The network effects theory holds that products are more valuable to consumers the more widely they are used (Stenborg). This is certainly true of Microsoft Windows, an operating system that received the widest range of hardware and software compatibility as its popularity soared. Further, as businesses invested time and money to train their employees in Microsoft products, they continued to upgrade to the same software to maximize productivity.
Firms in new economy industries must invest great sums of money to develop their products, either in upfront research and development or in physical or virtual networks to create and deliver products (Stenborg). Microsoft is a natural monopoly business (Spaudling). Initially, it is expensive to produce software, but it is very cheap to make copies. The marginal cost of Microsoft's software is virtually zero, so average total costs decline with each copy sold. As the company established its lead, it become more difficult for competitors to compete against it with lower prices, sine their own costs have to be recouped with fewer sales.
In the new economy, innovation produces a winner takes all or almost all of the market (Stenborg). This happens because of the network effect discussed above which makes it easier to attract additional customers with more attractive products. and, making more sales allows firms to reduce their average costs and to make high profits while charging low prices. In fact, in the new economy network effects and scale economies are so strong that some companies will give away their products to gain market penetration and influence standards (Stenborg). This is in sharp contract to the traditional function of a monopoly that tries...
Minimum wage laws have always had a high price to pay. Essentially, there are a number of costs associated with governments implementing minimum wages on an otherwise free labor market. First, there is the issue of reconciling increased labor costs with static production profits. According to the research, "Minimum wage increases make unskilled workers more expensive relative to all other factors of production," (Gorman 2008). The increase in wages can
Public Policy of the Minimum Wage Public Policy on minimum wage in the United States has shifted focus in recent years. Many in the public and in the White House have sought to raise the national minimum wage to $15 per hour. This is what many find to be a decent living wage that may help those in poverty or near poverty. The past has seen introduction of the minimum wage
Introduction to Economics and Global Capitalism The idea that minimum wage, even though it has risen, has not kept pace with real wages, according to the U.S. Senate Committee on Health, Education, Labor and Pensions (2013). The issue of course is one of inflation. So if Sen. Harkin wants to grow the middle class, which he calls the backbone of the economy, he should simply get on the Fed to stop
By bringing more locals into the overseas operation, the use of expats can be reduced. In addition, the cost of expats should be factored into the decision to enter a market. Major markets will still be profitable even with the presence of expats, but there are many marginal markets that may not be viable once expat costs are included (for example, where Malaysia may be profitable, adjacent Brunei may
Malnutrition / Obesity Due to Low Wages This paper delves into the direct affects of minimum wages on eating habits of people. People die of starvation and malnutrition but with the advent of genetically modified food and other such technologies the number of people dying due to obesity is also on an increase. In this paper I shall discuss why the poverty stricken people are more prone to obesity as opposed
Establishing a minimum wage has been a topic of hot debate among economists, policymakers, and the public at large. Proponents of minimum wage laws argue that they are essential for ensuring a fair standard of living, reducing poverty, and promoting economic fairness. This essay presents three facts that support the implementation of a minimum wage. Firstly, a minimum wage can help in reducing poverty and improving the living standards of low-income
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