Join the new world

Lesson 3: Microeconomics in eRepublik

Elasticity is the measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which individuals (consumers/producers) change their demand/amount supplied in response to price or income changes.

Elasticity= % change in quantity/%change in price

Elasticity is used to assess the change in consumer demand as a result of a change in the good's price. When the value is greater than 1, this suggests that the demand for the good/service is affected by the price, whereas a value that is less than 1 suggest that the demand is insensitive to price.

Businesses often strive to sell/market products or services that are or seem inelastic in demand because doing so can mean that few customers will be lost as a result of price increases

In an eRep economy food is an example of an inelastic product, no matter the price people need to buy it. Guns and gifts are examples of products that have an elastic response to price.

The theory of price is an economic theory that contends that the price for any specific good/service is the relationship between the forces of supply and demand. The theory of price says that the point at which the benefit gained from those who demand the entity meets the seller's marginal costs is the most optimal market price for the good/service.

For example, suppose that market forces determine that it costs $5 for a Q2 gun. This suggests that Q2 gun buyers are willing to forgo the utility in $5 in order to possess the q2 gun and that the Q2 gun seller perceives that $5 is a fair price in exchange for giving up the wQ2 gun. This simple theory of determining prices is one of the core principles underlying economic theory.

Utility is the total satisfaction received from consuming a good or service.

Opportunity cost is the cost of an alternative that must be forgone in order to pursue a certain action. Put another way, the benefits you could have received by taking an alternative action.

The opportunity cost of going to college is the money you would have earned if you worked instead. On the one hand, you lose four years of salary while getting your degree; on the other hand, you hope to earn more during your career, thanks to your education, to offset the lost wages.

Here's another example: if a farmer decides to grow carrots, his or her opportunity cost is the alternative crop that might have been grown instead (potatoes, tomatoes, pumpkins, etc.).

In both cases, a choice between two options must be made. It would be an easy decision if you knew the end outcome; however, the risk that you could achieve greater "benefits" (be they monetary or otherwise) with another option is the opportunity cost.



Lesson 4: Intro to Business

How to create an organization:

For creating an Organization it is required to have 5 gold. Go to My Places, from the drop down menu go to Organizations. Select Create New and follow simple instructions. There are no special names or logos that you need to use chose anything you would like for it won't make a difference in eRepublik. Once you have the Organization set up you would need to go back to your personal account and donate gold to your Organization account.

There are few reasons why you would want to have an Organization to run a successful business. 1) You can own a company and still work for another company to make enough money to support your company in case of a financial crisis. 2) You can also be employed in your own Company and set the amount of money you need to be making in order to buy food and gifts for your wellness. 3) You may change your residency without worrying of taking your company with you.

The cost of creating a new company is 20 Gold. I would not suggest anyone to create a company once they have 20 Gold. After creating your company you would need to hire employees and pay your expenses to start your business. I would suggest you go around in the market and search for companies that are on sale. You can find companies on sale for as low as 14 gold, that is lower then creating one. Use the rest 6 gold to buy yourself money to pay your expenses. Make sure you do some research on the companies you do want to purchase, sometimes the companies could worth nothing, depending on the productivity level. If the productivity is medium or no productivity you want to stay away from these companies. In case you don't find any descent companies to purchase, use 20 gold and create your own company make sure you have enough money to start the business. If you do not have an Organization you would need to make sure you have enough money to run a stable company since you will not have any alternative ways of making money until your company makes you enough profit.

Many of the companies use raw materials such as grain, wood, iron, oil and diamonds. Others are to make the raw materials. For a starter in the business it is hard to decide which company to buy/create, a Raw Material, Manufacturing or Construction companies. Manufacturing companies require grain, diamonds, iron, or oil as their RM and are optimal with 10 employees. Construction companies require wood and are optimal with 20 employees. Manufactured products take 1,2,5, or 10 production points to make a product, while constructed products need 200 or 2000 points to make a product. As such, manufacturing is easier to enter than construction because there are fewer employees to pay and products are finished quicker. Construction Company has a decent barrier to entry because of the 20 employee max productivity and you have to front the cost of the house/hosp/DS until it sells. Raw Material Companies are much simpler to manage and calculate break-even product price, but they require a lot of initial capital to make a profit because of the productivity scaling with quality levels. Q3 is roughly the level where it becomes profitable (50+20+20=90 Gold). Since it could be very arguable as to which one to chose for a starter in the business, it is your choice to choose whichever one you want. Either way you would need to make sure you have enough funds to cover all the initial expenses and managing expenses before you start making profit.