Milestone 2

Business Recommendations Based on Economic Projections

Milestone 2: Larson Company

Economic Futures

The economic situation for Larson is bound to change over a period of time. Regardless of the location, whether it is America or Germany, things will begin to shift. What will be extremely important in this time of shift will be how well they can determine the rationing function of prices (McConnell, 2009). Rationing functioning of prices is “the ability of the competitive forces of supply and demand to establish a price at which selling and buying decisions are consistent” (McConnell, 2009).

Alternative 1

First, there is a chance that the economy will remain the same. “When recession occurs and households must trim their budgets, purchases of these goods are often deferred” (McConnell, 2009). Though this is unlikely because we live in a world of constant change with new opportunities, technology, and all kinds of advancements, it is an economic future that must be considered. In this case, the company will need to evaluate their sales in comparison to costs in order to keep things moving along through the downturn of sales. The sales must be enough to cover costs; therefore, readjusting the cost per unit may or may not be necessary. “Simultaneous changes in supply and demand affect equilibrium price and quantity in various ways, depending on the relative magnitudes of the changes in supply and demand” (McConnell, 2009). During this period it will be important to know the cost of other replacement or competitive products.

Alternative 2

Secondly, there is a chance that the economy will get worse. Sometimes things do not get better until they get worse. Depending on how the economy shifts, there way or may not be more people unemployed. If the markets take a downward turn and ends up in the trough stage of the business cycle, there will be need for a company evaluation. It will be important to see how much of this product is actually demanded in...