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Bus 508 the Business Enterprise week 3 Assignment 1

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Bus 508 the Business Enterprise week 3 Assignment 1
Week 3: Assignment 1
BUS 508: The Business Enterprise
Professor N. Nayak
Discuss what you think will happen to the supply, demand, and price of
the product in the short-term.
The supply of the pies is based on the demand—the idea that if the price
of doing something goes up, then people will want to consume less of it,
and vice versa. The ‘something’ has to be good and not bad. Weeds will
constantly go up in supply and continue to grow, but nobody wants them,
and therefore the supply means nothing. The quantity demanded equals
the quantity supplied. In the case of Mrs. Acres Homemade Pies, the
supply of pies will increase because the number of consumers has
increased, therefore increasing demand. The price of the product will
stay the same, because the expansion to provide more staff and use of
the facility will bring in more revenue.
Discuss what you think will happen to the supply, demand, and price of
the product in the long-term.
In the long-term, based on the success rate of Mrs. Acres Homemade
Pies, I think the supply will continue to rise if the demand continues to
rise as well. Given the information, the pies continued to sell and the
profit went up for Mrs. Acres—even though the cost of expansion to
produce more pies increased. Should the number of consumers continue
to increase, the demand for the pies will go up. The makers of the pies
will need to continue to increase in numbers, therefore increasing the
supply as well. To increase the growth of making the pies, the cost will
go up. Therefore, the price of the pies for the consumer will rise. If the
potential for profit increases in the long-term, Mrs. Acre will continue to
supply more pies while having to borrow less money to increase her
business at the same time.
Explain why you think supply, demand, or equilibrium price will be
different, if at all, in the short-term and the long-term.

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There will definitely be differences in all three categories from the short-
term to the long-term. There is a higher cost to begin a business with
little profit earned in that stage. This is because in order to start a
business, resources have to be used. The old saying goes, ‘You have to
spend money to make money,’ and that is exactly the case. It cost Mrs.
Acres more money to hire people to make the pies, purchase all the
ingredients, and pay to use a facility, all with little profit at the beginning.
That is not because the pies were not successful, but because the
money invested to start the business had to be earned back before profit
could be taken into account.
The supply is different in the short-term because like any new product,
consumers are cautious. They do not wish to buy what they do not need.
There is always doubt and skepticism for any new product, which makes
the development of the business a risk in the first place. The supply will
be less in the short-term than the long-term because there cannot be
immediate success that stays on the same level. The pies were a
success from the beginning, yes, but the success increased to a whole
new level after the pies were consumed by the people and word of
mouth spread. Therefore, the supply was drastically different in the long-
term because the demand for the pies increased exponentially. The
same goes for demand of the pies. In the beginning, there was not as
high of a demand because the product was new. In the long-term, the
success of the pies led to more demand of them.
The prices of the pies I feel were also different in the short-term and
long-term. The cost to make the pies with three part-time employees was
less in the short-term than when hiring four full-time employees. So in
the short-term, the cost to make the pies was not as high, therefore, the
price to sell the pies would not be as high. Also, since the product is
new, the price point needed to be at a very affordable and reasonable
price to entice the public to try it. If there were a Reese peanut butter cup
or a new Smith’s peanut butter cup offered in front of me for the same
price, the Reese cup would win because I know what I am paying for.
The quality of what I know makes me want to purchase the Reese cup
for that price. Now if the cost of the Smith’s peanut butter cup was less, I
would be more enticed to try it because I would be saving money on
something I could potentially like. Should the peanut butter cup be
delicious, I will buy more of them at that price. In the case of the pies, the
public loved them and more production was required to fulfill the
demand. Since the product became a success in the short-term, Mrs.

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Acres would definitely be able to raise the price of the product because
of it—making the price increase in the long-term.
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.
The factors of production for soft drinks include all three economic
resources. Natural resources must be used because the public
consumes the product. Sugar, water, and all of the various ingredients
used to make the syrups for the soft drink are natural resources. To gain
those resources, the company will need to work with those in control of
them and hire people to collect them. That brings us to the human
resource factor. The company must hire employees not only to retrieve
the natural resources required to make the soft drinks, but also to make
the drinks, bottle them, sell them, and market them. In order to have the
ability to hire those human resources, the company has to be ready to
pay for them, which leads to financial resources. Companies need
money to buy the resources and pay for the employees to create the soft
drinks. That being said, each factor can give the soft drink business a
competitive advantage. The natural resources for one soft drink
company might be completely natural with no added preservatives, while
another uses artificial flavorings in their product. 7-Up for example,
markets that their product is an all-natural soft drink now, enticing those
who are trying to live a healthier lifestyle. The soft drink business could
also be selective as to whom they choose to run their business. Coca-
Cola could play the advantage of hiring people with degrees in
production, marketing, and horticulture, while Pepsi Cola would play the
advantage of keeping diversity a main priority when hiring their
employees—which is a great strategy as well, considering there are so
many people without degrees. There are always ways for businesses to
make decisions that will entice the population into buying their product
one way or another. In a monopolistic competition, the differences are
usually so small that every other factor counts. Every soft drink requires
sugar and water, but not every soft drink has a celebrity promoting it or
has a sponsorship with other companies.

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