Economics and Ethical Issues
1. Discuss what you think will happen to the supply, demand, and price of the product in the short-term
The best option for the short-term growth for Mrs. Acres homemade pies is to expand the facility and stuff while maintaining the current price. First of all, customers are already aware of the quality of the product. Second of all, they agree that the price is great for such quality. And most importantly, Mrs. Acres homemade pies has motivated and productive employees. It just needs more quality people to help with the expansion.
Based on proven success of Mrs. Acres homemade pies, the price of the product should stay the same, however, the production of pies needs to be increased.
2. Discuss what you think will happen to supply, demand, and price of the product long-term
Since the facility and staff are growing, it is important to expand the business by bringing new product to the market. The focus for the long-term growth should be to provide great variety of pastries, cookies, and other related products to the new and existing customers. Great quality plus great variety of products equals more success long-term.
Another option for long-term growth is to expand the business by selling the product not only in local supermarkets and select family restaurants but also national (maybe even international) supermarkets and restaurants. It would take some time and effort to help with such expansion; however, it is definitely achievable long-term.
3. Explain why you think supply, demand, or equilibrium price will be different, if at all, in the short-term and the long-term.
Equilibrium price is “the price at which the number of products that businesses are willing to supply equals the amount of products that consumers are willing to buy at a specific point of time” (Ferrell, 2009, p. 14). In our case equilibrium price might be different in the short-term and the long-term based on several factors. It might go up or might stay the same depending on how much profit is being generated from each pie individually and the number of sales. Right now Mrs. Acres is netting $1.50 profit per pie. As long as it stays the same or grow up, the equilibrium price should be the same.
It might go down though based on current economic situation like inflation, recession, unemployment, or depression.