Principle of Economics Week 3

You are the owner of a fast-food restaurant. Given a new item that you recently advertised, you experience additional demand for your business that you do not want to ignore. Identify your fixed and variable costs at your fast-food restaurant, and explain the changes to each of these costs, given the increased demand.

Examine a perfectly competitive firm that you have recently purchased a product from, focusing specifically on how it relates to the characteristics of the market.

The new item on the menu since it has increased in its demand; the fixed cost that would not change is the amount of money it takes to manufacture the item on the menu which will stay the same depending on the demand of the product. As far as variable cost, the labor and capital will change from how much revenue is coming into the company and how long this new item will be available, for example if the new item causes a 400% increase in business and revenue, the amount of labor may have to go up to keep the company running at a positive pace to keep up with customer demands so that revenue will not drop. As far as the price of the item on the menu that is also a fixed cost, because changing it may affect the demand of the product which is a risk most businesses do not take.

A place I recently purchased an item from was Popeye’s, now this establishment is on a road with four other primarily chicken fast food chains. They all sell the same type of items, but when it boils down to the consumer it two things they are looking for such as price and flavor, so in competition all markets are selling their food at the same price when one starts a promotion, another usually follows suit and revamp the same promotion geared towards their establishment. The fast food industry is pretty competitive because it’s more of an industry where people are looking for the most they can get while paying the less when it comes to fast food.

Corey,

Great Post Corey I live in a similar area where...