Economics and Ethical Issues

In: Business and Management

Submitted By allenwn
Words 1207
Pages 5
Introduction (Background of Mrs. Acres Pies) Mrs. Acres Homemade Pies derived from Shelly Acres whose grandmother gave her a family recipe for making pies. Shelly Acres loved to cook so she decided to start her own business called Mrs. Acres Homemade pies. The company produced specialty pies and sold them in local supermarkets and selected family restaurants. In the first six months Shelly Acres and three part time employees sold 2,000 pies for $4.50 each, netting $1.50 profit per pie. The business was so successful they could not keep up with demand. In order to meet demand Shelly Acres had to expand operations, borrow money, and increase staff to four full-time employees. Production and sales of the homemade pies increased to 8,000 pies per month and profits increased to $12,000 per month. Shelly Acres’ homemade pies continued to increase beyond what she could supply. Now Shelly has the dilemma of making a decision of how she should proceed with her company in the short run and long run to continue to make profits.

Short-Term Supply, Demand and Price In the short run with supply staying constant and demand increasing. Shelly Acres will have to make a decision whether to increase price to maintain supply and demand. With an increase in demand in pies will raise both the equilibrium price and equilibrium quality. In the short run Shelly Acres has expanded her operations, borrowed money, and increased her staff in order to keep up with demand. In the short term of things Shelly Acres has made all of the correct business decisions to make her business stay afloat with the increase in demand of her homemade pies.

Long-Term Supply, Demand and Price In the long run Shelly Acres will have to increase supply as well as price in order to keep up with demand. In order to keep up with demand for Mrs. Acres Homemade Pies, Shelly Acres will have to expand her…...

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