Pindyck, Robert S. – Rubinfield, Daniel L.: Microeconomics. New York : MacmillanPublishingCompany, 1989. s. 8 - 9
1.3 Why Study Microeconomics?
Wethinkthatafterreadingthisbook,youwillhave no doubtabouttheim-portance and broadapplicabilityofmicroeconomics. In fact, oneofour major goalsis to show youhow to applymicroeconomicprinciples to actualdecision-makingproblems. Nonetheless, some extra motivationearly on never hurts. Here are twoexamplesthat show theuseofmicroeconomicsinpractice and alsoprovide a previewofthebook.
CorporateDecisionMaking: FordIntroducestheTaurus
In late 1985 FordintroducedtheTaurus—a newlydesigned, aerodynamicallystyledfront-wheeldrive automobile. Thecarwas a hugesuccess and helpedFordalmost to doubleitsprofits by 1987. Thedesign and efficientproductionofthiscarinvolvedsomeimpressiveengineeringadvances, butitalsoinvolved a lotofeconomics.
First, Ford had to thinkcarefullyabouthowwellits new designwouldbeaccepted by thepublic. Howwouldconsumersbeswayed by thestyling and performanceofthecar? Howstrongwoulddemandbeinitially, howfastwoulditgrow, and howwoulddemanddepend on thepriceFordcharged? Under-standingconsumerpreferences and trade-offs and predictingdemand and itsresponsiveness to pricewereessentialpartsoftheTaurus program. (Wediscussconsumerpreferences and demand in Chapters 3, 4, and 5.)
Next, Ford had to beconcernedwiththecostofthecar. Howhighwouldproductioncostsbe, and howwouldthisdepend on thenumberofcarsFordproducedeachyear? Howwouldcostsbeaffected by unionwagenegotiations or by thepricesofsteel and otherrawmaterials? Howmuch and howfastwouldcostsdeclineasmanagers and workersgainedexperiencewiththepro-ductionprocess? And to maximizeprofits, howmanycarsshouldFordplan to produceeachyear? (Wewilldiscussproduction and cost in Chapters 6 and 7 and theprofit-maximizingchoiceofoutput in Chapter 8.)
Fordalso had to design a pricingstrategyforthecar and considerhowitscompetitorswouldreact to thisstrategy. Forexample, shouldFordcharge a lowpriceforthebasicstripped-downversionofthecarbuthighpricesforindividualoptionssuchasairconditioning and powersteering? Or woulditbe more profitable to maketheseoptions "standard" items and charge a highpriceforthewholepackage? WhateverpricesFordchose, howwereitscompetitorslikely to react? Would GM and Chryslertry to undercutFord by loweringprices? MightFordbeable to deter GM and Chryslerfromloweringprices by threat-ening to respondwithitsownpricecuts? (Wewilldiscusspricing in Chapters 10 and 11 and competitivestrategy in Chapters 12 and 13.)
TheTaurus program required a largeinvestment in new capitalequipment, and Ford had to considertherisksinvolved and thepossibleoutcomes. Someofthis risk wasdue to uncertainty over thefuturepriceofgasoline (highergasolinepriceswouldshiftdemand to smallercars), and somewasdue to uncertainty over thewagesthatFordwouldhave to payitsworkers. Whatwouldhappenifworldoilpricesdoubled or tripledagain, or ifthegovernmentimposed a new tax on gasoline? Howmuchbargainingpowerwouldtheunionshave, and howmightthisaffectwagerates? HowshouldFordtaketheseun-certaintiesintoaccountwhenmakingitsinvestmentdecisions? (Commoditymarkets and theeffectsoftaxes are discussed in Chapters 2 and 9. Labormarkets and unionpower are discussed in Chapter 14. Investmentdecisions and the role ofuncertainty are discussed in Chapters 5 and 15.)
Fordalso had to worryaboutorganizationalproblems. Fordisanintegratedfirm-separatedivisionsproduceengines and parts, thenassemblefinishedcars. Howshouldthemanagersofthedifferentdivisionsberewarded? Whatpriceshouldtheassemblydivisionbechargedforenginesitrecievesfromanotherdivision? Shouldallthepartsbeobtainedfromtheupstreamdivisions, or shouldsomeofthembepurchasedfromoutsidefirms? (Wediscussinternalpricing and organizationalincentivesfortheintegratedfirm in Chapters 11 and 17.)
Finally, Ford had to thinkaboutitsrelationship to thegovernment and theeffectsofregulatorypolicies. Forexample, theTaurus had to meetfederalemissionstandards, and productionlineoperations had to complywithhealth and safetyregulations. Howweretheseregulations and standardslikely to change over time? Howwouldtheyaffectthecompany'scosts and profits? (Wediscussthe role ofgovernment in limitingpollution and promotinghealth and safety in Chapter 18.)