Macroeconomics

Topics: Price, Scarcity, Cost Pages: 3 (1025 words) Published: June 21, 2013
1. People like Ferraris. Ferrari’s cost as much as consumers are willing and able to pay for them! The cost of Ferrari does depend on markets and prices, which makes up the market system. Resource prices also determine the cost a product or good. The higher the resource price, the higher the cost of production, and price of the good would be, which brings you to supply and demand. If you able to produce a product at a certain price and consumers keep buying, then you would not have to make any adjustments in price unless there was a change in production, labor, or technology. Keep in mind that if a company doesn’t make profit, then the price can be adjusted. Ferrari’s are made in small amounts. So if the supply is small, the price off the product is more, because of scarcity. In addition, Ferrari parts are more expensive. So with the parts that is used to construct the car that would affect the resource price. To add, Ferrari’s are hand- made, so there are no robots used. If robots were used, then production would be high, and cost less, so when you factor Ferrari’s made in small amounts and how expensive the materials are, that affects supply and demand. Consumers are waiting months and months at a time for a specific product like the Ferrari so that’s why consumers are willing to pay hundreds of thousands of dollars for that brand of Ferrari because of the quality and want. If their income allows, it will be brought. We have unlimited wants.

2. Of course everyone would like to own the Ferrari, but logically the consumer still wouldn’t be able to afford it. Additionally, the company would go out of business. It cost so much to construct a Ferrari that the company would not be able to make profit. Not only would the company suffer but so would the consumer. The consumer would not be able to keep up the maintenance nor the insurance premium. To top it off, nothing is free! It may be free to consumers but not to the community. So when we use a resource to...
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