Group Members:

1

• Group Members
• Stewart Biro Melissa Camerota
  Craig Chaney
• Lauren Collins Sandra
  Deskevich

2
Speaker Topics

• Stewart Biro
• Complements
• Substitutes
• Price Elasticity
• Sandra Deskevich
• Perfectly Competitive
• Firm
• Monopoly

• Melissa Camerota
• History of Hersheys
• Factors of Production
• Opportunity Cost
• Lauren Collins
• Law of Diminishing Marginal Utility
  
• Implicit Costs
• Explicit Costs
• Craig Chaney
• Oligopoly
• Labor Markets

3
A palatable confection and a most nourishing
food
www.hersheys.com
4
History

• 1984, the Hershey Chocolate Company in Lancaster,
  Pa
• Began by producing chocolate coatings for his
  caramels, realized growing demand for chocolate
  so he switched producing to milk chocolate candy
• Company re-located in south central PA in 1905,
  which was closer to their suppliers
• 1924, the company had the HERSHEYS KISS
  Chocolate as official trademark
• Renamed company Hershey Foods Corporation in 1968

http//www.hersheys.com/discover/milton/milton.asp
5
Factors of Production

• Land
• Labor
• Capital
• Entrepreneurial Activity

6
Land

• The physical space where production occurs
• Headquarters located in Hershey, Pa

http//www.yellow-springs.k12.oh.us/ys-mls/_border
s/Hershey_PA.jpg
7
Labor

• Time workers spend producing goods and services
• 14,800 workers fulltime

http//www.codehappy.net/mimage/wonka020.jpg
8
Capital

• Long Lasting tools used in production of goods
  and services
• Physical Capital machines, equipment, buildings
• Human Capital the skills training workers use in
  production

9
Entrepreneurial Activity

• Recognizing and taking advantage of an
  opportunity
• Milton S. Hershey

http//www.pinedafamily.com/stamps/1995/Images/mil
ton.jpg
10
Opportunity Cost

• What is given up when taking an action or making
  a choice
• Price of Hershey Bar .65 cents

http//www.inboundlogistics.com/cgi-script/csPubli
sher/library/Hershey20Bar.jpg
11
Opportunity Cost Includes

• .65 cents
• The time to shop ( 1 hour )
• Gas Money( 20 )
• Price of what student gave up for Hershey Bar( 6
  )
• Price varies from .65 cents to 59.50 depending
  on size desired

12
Complement Goods

• A good that is used together with some other
• Hersheys complements Milk
• Ice Cream

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s/MILK.jpg
http//www.magiccitymarket.com/ice_cream.jpg
13
Complement Goods Cont.

• A rise in the price of a complement decreases the
  demand for a good, shifting the demand curve to
  the left.
• Therefore, if the price of milk goes up, the
  demand for Hersheys will shift to the left.

http//raybromley.com/notes/noteimages/equilibrium
/incrdemandeq.jpg
14
Substitute Goods

• A good that is used in Place of some other good
  and fulfills more or less the same purpose
• Hersheys most credible substitutes
• Mars
• Nestle
• Kraft
• Cadbury

http//www.fonte.org.br/image/Logo_Nestle_202003.
JPG
http//www.kraft.com/
http//www.loudbassoon.com/food/images/mars.jpg
http//www.cadbury.co.uk/EN/CTB2003/
15
Substitute Goods Cont.

• A rise in the price of substitute increases the
  demand for a good, shifting the demand curve to
  the right
• Therefore, if the price of Mars increases,
  Hersheys will increase in Demand

http//raybromley.com/notes/noteimages/equilibrium
/incrdemandeq.jpg
16
Price Elasticity of Demand

• Price elasticity is the sensitivity of quantity
  demand to price
• or.
• It is the percentage change in quantity demanded
  divided by the percentage change in price

17
Law of Diminishing Marginal Utility

• As consumption of a good or service increases
  marginal utility decreases

http//www.pmca.com/www/Images/thumbs/pages/Hershe
y20Kiss.html
18
Utility and Marginal Utility

• Utility a quantitative measure of pleasure or
  satisfaction obtained from consuming a good
• Marginal Utility the change in total utility an
  individual obtains from consuming an additional
  unit of a good or service

MU ?TU/ ?Q
19
Marys Total and Marginal Utility from consuming
a Hersheys Bar
20
Law of Diminish Marginal Utility Chart
21

Implicit Cost
Vs.
Explicit Cost
http//kinder.cmsd.bc.ca/kinder-l/2000/0006/att-02
71/01-kiss.jpg
22
Definitions of Cost

• Implicit Cost no direct payment of money being
  made
• Explicit Cost direct payment of money being made

23
Examples

• Implicit
  Explicit
• Owners money
  Salaries
• Owners time Cost of Material

24
Hersheys Implicit Cost

• Mr. Hersheys Time and Money

http//www.hersheyfoods.com/
25
Hersheys Explicit Cost

• Salaries 585,419
• Cost of Material 2,544,726
• 3,130,145

26
Is Hersheys a Monopoly?

• NO

27
Monopoly

• Only seller of a good
• No Close Substitutes

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s/coolmid.gif
http//www.woundedego.com/Monopoly20Poor20Guy_sm
all.jpg
28

• Opportunity Costs are the same for Perfectly
  Competitive firms as for the monopolist

29
Perfect Competition

• Large number of buyers and sellers
• Each sells a fraction of the total quantity in
  the market
• Standardized product
• Easy Entrance or exit from the market

30
Oligopoly

• An Oligopoly is a market structure in which only
  a small number of firms are strategically
  interdependent
• Hershey has to take in account how other
  companies such as Nestle are advertising,
  marketing, and pricing their products

31
Why Do Oligopolies Exist??

• Economies of Scale Natural Oligopolies
• Reputation as a barrier
• Strategic Barriers
• Government Created Barriers

32
Is Hersheys an Oligopoly??

• Many buyers and sellers
• No standardized product
• Several barriers are present

Therefore
YES!!!!!
33
Labor Market

• Product Market
• Produces Goods and Services
• Perfectly Competitive Labor Market
• Many Buyers and Sellers
• All workers appear the same to firms
• No barriers on entry or exit of the market
• The Firm Becomes a wage taker

34
Hersheys As A Labor Market

• Constraints on Firm
• Technology
• Market Price
• Market Wage
• Marginal Approach to Profit

35
What Have We Learned??

• Factors of Production
• Opportunity Cost
• Complements and Substitutes
• Price Elasticity
• Law of Diminishing Marginal Utility
• Implicit and Explicit Costs
• Perfectly Competitive Firm
• Monopoly
• Oligopoly
• Labor Market

36
Any Questions???
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/question_mark.jpg
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inson/images/question_mark_-_colour.jpg
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