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