Access over 20 million homework & study documents


Bus 508 Assignment 1 Economics and Ethical Issues






Showing Page:
Bus 508 Assignment 1 Economics and Ethical Issues
BUS 508: The Business Enterprise
1. Discuss what you think will happen to the supply, demand, and price
of the product in the short-term.
Since the demand for the pie is high, the price of the pie will go up. Also,
since more people are willing to pay for it. The demand and supply for
the pie will go up also, simply because the people want them and the
price is what they can afford to pay for it. Consequently, the rise in price
prompt more pies to be supplied as supply relationship shows that the
higher price, the higher the quantity supplied (Ferrell, O.C., Hirt, G., &
Ferrell, L. (2009). Producers supply more at a higher price and selling a
higher quantity at higher price increases revenue (McConnell, C., &
Bruce, S. (2008).
2. Discuss what you think will happen to supply, demand and price of the
product in the long- term.
In the long term, if the demand for the pie goes down, the price as well
will go down. That is to say all else equal, as price falls, the quantity
demanded rises, and as price rises, the quantity demanded falls which
affect the amount purchased. For instance, If new style of pie comes out
and everyone wants the new one, the demand for the old pie will drop,
thereby forcing the supply to drop too (McConnell, C., & Bruce, S.
(2008). Mrs. Acres will have to do something in order to meet the long
term levels of demand such as. (a) Tastes: A favorable change in
consumer tastes for a product brings a change that makes the product
more desirable. That is to say that an increased taste in a product
increases its demand, thereby shifting the demand curve to the right. A
decreased taste in a product decreases its demand, shifting the demand
curve to the left. (b) Number of consumers (buyers) on the market: More
consumers increase a product’s demand and fewer consumers decrease
a product’s demand (Ferrell, O.C., Hirt, G., & Ferrell, L. (2009).
3. Explain why you think supply, demand or equilibrium price will be
different, if at all, in the short-term and long term.
Price is constantly an obstruction from the standpoint of the consumer,
who is on the paying end (Ferrell, O.C., Hirt, G., & Ferrell, L. (2009). The

Sign up to view the full document!

lock_open Sign Up
higher the price, the lesser the consumers will buy. To Mrs. Acres, price
represents revenue, which is an inducement to produce and sell her pie.
The higher the price, the greater her motivation and the greater the
quantity she will supply. When the supply and demand are equal, the
economy is said to be at equilibrium. At this point, the allocation of her
good is at its most efficient because the amount of goods being supplied
is exactly the same as the amount of goods being demanded
(McConnell, C., & Bruce, S. (2008). In a long term level, the prices of
goods are constantly changing in relation to fluctuations in demand and
supply. For example, if the price is set too high, excess supply will be
created within the producer and this will be assigned inefficiency for Mrs.
Acres because the quantity that the consumer wants to consume is less
than the quantity supplied. An increase in supply reduces equilibrium
price, but increases equilibrium quantity. Also, excess demand can make
her supply, demand or equilibrium price to be different too. Excess
demand is created when price of a good is set below the equilibrium
price, and because the price is so low. Too many consumers would want
the goods while the producer (Mrs. Acres) would not be making enough
from the pie because there are too few goods (pies) being produced to
satisfy the demands from the consumers (McConnell, C., & Bruce, S.
(2008). In other words, she needs to consider other factors that influence
on the quantity supplied of any product other than price alone.
Resources prices: As resource prices increase, the cost of production
increases. As a result, Mrs. Acres must receive higher prices to be willing
to produce any given level of output. Technological changes: Changes in
technology usually result in improved productivity. Increased productivity
can reduce the cost of production. A decrease in the cost of production
will increase supply. Taxes and Subsidies: Businesses treat most taxes
as costs. A producer aims to minimize his profit, but an increase in tax
can increase his production costs and his capacity to buy resource
supplies and forcing him to reduce his supply. In contrast, If the
government subsidies the production of a good, it is in effect lowers the
producers’ costs and increase supply (McConnell, C., & Bruce, S.
4. Identify the factors of production (economic resources including
natural, human, and financial resources) and for each factor of
production give an example of what might be needed to operate that
business (Chose: Laundry detergent)

Sign up to view the full document!

lock_open Sign Up
Labor, capital, land and entrepreneur are considered factors of
production. Capital is defined as produced equipment; as all finance
used to begin and carry on production, including the ‘wage fund” and as
the assessed value of the whole productive enterprise (McConnell, C., &
Bruce, S. (2008). Labor is human efforts provided in the creation of
products, paid in wages. That is everything that people do to convert
natural opportunities into human satisfaction (McConnell, C., & Bruce, S.
(2008). Labor operates on capital to be able to produce. Both capital and
labor contribute equally to the final economic value realized. Land
(Natural resources, gifts from nature) is the natural resources used in
creation of products. Natural resources are fundamental to the
production of all goods, including capital goods and labor uses capital on
land to produce wealth (McConnell, C., & Bruce, S. (2008). In other
words, every tangible good is made up of the raw materials that come
from nature, and because all people (and other living things) have
materials needed for production. Every industry must have access to
some land in order to function properly. The entrepreneur is the
individual who takes an idea and attempts to make an economic profit
from it by combining all other factors of production. He takes on all of the
risks and the reward of the business. The entrepreneur needs other
factors of production to be able to function properly (McConnell, C., &
Bruce, S. (2008).
5. Explain how that factor could be used to give the business a
competitive advantage.
Since advancement of technology does exist, labor can be more
productive to the business and it continually throws laborers out of work.
But if the company attributes productivity to equipment rather than only
to labor, referring to equipment as capital, they will develop production
functions featuring labor and capital as substitutes for each other. Also,
choice among production techniques involving different combinations of
labor and capital would be beneficial to the business (McConnell, C., &
Bruce, S. (2008). Looking at the land which is natural resources and can
be scarce for a long term like other factors of production could be. In this
case, the industry has the possibility of substituting among factors to
design alternative production method, whereby the optimal production
method allocates all the factors to equalize their marginal productivity
with their marginal costs (McConnell, C., & Bruce, S. (2008). In capital,
the business has to treat any investment as a capital investment and as
acquired skills (as opposed to “know how”, an attribute of society rather

Sign up to view the full document!

lock_open Sign Up
User generated content is uploaded by users for the purposes of learning and should be used following Studypool's honor code & terms of service.

Excellent resource! Really helped me get the gist of things.