Economics
Discussion Questions
1. Suppose the price of coffee beans increases by $0.20 per pound. What is the effect of this raw material price increase on the demand for roasted coffee? If one pound produces 50 cups of coffee, would the price of a cup of coffee rising by $0.01? Explain.
Price of the product comes from the production of the goods all the way till it hits the market shelf. So when the price of the product like coffee increases during the productivity of the product then the end cost could increase too. Changes of the productivity can increase by changes in technology and human capital. This allows the production of the products to become better managed by managers because it can track all the materials that is
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For companies that lower the price it’s okay for them to increase the prices wants the economy is back to a recovery state. Consumers will not hold it against the company for increases the prices because they know that when times get tough they will do what they can to help each customer out by lowering the prices again.
Companies slashing prices to maintain a marker share is okay because they will do what they can to stay ahead of the competition. Market shares are a part of the company’s financial support. When customers by the shares in a company they are investing in that company for the long haul and hoping to make some extra money along the way. When they lower prices it draws customers to their company name because they want to get a better deal then they possible are at the company they at. On the flip side is that a company lowering their prices could mean that they have increased the price because they want to get more profits. This could cause concern by customers that the company has more room to move the price down because they have just increased it over time because they wanted profits and might not know what the bottom price really is.
Reference:
Boyes, W. (2012). Managerial economics: Markets and the firm (2nd Ed.). Mason, Ohio: South-Western
Cengage
By lowering their prices for electrical household products, this might raise questions among the Marks and Spencer customer’s as they would doubt the quality of the products thus residing from purchasing the equipment’s. Another problem would if that if they reduce the prices of the equipment’s they won’t be able to go back to the original prices. Also, if the sales stay the same while the prices go down the revenue will also decrease as a result and therefore less profits will be made.
When it comes to pricing we always strived to provide one of the lowest prices in the market. We decreased product prices by $0.50 on each product each year to appeal to consumers. Since providing a low cost product was one of our strategic goals we did not stray from decreasing prices. Looking back, perhaps we shouldn’t have been so loyal to our strategy when we were unable to turn a profit. While a strategy is important to stick to, being a profitable company is the ultimate goal.
4) For each article describe causes of changed price and the effects of the changed price.
Price fixing and exclusive dealings are harmful for consumers and small businesses trying to compete with large businesses. The issues with price fixing is that the consumers have to buy an item for a certain price. There is no supply and demand, along with the fact that the prices can fluctuate without any certain pattern. As the prices become higher, the company get
In our global economy, the price of coffee is thought of as elastic. What this means is that as the selling price of coffee increases or decreases, so does the demand for it. Simply put, coffee is not needed by humans to survive but rather is a luxury item, so as the price increases there is less of a demand for coffee and vice versa. Things that would be looked at as inelastic in our economy are staple products such as fuel, food, and water. These items are things that we believe we cannot do without and consumers will still purchase these items in spite of the price increases because without them they believe,
Michigan has an abundant supply of fresh water. However, an economist would consider it a scarce resource because
Assignment 5: Based on your reading in Ch 9 in Kessler, the posted readings Morality Without Religion and Universality of Moral Law, the Socrates & St. Augustine power point, pgs. 24-39 in Nye, and the Popular Culture power point.
This is because other dealers in the market will get an opportunity to sell their products in the market. Customers can get products locally with the change. Some suppliers can still get a way of working around the pricing issue to increase their sales.
brand image of the company same time it will initiate a price war. It will not benefit the
Because consumers aren’t paying as much for the product, producers will not be able to produce as much at the lower price, and consumers will demand more because the product is cheaper. The end result will be consumers not being able to buy the product since there is not enough being made. For example, the price of milk was $2 per litre, and has now been reduced to $1 per litre. This will be great for consumers as they can buy more milk for less, until it runs out. Therefore price ceilings have a good impact on consumers.
In regards to the company Starbucks, their cost of production includes the cost of coffee beans, milk, plastic products, advertising, rent and labor. When it comes to the high price of Starbucks coffee customers should consider the cost of what goes into the coffe, Howard Schultz said “I am concerned about dairy, both domestically and around the world, and we are working feverishly with our suppliers, (and to) identify new suppliers (Thomnson, R. 2014). When it comes to the price of coffee, “prices recently hit a two-year high due to crop-damaging drought in Brazil, the top producer” (Thomnson, R. 2014). This has a huge impact on the price consumers pay for their coffee.
However, there are several factors for the company to choose its pricing strategy. In this case, it may be better if the company choose to sell its product at $21.50 instead of $15.50. This is due to the fact that price-cutting appears to be not a good strategy in this industry. If every player in the same industry starts to lower the price of their products, every company will end up having the low price, which in turns lead to a low profit margin. Moreover, referring to the calculation in a below table, it also implies that if the price is lower than $12, sales will not be able to cover the variable cost incurred, thus it will bring about a loss in net profit.
Assuming that the demand and supply for premium coffees are in equilibrium, the price will be at a constant, without significant pressure from the market. If Starbucks introduced the world to premium blends, this would cause a positive shift in the demand curve. There a higher equilibrium price and higher quantity when demand increases and supply remain unchanged. As prices increase, and the market moves to a new equilibrium, we will see higher wages, more advances and investments in technology and infrastructure, and greater competition. As production become more efficient and competition becomes greater, supply will increase and cause prices to settle back down. There are several factors that will impact the long-term equilibrium, such as changes in supply. For example, if a hard freeze eliminated Brazil’s premium coffee crop, this would cause a negative shift in the supply curve. Assuming demand remains constant a negative shift in the supply curve will cause quantity to decrease and equilibrium price to increase. Research shows that in 2011 a frost occurred in Brazil's southeastern coffee growing belt. Traders worried that next year's yields could be hurt. At the same time, heavy rains during harvest forced Columbia to reduce its crop estimate for 2011. Understanding the impact of problems along the supply chain and how the changes in supply
These shifts in supply and demand would influence price, quantity, and market equilibrium because of the natural disasters, shift in prices or speculation the supply of coffee decreases, which would cause a significant product shortage for consumers. Due to a shortage, consumers would to pay higher prices in order to purchase coffee and all coffee producers would then demand a higher price in order to produce more products. Higher prices are beneficial to the producers of the product, but consumer would purchase fewer products. Lower product pricing would discourage coffee production, but would benefit consumers. Both supply and demand would balance consumption, which is demand and production, which is supply.
Evaluate each of the following changes in supply and/or demand. How will each affect equilibrium price and quantity in a competitive market? Will price and quantity rise, fall, or be unchanged? Based on shifts, will the answers be indeterminate?