pens, producers may decide to lower the prices. As a result, pens will become cheaper compared to pencils. Since the two commodities are substitutes, some buyers will shift from using pencils to pens.
Get your 100% original paper on any topic done in as little as 3 hours Learn More However, this statement is based on the assumption that the consumers are behaving rationally. A rational consumer will tend to choose an alternative that maximizes their benefits and minimizes their costs.
Figure 1: Supply curve for pens
A technological breakthrough in pen manufacturing will cause the supply function of the pens to shift outwards. The quantity of pens supplied will increase significantly. This is as a result of increase in the quantity demanded as a result of a fall in prices.
Impacts on the price of pens and the quantity demanded for both pens and pencils after a technological breakthrough which reduces the cost of producing pens
Since substitute goods can be used interchangeably, they exert competitive pressure in case the prices or the quality of one of these products changes. In this case, a technological development has led to a significant reduction in the prices of pens. As a result, the quantity of pens demanded will increase.
Figure 2: The demand curve for pens.
From the graph above, it is clear that the quantity demanded is inversely proportional to the prices. In other words, the higher the prices, the lower the quantity of a product demanded and vice versa. From the graph above, the original price of pen was p1.
After a technological breakthrough, the production of pens falls significantly. As a result, the prices of pens fall from p1 to p2. At price p1, the buyers are willing to buy Q1 of pens. At price level p2, the buyers are willing to buy Q2 of pens. Therefore, it is clear that the quantity of pens demanded will increase significantly after a fall in prices.
We will write a custom Research Paper on Substitute Goods specifically for you! Get your first paper with 15% OFF Learn More On the other hand, the quantity of pencils demanded will fall significantly. Since pens and pencils are substitutes and that they serve the same purpose to the consumer, most of the buyers will turn to buy pens because they will be cheaper.
The substitute goods usually have positive cross elasticity of demand. This implies that an increase in price of one of these goods leads to an increase in prices of the other good. Consequently, the quantity of pencils demanded will fall significantly.
Figure 3: Demand curve for pencils.
From the graph above, a decrease in the prices of pens will cause the demand curve for pencils to shift in. This leads to a reduction in the quantity of pencils demanded significantly.
How managers for pen-makers and pencil-makers should decide given the above answers
From the above discussion, it is clear that the technological breakthrough in production of pens will favour pen manufacturers while it will present a big threat to the pencil manufacturers.
This is because the quantity demanded of pencils will tend to fall as more people shifts from using pencils to pens which are now cheaper than before. Therefore, there is a need for the managers of pen-makers and pencil-makers to take appropriate actions in order to retain and improve their performance respectively.
For the pencil-makers manager, it is advisable to take appropriate actions which can reverse the trends of demand for pencils arising from a fall in prices of pens. One of the actions that the managers can consider is differentiation. Differentiations play a significant role in increasing the sales of substitute goods which tends to compete in the same market (Piana par 6).
According to Forgang Einolf, differentiation will also help the pencil makers from reducing prices to unprofitable levels (170). Since pens and pencils do not have exact identical features, it will be easier to differentiate the two products.
Not sure if you can write a paper on Substitute Goods by yourself? We can help you for only $16.05 $11/page Learn More This can be through improvement in the quality and also introducing a wide variety of pencils. As a result, buyers will tend to buy the product to enjoy the unique features which are not present in the other substitutes. As a result, the demand for pencils will increase.
On the other hand, the managers for pen-makers need to apply appropriate measures in order to maximize their profits. Since the level of demand for the pens has increased, the managers should take necessary measures to increase their production in order to satisfy the increase in demand.
This will help in reducing shortages of peens in the markets. This may require expansion in their production capacities in order to satisfy this demand.
Works Cited Forgang, William and Einolf, Karl. Management Economics: An Accelerated Approach. New York: M.E. Sharpe, 2007.
Piana, Valentino. “Substitute Goods.” Economics Web Institute, 2005. 24th June. 2011.