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CARIBBEAN ADVANCEDPROFICIENCYEXAMINATION

ECONOMICS
INTERNAL ASSESSMENT

STUDENT NAME: SHEMAR EDWARDS


CENTRE NUMBER: 100107
NAME OF SCHOOL: ST. GEORGES COLLEGE
CANDIDATE NUMBER: 1001070982
TERRITORY: JAMAICA W.I
YEAR: MAY 2015
TEACHER NAME: MS. N. QUARRIE
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TABLE OF CONTENTS
Acknowledgement .. Pg 3
Aims and Objectives .. Pg 4
Introduction Pg 5
Methodology ... Pg 6
Report .. Pg 7
Conclusion
Recommendations
Bibliography
Appendices

ACKNOWLEGEMENT

I would like to thank the LORD for giving me the wisdom and strength to
complete this research because there is no way I could have finished the research
without him. However, it would not have been possible without the kind support
and help of friends and family. I would like to express my gratitude towards my
parents and I am highly indebted toMrs Hudson and Kurts Auto Works for their
guidance and constant supervision as well as for providing necessary resources and
equipment regarding the research and also for their support in completing the
research.

AIMS AND OBJECTIVES

Title: An examination of the strategies used by Kingston Bookshop to satisfy its


customers and by extension it contribution to the development of Jamaica.

The aims of the research project are:


o To examine the market structure within which Kingston Bookshop operates.
o Evaluate strategies Kingston Bookshop uses to attract customers.
o Evaluate the contribution to the community within which Kingston
Bookshop operates as well as the overall Jamaican economy.

INTRODUCTION
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In the following research you will learn about the impact of Kingston Book
Shop on the Jamaican economy. Strategies used by Kingston Bookshop to satisfy
customers and towards the development of Jamaica are the main focus in this
research. KINGSTON BOOKSHOP is the Caribbean's leading supplier of
educational textbooks. Its flagship store located at 70b King Street in downtown
Kingston holds primary place as the store selling most school texts in the Region.
This location is chosen because they are closer to their resources and it is the head
office. Although traditionally the chain is best known for its quality product and
excellent service in meeting educational needs at all levels, Kingston
Bookshop stores also offer a wide variety of other reading materials, stationery
items and gifts. The objectives I am hoping to achieve are market failures and
methods to avoid or prevent market failures.In spite of the difficult economic times
the Kingston Bookshop continues to grow and maintain its profitability. This
success can truly be attributed to the astute and inspired leadership of managing
director coupled with the hard work of the management team and rank and file
staff.

METHODOLOGY
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The information for this Internal Assessment was obtained from both
secondary sources and primary sources. Data from the primary sources will be
obtained through non-participant questionnaires and interviews. Data from
secondary sources it will be mainly from sourced textbooks, newspaper article and
internet articles to clarify the market structure concepts to complete this research.
Twenty questionnaires were distributed among the general population in downtown
Kingston to males and females around the ages of 20-45. An interview was also
taken in February with few employees and customers to obtain information about
the contribution Kingston Bookshop have brought to the surrounding communities.

REPORT
MODULE 1
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Kingston Bookshop Ltd. has produced a variety of books. Since the need of books by students
and teachers are very high, there have been many suppliers for this commodity. When analysing
the operations of Kingston Bookshop it is important to look at the supply and demand. There are
a number of factors that affect supply: price of factors of production, level of technology,
government policy (tax) and objectives of the firm.
The back to school season could cause an increase of supply for books, when supply increases,
the supply curve shifts to the right from S0 to S1. An increase in supply of books caused by an
increase in the level of technology would cause supply to increase. This would reflect by a
downward shift in the suplly curve.

Price

S0
S1

X
Quantity Demanded

When supply decreases, the supply curve shifts to the left from S1 to S2. Demand curve DD is a
vertical straight line parallel to the Y-axis. Due to decrease in supply for the product, the new
equilibrium is established at point E2. Equilibrium price rises from OP to OP2 but equilibrium
quantity remains the same at OQ as demand is perfectly inelastic.

1http://www.yourarticlelibrary.com/economics/effect-on-equilibrium-price-andequilibrium-quantity-micro-economics/9182/
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Equilibrium price and equilibrium quantity in a given market are determined by the
intersection of the supply and demand curves. Depending on the elasticitys of supply and
demand, the equilibrium price and quantity can behave differently with shifts in supply and
demand. We can see one example of how this works at Kingston Bookshop, if they lower their
prices for books it will a cause shift in the supply curve will result in large changes in quantity
demanded and small changes in price at the equilibrium point.

Figure %: Shifts in Supply with Elastic Demand

2http://www.sparknotes.com/economics/micro/elasticity/section1.rhtml

If Kingston Bookshop rises their prices of books causing a shift in the supply curve which will
result in large changes in price and small changes in quantity at the equilibrium point.

Figure %: Shifts in Supply with Inelastic Demand

Tax is a compulsory contribution to state revenue, levied by the government on workers' income
and business profits, or added to the cost of some goods, services, and transactions.A sales tax is
a tax paid to a governing body for the sales of certain goods and services. In Jamaica, the
government has found it to tax (sales) certain products and this tax has an effect on demand,
supply and thus price. In the recent tax implemented, the company has seen the increase in price
of the books being provided. This will lead to the demand of the product falling as more
consumers do not feel the urge to buy the books as the price is said to be too high and has lead
Kingston Bookshop to a loss of profit and production.

Elasticity refers to the degree of responsiveness in supply or demand in relation to changes in


price. If a curve is more elastic, then small changes in price will cause large changes in quantity
consumed. If a curve is less elastic, then it will take large changes in price to effect a change in
quantity consumed. For example, if Kingston Bookshop lowers their prices that mean that they
will sell more than if the prices were raised they wouldnt sell as much.

The Income Effect is the effect due to the change in real income. For example, when the price
goes up the consumer is not able to buy as many bundles that she could purchase before.
Changes in price can affect buyers' purchasing decisions. So that means if the manager of
Kingston Bookshop raise the price of a book that change in price would affect the buyers
decision causing him/her to buy less or buy at a next store for a cheaper price.

Kingston bookshop sells books but suddenly the price of a book increases and the price
of the same book at Sangsters Book Store remains constant. The customers might be more
inclined to buy books at Sangsters Book Store which is more affordable instead of buying books
at Kingston Bookshop. This tendency to change your purchase based on changes in relative price
is referred to as the substitution effect. When the price of books goes up, it makes books
relatively expensive at Kingston Bookshop and relatively cheap at Sangsters Book Store, which
influences customers to buy fewer books and/or buy books at another store because they feel
relatively poor so you now have to urge yourself to buy less. Likewise, a decrease in the price of
books at Kingston Bookshop would cause you to buy more books and not going to Sangsters
Book Store.
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Substitution Effect
Income Effect

Kingston Bookshop
Negative
Negative

Sangsters Book Store


Positive
Negative

The production cost that the Kingston Bookshop is facing is capital. Thisrefers to human-made
goods which are used in the production of goods or services. For example, if KBS produce more
books, they will have to pay for more raw materials, such as coated paper, book binding cloth
and colour ink, etc.

3http://www.sparknotes.com/economics/micro/supplydemand/demand/section2.rht
ml
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Economies of scale refer to the cost advantages that a business obtains due to expansion.
There are factors that cause a producers average cost per unit to fall as the scale of output is
increased. "Economies of scale" is a long run concept and refers to reductions in unit cost as the
size of a facility and the usage levels of other inputs increase. Kingston Book Shop is currently
under technical economies. Technical economies are the cost savings a firm makes as it grows
larger, and arise from the increased use of large scale mechanical processes and machinery. This
means that Kingston Book Shop can benefit from expansion of the firm of technical economies
because it can employ mass production techniques and benefit from specialization and a division
of labour.

MODULE 2
Firstly, the term market structure refers to the level of competition experienced by
businesses in an industry. Kingston Bookshop operates in a perfect competition market
structure.This market structure is characterized by many buyers and many sellers of a product.
The product is not unique as it is available from many sellers. Firms in this market structure are
price takers as they cannot sell above the price of their competitors. Firms must accept the
markets price as there are several competitors. There is perfect knowledge about the business
and there are no barriers of high start-up cost, control of strategic raw materials and perfectly
elastic demand curve.
Some of the key characteristics that perfect completion exhibits are: there is perfect
knowledge (knowing everything about the product and the market), there are large numbers of
buyers and sellers, freedom of entry and exit, goods & services are homogenous and there are no
government regulations in the operation of the market.

A market failure is a situation where free markets fail to allocate resources efficiently, this
is a direct result of a lack of certain economically ideal factors, which prevents equilibrium. It
can also be referred to as having negative effects on the economy because an optimal allocation
of resources is not attained. In other words, the social costs of producing the good or service are
not minimized, and this results in a waste of some resources. For example, if Kingston Bookshop
buys raw materials to produce their books and all of the raw materials are not used up or
minimized and results in a waste of resources which is market failure.

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Firstly, if you are operating in a perfect completion market you can only make normal
profits expect in some cases if there are not many firms joined in as yet, you canmake abnormal
or economical profits in the long- run but otherwise it is impossible. Normal profit is a minimum
profit necessary to attract and retain suppliers in a perfectly competitive market. Markets where
suppliers are making normal profits will neither expand nor shrink and will, therefore, be in a
state of long-term equilibrium.

So Kingston Bookshops profit situation over the past 10 years would be normal profit
because it is the level of profit needed for a company to remain competitive in the market. It is
impossible for a firm to earn economic profit in the long run, which is to say that a firm cannot
make any more money than is necessary to cover its economic costs.

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