Tuesday, 14 October 2014

More on Isocost

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The Production Process: The Behavior of... 
Appendix: Isoquants and Isocosts

Isoquants allow us to show all of the various combinations of capital and labor that can be used to produce a level of output. For example, in the table below, 50 units of output can be produced with 1 unit of capital and 8 units of labor, or with 8 units of capital and 1 unit of labor. The two resources can be substituted for each other. We can do a similar analysis for 100 and 150 units of output.
Table 6.A1.gif
Graphing the data, we have the following:
While the figure above shows only three isoquants, there are many more (one for each possible level of output). The slope of an isoquant represents the rate at which labor can be substituted for capital (reading down the isoquant from left to right, the amount of capital is decreasing and the amount of labor is increasing). This is shown in the figure below:
That is why the slope is called the marginal rate of substitution. It is equal to the ratio of the marginal product of labor to the marginal product of capital (or MPL/MPK) because in order for output to stay the same, the production lost in using less capital must be made up for by the gain in production from using more labor.
But as we have seen, firms need to know what it costs them to produce a level of output. The isocost line allows us to represent the quantities of labor and capital that can be purchased at given input prices, given an amount of total cost.
For example, in the figure below, assuming that the price of labor and the price of capital are both $1 per unit, if the firm bought only labor, its total cost would be $5. If it bought only capital, its total cost would be $5. It can also spend that $5 to buy different combinations of the two inputs. The different isocost lines represent different levels of total cost.
The slope of the isocost is the ratio of the two input prices, or PL/PK. This is shown in the figure below:
We can bring the isoquants and the isocosts together to determine the least-cost combination of inputs. This is shown in the figure below:
In the figure, the cost-minimizing technology is shown by point C, which is the point of tangency of the isoquant and the isocost. At a point of tangency, the slopes of the two curves are equal; therefore, at point C MPL/MPK = PL/PK.
and rearranging terms, this means that at point C: MPL/PL = MPK/PK
which is the condition for producer optimization (marginal product per dollar spent should be equal for all inputs purchased).
Plotting a series of cost-minimizing combinations of inputs, shown as points A, B, and C in the figure below (at left), we can derive the firm’s cost curve (at right) and illustrate the idea that such a cost curve shows the minimum cost of producing any given level of output.
For more practice in understanding production decision, try the following Active Graph Level Two exercise:

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Isoquant and Isocost

I. Isoquant and Isocost (Theory of Production in the long term)
II. Objective: Students will know:
1. Isoquant Curves
2. Isocost Curves
3. Cost minimization or Output maximization; Expansion Path
III. Materials
IV Procedure
1. Isoquant Curves
Isoquant and Isocost curves are used for finding the best level of production in the
long run, when all elements of production are variable, Labor (L) and Capital (K).
Isoquant: A curve showing all possible combinations of inputs capable of
producing a given level of output.
Isoquants are convex

producing a given level of output.
Isoquants are convex to show there is an
increasing cost to replace capital with labor (or replace labor with capital) The
marginal product (MP) of labor decreases as it is used to replace capital.
Marginal Rate of Technical Substitution (MRTS): The rate at which one input is
substituted for another along an isoquant.
MRTS = -∆K
(minus sign is added to make MRTS positive, since the slope of an isoquant is
The MRTS will equal the ratio of the marginal products of the two units.
The level of output (Q) depends on the use of the two inputs K and L. Since Q is
constant on an isoquant, ∆Q must equal zero for any change in K and L.
To solve for MRTS set ∆Q equal zero
(MPL)(∆L) + (MPK)(∆K) = ∆Q
(MPL)(∆L) = -(MPK)(∆K)
MRTS = -∆K = MPL

2. Isocost Curves
Isocost: Lines that show the various combinations of inputs that may be purchased
for a given level of expenditure at given input prices.
Generally an isocost is a straight line, however there may be a bend in the curve.
For example if a firm receives a discount for a large purchase of capital. (We will
assume the firm has a straight isocost.)
This is an isocost curve for a firm that
must pay $25 for each unit of labor, and $50 for each unit of labor, with a budget
of $400.
The price of Labor is wages (w) and the price of Capital is rent (r). Total Cost (C)
is the sum of the cost of these two inputs
C = wL + rK
The cost function for the above isocost is
400 = 25L + 50K
Then to find the slope of the curve, set the equation equal to capital:
K = C/r - w/r L

K = 400/50 - 25/50 L = 8 – 1/2 L

3. Cost minimization or Output maximization; Expansion Path
Managers whose goal is profit maximization will search for the least cost
combination of inputs
A manager working on
isoquant Q1 is producing 10,000 units, and needs to find the least cost combination
of labor, with a price (w) of $40 and capital with a price (r) of $60 per unit.
The firms starting point is A, using 60 units of labor, and 100 of capital. Total cost
at that point is $8,400
C = wL + rK = ($40 x 60) + ($60 x 100) = $8,400
Now if the manager reduced capital to 60 and increased labor to 90 the firm would
be move to point B.
C = wL + rK = ($40 x 90) + ($60 x 60) = $7,200
The firm has kept the same level of production while reducing costs. But what if
the manager thought the firm might do even better with only 40 units of capital and
150 units of labor (point C)?
C = wL + rK = ($40 x 150) + ($60 x 40) = $8,400
The firm moved back to the original isocost curve, and the price of inputs
increased. The firm is best of on point B.
The firm could also take a marginal product approach to cost minimization. Since:
MRTS = MPL/MPK = w/r

MPL/w = MPK/r

Wednesday, 1 October 2014

list of students whose assgnment received

juhi bajaj
taruna arora
reena thakur
jyoti khanna
jyoti bansal
jyoti chauhan
anjali chauhan

Sunday, 21 September 2014

Advertising and sales assignment for Sem V

Assignment to be submitted with examples in your own words. IT should not be a direct copy from books or Internet. In case it is found to be a copy zero will be awarded. Submit by mail. Last date is Thursday 25th September

Meaning, nature and importance of advertising; 503
Types of advertising; 506
Advertising objectives and audience selection;512, 515
Setting of advertising budget. 519
Major media types - their merits and demerits; 528,531,536 print, a/v, ooh
Factors influencing media choice.539
Advertising appeals, 542
Advertising copy and elements 545
Evaluating communication and sales effects 548
Pre and Post testing techniques. 551,555
Role, types and selection of advertising agency.559
Ethical and legal aspects of advertising.562
Nature and importance of personal selling; 566
Types of personal selling situations and selling jobs; 569,573
Personal selling and salesmanship; 576
Characteristics of a successful salesman;585
Customer knowledge – buying motives and selling appeals; 592, 595
Product and market knowledge. 598
Prospecting, pre-approach and approach; 600,602
Presentation and demonstration.605
Types of objections; 610
Handling objections; 636
Closing the sale, Customer follow-up 639
Sales forecasting; Sales budget; 634
Sales quota; Sales territories. 632
Recruitment and selection; 631
Training and development; 629
Direction and supervision 619
Sales force motivation and compensation 618

Sales force performance appraisal. 612

Thursday, 18 September 2014

Online Ad Market

Online advertising market to touch over Rs 3,500 crore by March 2015

The online ad segment is expected to grow at a compounded annual growth rate of 25 per cent between FY'2011 to FY'2013.
The online ad segment is expected to grow at a compounded annual growth rate of 25 per cent between FY'2011 to FY'2013.
NEW DELHI: Rising marketing spend in sectors like e-Commerce, telecom, FMCG andconsumer durables will help the online advertising market in India, which is projected to grow at 30 per cent to touch Rs 3,575 crore by March 2015, a IAMAI-IMRB study today said. 

According to the study, the online advertising market has grown from Rs 1,140 crore in 2010-11 to Rs 2,260 crore in 2012-13 and was estimated to be worth Rs 2,750 crore in 2013-14. 

The online ad segment is expected to grow at a compounded annual growth rate of 25 per cent between FY'2011 to FY'2013. 

The overall ad spend in the country across all media is Rs 38,598 crore as of 2013 with a year-on-year growth rate is 12 per cent, with television accounting for 44 per cent of the spend. 

"The gradual increase in adaptation of Internet has opened the door to the marketers to go online and spend on digital advertisement. With mobile devices becoming a predominant mode of Internet access among the users in India, this number is expected to increase (further)... 

"Although traditional media still holds strong ground in the Indian ad space, digital advertising is catching up fast and is expected to overtake traditional media within the next 5-10 years," Internet and Mobile Association of India (IAMAI) and IMRB International said. 

The high growth can also be attributed to increasing advertisement measurability, which is both quick and effective, it added. 

"In addition to the increasing adoption of mobile devices, the increasing connectivity and improvements in broadband infrastructure will lead to increased investments in more content rich advertisements viz video and social media advertisements," it said. 

Digital ad spend on mobile devices stood at 14 per cent, whereas on desktops and laptops at 86 per cent. 

As of June 2014, there were 243 million claimed Internet users in India out of which 192 million are active users (use Internet at least once a month). 

The growth in e-Commerce industry and their ad-spend in digital media is the highest, contributing close to 20 per cent, followed by telecom and FMCG & consumer durables. 

The digital ad spends by the e-Commerce industry has been growing at a CAGR of 59 per cent since 2011 and stood at Rs 495 crore at the end of March 2014. 

Spend by telecom stood at Rs 413 crore, followed by FMCG & consumer durables (Rs 385 crore), BFSI and travel (Rs 303 crore each). 

Currently, search and display contribute 38 per cent of the overall ad spends, followed by display ads (29 per cent) and social media (13 per cent). 

"It is estimated that the proportion of spends on search advertisements will reduce and spends will increase on email, video and mobile ads," it said.

Luxury Market

Luxury players using cinema halls, TV, newpapers to target buyers

Luxury players have started advertising through cinema halls and televisions.
Luxury players have started advertising through cinema halls and televisions.
NEW DELHI: It is unusual for a top jewellery brand, which sells super expensive items such as a Rs 50-crore necklace through auctions, to put out advertisements in cinema halls for the popcorn-munching audience. But designer Nirav Modi's namesake jewellery label does exactly that recently. 

"Be it someone who earns Rs 5,000 or Rs 5 crore a month, everyone watches films in India. It is a great way to reach out to a larger set of potential buyers," the designer reasons. "It is a great way to reach out to a larger set of potential buyers, but what you show and where has to be chosen wisely." 

Modi is one of the numerous luxury players who have started using mass media including TV, cinema, DTH and mainstream newspapers to reach out to a larger set of audience and open new areas of growth, rather than limiting themselves to the glossy sheets of lifestyle magazines and airport billboards. 

A host of luxury brands across categories such as luxury clothing, jewellery, automobile, watches and cosmetics, including Jaguar, Bentley and Rado, have started advertising through cinema halls and televisions. 

The Collective, a multi-brand retail store chain that sells premium and luxury merchandise from close to a 100 brands in India, is contemplating tying up with DTH services providers to put out ads through the digital video recorders, while cosmetics brand Forest Essentials that markets itself as luxury ayurveda has already launched television commercials. 

"It is just a thought at the moment, but would be an interesting way to target the consumer who is not aware about the brand," said Amit Pandey, marketing head for The Collective. 

He is of the view that experimenting with mediums new to luxury brands was an investment for the future. "The view is that a lot of wastage happens on mass media, but with so much new money in India, there is a huge opportunity to tap the new consumers," he said. 

The luxury market in India is still minuscule and so is advertising spend by luxury brands. Estimates suggest that in China, luxury brands contribute around 10% to the total media spending, while in India it is hardly 0.5%. 

That seems to be changing though. 

Innovative campaign

Innovative campaign: HUL gets Mumbai vendors to wrap bhelpuri in leaflets featuring Pepsodent ad

HUL has tied up with around 48 bhelpuri walas across Mumbai, asking them to wrap their popular roadside snack in leaflets of Pepsodent’s campaign.
HUL has tied up with around 48 bhelpuri walas across Mumbai, asking them to wrap their popular roadside snack in leaflets of Pepsodent’s campaign.
MUMBAI: When Vishal Thakkar bought four packets of bhelpuri from a roadside vendor in Mumbai late last month, they all came wrapped in similar green colour papers with children's drawings and messages about brushing teeth and fighting germs, bringing a smile to his face. Only when he found the same eye-catching design on the paper cone in his next 'chaat outing' did Thakkar realise it wasn't a coincidence. 

It was part of a marketing campaign by Hindustan Unilever for its oral care brand Pepsodent. India's largest consumer products firm has tied up with around 48 bhelpuri walas across Mumbai, asking them to wrap their popular roadside snack in leaflets of Pepsodent's campaign about fighting germs and brushing twice a day. 

"The idea was, 'how can we spread the oral care message to adults in a manner that is relevant for them?' Bhel is a popular evening snack and that is the time to tell adults to brush twice a day," said Atul Sinha, category head for oral care at HUL. Marketing experts say such initiatives create a bigger impact than promoting brands through paid media channels. 

"At a very low cost, you get high recall and people talk about it. So the engagement quotient is high too," said Alpana Parida, president at brand strategy firm DY Works. She considers HUL's initiative as part of 'earned media', which means creating a buzz by virtue of your own action.This is not the first time HUL has come up with such an innovative idea to take its message directly to consumers. 

A year ago, at the Kumbh Mela, it stamped 'Did you wash your hands with Lifebuoy?' message in Hindi onto millions of rotis in a campaign that was awarded the Grand Effie as well as Bronze Lion at Cannes earlier this year. 
Innovative campaign: HUL gets Mumbai vendors to wrap bhelpuri in leaflets featuring Pepsodent adLast year, Coca-Cola came out with its 'Small World Machines' campaign that allowed consumers in a mall in New Delhi to interact with those in a mall in Lahore through high-tech Coca-Cola vending machines with 3D touchscreen, and it followed it up with a commercial with visuals of some of these interactions. 

HUL started its Pepsodent campaign about brushing twice a day early last year. It teamed up with over 1.5 lakh kids across schools who expressed their creativity through paintings to promote the message. The leaflet distributed through bhelpuri walas carries one of these paintings. 

Now, HUL plans to launch an advertisement based on the whole campaign, from tying up with schoolchildren to using the leaflets for wrapping bhelpuri. The company plans to launch this commercial digitally before airing it on television, hoping that it will go viral. 

Hindustan Unilever has been trying to improve its share in the Rs 6,000-crore oral care market, which is dominated by Colgate with market share of 54.3%. HUL is a distant second with roughly 24% share. The sector is seeing increased competition and aggressive advertising spends, especially after the entry of Procter & Gamble.