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Each of these different options would have more complex influence on price, supply, and demand in the long-term. Keeping production at its current level, while leading to a short-term price increase, would eventually cut the demand for Mrs. Acres' pies; in a "perfect" world, the price would increase until the demand reached current supply levels (i.e. eight thousand pies per month). Increasing production without raising the price would eventually allow supply to meet demand, but the overhead costs will increase and profits-per-pie will be reduced, eventually leading to a price increase and a cut in demand at uncertain levels. Similar results would come from passing on production, though Mrs. Acres would be insulated from uncertainties.
The reason that supply, demand, and price will not remain consistent over both the short- and long-term is that the company is quite obviously in a period of transition, and as with any transition there are both some risks and some uncertainties involved. Any expansion effort would be based on an uncertain projection of the true demand, as there is no way to measure the true demand for Mrs. Acres' pies as of yet -- the demand has never been reached, and sales appear to have...
The same uncertainty exists for increasing the price and keeping production at the same level; while there is definitely room for a price increase, it is unclear when the eventual drop in demand would occur, and whether a solid equilibrium could be found in the supply capabilities and what people are willing to pay for a relatively cheap consumable commodity like a pie. Whatever choice Mrs. Acres makes, changes are certain to occur over the short-term that will eventually, but not instantly or even necessarily quickly, lead to a new long-term equilibrium.
The safest yet probably least profitable option for Mrs. Acres would be to let another firm handle production -- relatively minimal overhead increases for the restaurant chain would keep prices low, enabling massive demand-meeting production at the same price. Simply increasing the price could greatly increase Mrs. Acres' profits, but it is possible that a price limit would be reached before demand is truly met. The best option would be for Mrs. Acres to increase production capabilities and incrementally increase the price, maximizing profits by maximizing her ability to meet demand at a new price threshold.
For instance, the price would naturally have to rise in order to cover the cost of the contracted production, but Shelly's company would not be getting more money per pie despite any increases in the original prices of the pies. Any net profits acquired through a price increase would be forfeited to the third party contractor. The overall net profit of each pie would also go down. This means
Its relative volume however could change as set by movements in the price or the supply. As a general economic principle: When the price of a product or service increases, the demand for the respective product or service is expected to decrease, while the supply is expected to increase Vice versa, if the price of a product or service decreases, the demand for the respective item will increase, while the supply
Journal Article Review: Dolatabad, M. J., Azhdarifard, M., Acwin Dwijendra, N. K., & Ali Sharhan Al-Sudani, A. Q. (). Evaluating Agile Practices in Green Supply Chain Management Using a Fuzzy Multicriteria Approach. Discrete Dynamics in Nature & Society, 1�12.Identify the research question or central thesis of the articleThe central thesis of this study was that green supply chain management practices can produce a number of valuable outcomes for organizations of
Global Economics The September, 2003 supplement to the Economist, Running on One Engine contains a survey of the worlds economy, and outlines how the economic engine in America is similar to the single engine operation in a large commercial airliner. Connections are not made by the writers that an airliner operating on one engine can stay in the air for a limited amount of time, but cannot be expected to fly
FINANCE -- VALUE CHAINS, PORTER'S 5 FORCES AND ECONOMIC ATTRIBUTES The analyses of The Home Depot and Lowe's will involve value chain analysis, Porters 5 forces framework and economic analysis framework. These three perspectives complement rather than conflict with each other. Furthermore, they view a business internally and externally within a specific industry. The combination of all three perspectives will give an effective "picture" of The Home Depot and Lowe's individually,
Gasoline consumption vs. SUV's popularity Demand for SUVs, hybrids and the price of gas Virtually every time there is a new spike in gas prices, the death of the SUV is proclaimed. SUVs have long been demonized as gas-guzzling monstrosities, particularly those produced by American companies. However, the popularity of SUVs continues to climb, not just in the United States but around the world. While it is true that fuel-efficient hybrids have