Cost and Price

Topics: Cost Pages: 3 (974 words) Published: February 7, 2014

Economics
Discussion Questions
1. Suppose the price of coffee beans increases by $0.20 per pound. What is the effect of this raw material price increase on the demand for roasted coffee? If one pound produces 50 cups of coffee, would the price of a cup of coffee rising by $0.01? Explain. Price of the product comes from the production of the goods all the way till it hits the market shelf. So when the price of the product like coffee increases during the productivity of the product then the end cost could increase too. Changes of the productivity can increase by changes in technology and human capital. This allows the production of the products to become better managed by managers because it can track all the materials that is needed for that product with better technology. The price increase of $0.20 cents per pound does have an effect on the raw material cost of the product because the increase in price will come to the cost of the product which if the price is to high then the customers will stop purchasing the product. Demand for the product comes from customers purchasing the product that your company has which makes the demand for the company to purchase the product faster, better, and cheaper or at the same price that it was just at. When companies like the coffee products customers get fixed on this product and will stand by them even with the increase in the price. The raw material increasing only $0.20 cents per pound will not impact the cost of the product to much that the customers will have to look somewhere else. The demand will still be there with the cost increase of the raw material. The price of the product will not increase by only $0.01 cent per every 50 cups sold but the company will increase in the cost of each cup or almost every other cup was to increase more than $0.05 cents. I would try to make the coffee hold at the cheapest price possible so you don’t upset the customers will every price change that has to happen. 2. The...
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