Dr. Etido Akpan
Business Enterprise 508
July 18, 2010
Explain and demonstrate the relationship between supply and demand for Mrs. Acers Homemade Pies. The relationship between supply and demand for Mrs. Acers Homemade Pies is that demand exceeds supply in the sense that she does not seem to be able to provide enough pies to meet the demands of her vendors. She increased her work force which in turn helped her production of pies to go from 2000 pies to 8000 pies per month. Supply although went up, demand still exceeded the number of pies Mrs. Acers was able to produce to meet demand. What challenges does Shelly face as she considers the three options? They are many challenges that Shelly faces as she considers the three options. In regards to option one if Shelly maintains current production levels and raise prices; she may end up losing vendors in the long term due to the fact her current production level do not meet demand and consumers may not be receptive to raising prices. If Shelly chooses to expand the facility and staff while maintaining the current prices, she will end up minimizing her profit in the short term but will see an increase in profit in the long term. If she chooses to contract the production of the pies to a national restaurant chain, giving Shelly a percentage of the profits with minimal involvement it will take the burden of production of Shelly and she will no longer be the owner of the product. What would you do in Shelly’s position?
In Shelly’s position I would I would expand the facility and staff and raise the price by a small margin to assist with the expansion. Discuss what you think will happen to the supply, demand and price of the product in the short-term. In the short term, demand will continue to increase since the manager is not equipped with enough employees to satisfy demand; supply in the short term will stay the same (which is lower than the demand...