Essay on Maximizing Benefits with Limited Resources: Rationality in Consumer Decision Making

Introduction

Economic principles entail the unlimited consumer wants satisfaction with the use of few resources available. It also involves the choices made by consumers, along with the factors and the conduct influencing the choices made (Mankiw, 2020). Rationality is an economic principle that is involved in the decision making processes of a buyer. The principle states that, if a buyer comes up with logical decisions based on obtaining the greatest benefits at the cheapest costs and the outcomes of the decisions are in their self-interest, then the buyer is rational.

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Face trade-offs as an economic principle, states that, for a person to acquire a single thing of interest, then the individual has to end up giving up on another thing of own interest too (Mankiw, 2020). So, coming up with decisions requires one to trade a single goal for another. A good application in real life is how a family decides to spend its income. It might decide not to buy a car to get a good house. Here, both the car and the house were of interest, but the family has to choose one interest with the highest benefits.

Industry Goods and Services

The industry picked from the North American Industry Classification System is Machinery Manufacturing Industry: NAICS 333. The selected manufacturing industry is Caterpillar Inc., which produces both goods and services. Caterpillar is the leading in the production of mining and construction and equipment, industrial gas turbines, diesel-electric locomotives and diesel, and natural gas engines. Also, the Caterpillar industry operators specialize in manufacturing construction machinery along with equipment for utilization in highway, residential, street, nonresidential, as well as other infrastructure construction. It reaches to the production of finished goods mainly from the utilization of raw materials. The goods and services produced from the construction machinery industry include various types of power cranes, shovels and draglines; tractor shovel loaders; dozers along with other tractors; light maintainers, and motor graders, rollers and compactors; and other construction equipment and machinery. The company also provides services, like financing and insurance, and also services in maintenance and training. The goods produced are usually tangible products that are created by converting raw materials into various products that are useful or consumable.

Market Structure and Characteristics

In consideration of the construction, along with the mining equipment market on an international level, Caterpillar, along with not many other large competitors, are in the dominance of this market expanse. Recently, the Caterpillar Company owns nearly 30% of the machinery market globally, which then places it within a very competitive position with companies like Terex, Deere and Co., Cummins, and Komatsu. However, given that the number of companies in control of this market is not many, this defines or identifies Caterpillar Company to be within the oligopoly market structure. According to Geras'kin, & Chkhartishvili, (2017), oligopoly markets do not have many companies, and every single company is in a more likelihood of engaging explicitly within tactical decision making by considering the anticipated responses of the competitors to a made decision.

The main characteristics of the oligopoly structures are: the industry is usually not dominated by many big companies, the companies sell products which are either differentiated or similar, and the industry holds barriers which are significant to entry. These characteristics underlie a usual oligopolistic kind of behavior involving interdependent activities and decision making, the tendency of keeping costs rigid, nonprice competition pursuit instead of price competition, the inclination to merge firms as well as the motivation of forming collusive arrangements (Geras'kin, & Chkhartishvili, 2017).

Microeconomic Relationships, Market Outcomes, and Trends

Caterpillar Company competes with big companies such as Mitsubishi Heavy Industries as well as Toyota Industries Corporation as stated by Lynch, & Haskins, (2019). However, despite the multinational competition, Caterpillar Inc. still maintains its position as one of the leading businesses within the construction and heavy equipment market. The company can effectively achieve this by producing very high-quality products that give satisfaction to customers, and also developing its business value via marketing as well as its strong distribution network all over the globe (Lynch, & Haskins, 2019).

Caterpillar company increases its competitive edge through the business value chain by investing in big data, which is very useful for both IT and product innovation. Caterpillar Inc. talked of revenue decrease of -8.35% in the fourth quarter to $ 13,144.00 million, also from the same quarter within the year 2018. The drop in revenue in the fourth quarter of Caterpillar Inc compares unfavorably to the average revenue growth of 5.64% of the company (Lynch, & Haskins, 2019).

Caterpillar Inc's Revenue Results By Quarter And Year

Caterpillar Revenue (in millions $) FY 2019 FY 2018 FY 2017 FY 2016

IV Quarter December 13,144.00 14,342.00 12,896.00 9,574.00

III Quarter September 12,758.00 13,510.00 11,413.00 9,160.00

II Quarter June 14,432.00 14,011.00 11,331.00 10,342.00

I Quarter March 13,466.00 12,859.00 9,822.00 9,461.00

FY 53,800.00 54,722.00 45,462.00 38,537.00

Source: CSI Market, Inc.

How Government Intervention May Impact the Industry

Caterpillar produces and also delivers products and services that are generally the best, although this does not define success. Lynch & Haskins (2019) hold that, since the company operates globally, the actions taken by different governments in various countries all over the world may significantly impact the industry both in a positive as well as negative manner. It is so because each country has different legislation, regulation, agreements, and policies regarding its customers and employees. Consequently, Caterpillar is compelled to adhere to the appropriate matters in a way that should be consistent with all the governing policies and laws of each country, which is challenging at times since some laws are unfavorable to the company's operations.

Sources

Geras'kin, M. I., & Chkhartishvili, A. G. (2017). Structural modeling of oligopoly market under the nonlinear functions of demand and agents' costs. Automation and Remote Control, 78(2), 332-348.

Lynch, L. J., & Haskins, M. E. (2019). Caterpillar Inc. Taps the Chinese Bond Market. Darden Case No. UVA-C-2418.

Mankiw, N. G. (2020). Principles of economics. Cengage Learning.