Business_Ethics

ECONOMICS AND ETHICAL ISSUES SHEMIKA LOCKETT PROFESSOR JANET DURGIN BUS 508 THE BUSINESS ENTERPRISE JULY 18, 2010 Economics and Ethical Issues Given the business situation of Mrs. Acres Homemade Pies and using the economic concepts of supply and demand, explain * Discuss what you think will happen to the supply, demand and price of the product in the short-term; * Discuss what you think will happen to the supply, demand and price of the product in the long-term. * Explain why you think supply, demand or equilibrium price will be different, if at all¸ in the short-term and long-term. I want to begin sharing my findings with the definition of supply and demand. Supply is defined as the number of products, goods and services that businesses are willing to sell at different prices at a specific time (McGraw-Hill p. 13). Demand is the number of goods and services that consumers are willing to buy at different prices at a specific time (McGraw-Hill p.13). Mrs. Acres Homemade Pies started out successful which caused an increase in demand for the product. In the short-term, the supply of the product can be increased to meet the demand. Shelly had already taken the necessary steps to meet the rising demand of her product, by expanding operations and borrowing money in order to increase her staff. In order to meet the increasing demand in the short-term, Shelly could consider another expansion and find the financial means to increase her staff so she will be able to keep up the supply of the product. I think the price of Shelly’s pies will increase in the short-term, causing the demand for her product to either decrease or remain the same. The supply of the product in the long-term will increase if Shelly is able to find the financial resources necessary to expand and keep up with the production of the product. With expansion, the price of the product will increase in order for the company to continue making a profit. Demand for the product will also cause the price to increase, but it is important for the company to try to determine whether a price change that is caused by demand will be temporary or permanent. Long-term demand for the product will continue to rise if consumers continue to purchase the product, which will cause the company to make their production method more effective in order to meet the long-term levels of demand. The equilibrium price is defined as the price at which the number of products that businesses are willing to supply equals the amount of products that consumers are willing to buy at a specific point in time (McGraw-Hill p.14). The supply, demand and equilibrium price of Mrs. Acres Homemade Pies will be different in both short-term and long-term because supply and demand for the product will continue to go up and down. Equilibrium price creates a point where suppliers supply exactly what the consumer’s demand. Select one of the following businesses: Soft Drink or Laundry Detergent. Assume the business operates in market where the nature of competition is described as “monopolistic competition”. * Identify the factors of production (economic resources including natural, human and financial resources) and for each factor of production give an example of what might be needed to operate that business. * Explain how that factor could be used to give the business a competitive advantage. Monopolistic competition is defined as a market structure in which many firms sell a differentiated product, into which entry is relatively easy, in which the firm has some control over its product price and there is considerable non-price competition (McGraw-Hill p.78). For Soft Drink production to be successful, “it is no longer sufficient to automate selected process steps” (Siemens, 2010). The factors of production for a soft drink company include natural resources (land), human resources (labor) and financial resources (capital). Natural resources are naturally occurring goods such as water, land, air, soil and minerals that are used in the creation of products (Siemens, 2010). To operate a soft drink business, land would be needed for building space in order to produce the goods. Water is also a natural good that can be used in the production of soft drinks. Human resources refer to the physical and mental abilities that people use to produce goods and services. Labor is a human resource that is used in production because the company would have to hire employees who will use their physical and mental abilities to contribute to the production of the goods (McGraw-Hill p.9). Financial resources or capital, are the funds used to acquire the natural and human resources needed to provide products (McGraw-Hill p. 9-10). Capital is another factor of production. Capital can be machines, factories or office buildings; it is anything that helps man produce other goods (enotes, 2010). There has recently been another factor added to the factors of production called Entrepreneurial Ability (McGraw-Hill p.8). In markets, entrepreneurs combine the other factors of production, land, labor and capital in order to make a profit. They are often seen as innovators, developing new ways to produce new products. All of the factors discussed can give the soft drink business a competitive advantage over the competition. A competitive advantage is based on what a company does better than its competitors. Natural resources such as land, gives a company a competitive advantage they can choose to produce products that require the resources other companies do not have access to. Choosing land for buildings is also important because the size of the production facility could determine how much of the soft drink can be produced on a daily basis. Skilled employees or laborers, is an advantage if the company employs efficient, skilled workers who are motivated by incentives. Finally, the financial resources known as capital, will give the business and advantage because the more financial resources the company has, the better the marketing strategy will be. It was also allow them to bring in more workers, which will generate a greater supply of the product. WORKS CITED Ferrell, O., Hirt, G., & Ferrell, L. (2009) Business: A Changing World. McGraw-Hill Companies. Http://www.automation.siemens.com Investopedia News and Articles, www. Investopedia.com, 2010 “Marketing Mix.” Encyclopedia of Business and Finance. Ed. Allison McClintic Marion. Gale Cengage, 2001. eNotes.com. 2006. 16 Jul, 2010 www.wikipedia.com AP U.S. History 2007 omeHH