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Economics and Ethical Issues
Economics and Ethical issues
Dr. Victoria L. Figiel
The Business Enterprise – BUS508 – 010016-201005
July 18, 2010
Given the business situation of Mrs. Acres Homemade Pies and using the economic concepts of supply and demand, explain
1. Discuss what you think will happen to the supply, demand and price of the product in the short term.
In the short term, I think Shelly will continue to maintain her current production levels of her pies. If the determinants of supply (resource prices, technology, taxes and subsidies, prices of other goods, producer expectation, and the number of sellers in the market) remain the same her supply will remain the same as prices will increase and she will continue to operate generating positive revenue. Because her business is expanding so rapidly, consumers believe that the price they are paying for pies is a good one. As stated in the text book, businesses such as Mrs. Acres Homemade pies will produce and offer for sale more of their product at a high price than at a low price (McConnell & Brue, 2008). Any person in business is motivated by higher profits. Since price is derived by the interaction of supply and demand, her prices are likely to increase. With profits soaring to $12,000 per month, Shelly has a good indication that customers like her
products and are willing to pay for it; in addition it also demonstrates that she is gaining more and more customers. These are all positive indicators that “business is booming”. This is a business situation that any entrepreneur would desire.
2. Discuss what you think will happen to supply, demand and price of the product in the long term.
I think the demand would decrease in the long term. Consumers will eventually purchase less of an item as it gets more expensive because the average consumer’s goal is to save money and make their dollar stretch. In the long term, Shelly will discover the...
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