Posted at 11.06.2018
Mrs. Acres good quality homemade pies in reasonable price have made her business success in the market. It sparked the eye of costumers - local supermarkets and choose family restaurants - to stock her homemade pies and created popular for her product. To meet up demand, Mrs. Acres decided to increase the supply, so that she widened functions, borrowing money and increasing personnel to four full-time employees. However the demand for the pies remains to rise up beyond what Mrs. Acres can supply in the market, while production and sales increased to 8, 000 pies per month, and profit soared to $12, 000 per month after the functional expansion.
Mrs. Acres has several options to resolve this problem which every option will cause the changes in supply, demand and price of the merchandise:
maintain current creation level and improve the prices;
expand the faculty and staff while maintaining the existing price;
contract the development of pies to a countrywide restaurant string.
In economic ideas, supply is the amount of products - goods and services - that companies are willing to sell at different prices at a specific time and demand is the amount of goods and services that consumers are eager to buy at different prices at a specific time (Ferrell, Hirt & Ferrell, 2009).
In short-term, Mrs. Acres can maintain current development level, which will end result with the changes in supply, demand and price of the product. In this situation, the number of pie supplied on the market will be less than the quantity of pie demanded, so the demand will surpass the supply and can cerate the shortage. This shortage may cause the upsurge in price of Mrs. Acres homemade pies on the market. Additionally, Mrs. Acres can increase production to meet up with the demand. In other words, the source could be increased by widening the service and personnel, while maintaining the existing price. To be able to accomplish this development, it will require additional financial recourses. But I'd expect in the short-run for Mrs. Acres to raise the price of product without considerable changes in supply, because demand is high and this option will enable Mrs. Acres to get more income in the short-term.
Mrs. Acres should increase the procedure in the long-term, normally keeping the development level and nurturing the prices will cause losing the revenue in long-term procedures. But in line with the economic principles - the law of resource and regulations of demand - the price of a product will decrease, if the supply decreases or if the demand for the product rises. In this point, Mrs. Acres should be cautious in her creation that any changes in the resource could cause the surplus, this means more products supplied in the market than the demand for those products and requires owner of product to decrease the price and supply to meet the demand, and the scarcity, which is opposite of surplus and means less products offered in the market than the demand for those products and requires owner of product to boost the price and offer to meet up with the demand (Farnham, 2010).
In the long-term, Mrs. Acres should consider contracting the production of her pies out to a nationwide restaurant chain. I believe, this program would be a better option for long-term procedures, as a national restaurant string already gets the financial, human and natural resources to provide enough pies and meet the demand (McConnel & Brue, 2008).
The supply, demand, or equilibrium price will be different in the short-term and the long-term. In short-term, more demand for the pies and less way to obtain pies in case of keeping the creation level, will cause Mrs. Acres to raise price for decreasing the number demanded for the pies, thus removing the lack and taking the marketplace to equilibrium. However in the long-term, in the future the supply and demand will fluctuate due to varying factors. These factors routinely influence the changes in the purchase price to alter resource curve thus leading to a new equilibrium price.
Consider the laundry detergent market. The major factors of creation include a large number of chemical ingredients, equipment, technology and labor used to make, to package also to express laundry detergent, resources - land, building, equipment, delivery pickup trucks etc. - and management. For example, natural resources such as the land, drinking water, some chemicals etc. are definitely needed in production as well as the land must build the building and building is required to install the machinery to make the detergent. Technology must be applied to produce using latest possible techniques. Also, human capital such as management know-how on functioning a production range, expertise on useful distribution of the ultimate product, and experience on making good quality detergents and workers operating the machine and undertaking other responsibilities (packaging, delivering etc. ) would be needed. Funds are required to acquire belongings as well as support working capital.
Human resources may be used to provide competitive advantages in various ways. For example, human resources can be extensively trained on latest solutions as well as stimulated via appropriate bonuses and compensation to improve output and efficiency and thus, reduce cost of functions. Likewise, company can setup manufacturing in low cost nations such as Mexico to have advantage of low cost work force available in such countries.
Technology and equipment can be a source of competitive advantage if organization implements latest systems and machinery and improves product quality and efficiency of operations via such technology. Superior technology will provide an advantage over players in terms of product quality and features as well as cost and therefore, provide competitive edge.
In conditions of money/finances, organization can exploit low cost source of capital to lessen cost of capital and thus, obtain competitive benefits. Similarly, location of the land is also important in terms of choosing a tactical location for processing that offers cost, recruiting and circulation related advantages of the organization.