Agribusiness Management Review for Test 2

Agribusiness Management Review for Test 2 - Chapter 5...

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Chapter 5 Questions 1. Explain how the combination of consumers’ desire for utility maximization with the scarcity of available resources leads to competition in the marketplace and greater satisfaction for all members of society. 2. Define the terms utility, marginal utility, & the principle of diminishing marginal utility as used by economists. Explain how these concepts can be led to choose spinach over ice cream. Utility – Satisfaction; Marginal Utility – Satisfaction obtained from each additional unit of a good; Diminishing Marginal Utility – After consuming each additional unit, your utility declines which in turns will ultimately move you to choose spinach over ice cream. 3. Explain why price is the best allocator of scarce resources in a free market. Resources go to the highest bidder. Producers respond to price signals and would actually shift to receive higher profits. 4. Explain why economists make up the extension between consumers who are willing and those who are able to buy product when they talk about effective demand. Economist make up the extension between consumer who are willing & those who are able to buy a product because you can be willing to buy it but you may not be able to afford the product which does not effect the producer’s bottom line. 5. Identify and explain the factors that influence consumer demand. Which indicate a shift in consumer demand? Explain why shifts in consumer demand are important to agricultural business managers. What should a manager do if a shift in consumer demand for his or her product is found? When the demand schedule shifts from the left to the right, it can affect the long-term profits of the firm. They should reevaluate their marketing Price of the product (own price) – The factor that is most likely to influence the demand of a product is its own price. Seasonality – The demand for many products follows a seasonal pattern. Price of competitor’s products (substitute products) – An increase in the price of tea, for example, could lead some people to substitute coffee for tea. Price of complement goods – It is important to know the impact of changes in the price of goods whose use complements the use of your good. If the price of sugar was to shift significantly, it could affect the demand for coffee.
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This note was uploaded on 05/25/2011 for the course ACG 2021 taught by Professor Montgomery during the Summer '08 term at FSU.

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Agribusiness Management Review for Test 2 - Chapter 5...

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