Assignment#1 - Assignment # 1 Economics and Ethical Issues...

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Assignment # 1 Economics and Ethical Issues 2 Given the business situation of Mrs. Acres Homemade Pies (p.30) and using the economic concepts of supply and demand, explain: a. Discuss what you think will happen to the supply, demand, and price of the product in the short-term: Upon reviewing Mrs. Acres’ situation on page 30, there is a limited amount of information given. However, with the information we do know, Mrs. Acres can currently produce 8,000 pies a month with a full-time staff of 4 employees. In this circumstance, the quantity Mrs. Acres is able (willing) to supply and the current price of $4.50 that the consumer is willing to spend is known as the equilibrium price. In the short-term, given the above facts, with there being a max that can be produced, there will be no effect on supply. Mrs. Acres cannot produce anymore than the 8,000 pies as stated above. In order to do so Mrs. Acres will need to expand her facility or hire more staff. Expanding the facility cannot be accomplished in the short term. Adding additional staff will result in less access to the current equipment. As a result fewer pies would be produced in the same time frame causing the marginal cost of each addition pie to rise. At the maximum number of pies that can be made in the given situation, supply is limited and does not change. Since the current supply of pies is constant, demand will most likely increase. An increase in demand will raise both the equilibrium price and equilibrium quantity; however will not have an effect on the actual price of the pies.
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This note was uploaded on 10/18/2010 for the course BUS 508 BUS taught by Professor Dr.kikoto during the Spring '09 term at Strayer.

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Assignment#1 - Assignment # 1 Economics and Ethical Issues...

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