In recent years, Mrs. Acres Homemade Pies has expanded operations to meet growing consumer demand. The company has increased both production and sales, however, demand has continued to grow, and has reached a point beyond the production possibility of Mrs. Acres Homemade Pies' facilities. At this juncture, the business plan for Mrs. Acres Homemade Pie's must be re-evaluated to meet customer demand.
Supply and Demand for Mrs. Acres Homemade Pies
Currently, demand for Mrs. Acres Homemade Pie's is exceeding the amount that can be supplied. The excess demand connotes that the pies are currently underpriced. If the company were to increase prices this would cause a decrease in demand to an equilibrium point of supply production. In the short …show more content…
Acres must consider the risks and challenges of each of her options. One option would be to maintain the current levels of production and raise prices. This option, as stated above, would work in the short run to reduce demand by raising the price. However, the challenge of this option is that it is not sustainable for future profit. As aforementioned, this option would only be successful for a period of time until the market demand would decrease in response to raised prices causing Mrs. Acres to have an excess of the product. An excess of product would result in reduced profit and Mrs. Acres would most likely incur storage expenses. Additionally, an increase in price would invite more competition into the market and this competition would inevitably cause Mrs. Acres to lose …show more content…
From past experience, when Mrs. Acres expanded operations, money needed to be borrowed to cover the cost of expanding facilities. Nevertheless, the expansion of the business did yield a higher profit. According to data, Mrs. Acres Homemade Pies expanded operations by borrowing money and increasing staff from 3 part-time employees to 4 full-time employees. The result of this change was an increase in sales from 2,000 to 8,000 pies per month and an increase in profits from $3,000 to $12,000 per month. Thus, with an additional expansion, it is reasonable to assume that profits would again
Supply and Demand for Mrs. Acres Homemade Pies
Currently, demand for Mrs. Acres Homemade Pie's is exceeding the amount that can be supplied. The excess demand connotes that the pies are currently underpriced. If the company were to increase prices this would cause a decrease in demand to an equilibrium point of supply production. In the short …show more content…
Acres must consider the risks and challenges of each of her options. One option would be to maintain the current levels of production and raise prices. This option, as stated above, would work in the short run to reduce demand by raising the price. However, the challenge of this option is that it is not sustainable for future profit. As aforementioned, this option would only be successful for a period of time until the market demand would decrease in response to raised prices causing Mrs. Acres to have an excess of the product. An excess of product would result in reduced profit and Mrs. Acres would most likely incur storage expenses. Additionally, an increase in price would invite more competition into the market and this competition would inevitably cause Mrs. Acres to lose …show more content…
From past experience, when Mrs. Acres expanded operations, money needed to be borrowed to cover the cost of expanding facilities. Nevertheless, the expansion of the business did yield a higher profit. According to data, Mrs. Acres Homemade Pies expanded operations by borrowing money and increasing staff from 3 part-time employees to 4 full-time employees. The result of this change was an increase in sales from 2,000 to 8,000 pies per month and an increase in profits from $3,000 to $12,000 per month. Thus, with an additional expansion, it is reasonable to assume that profits would again