Spam Case Study

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Answer to question 1:
Since the first quarter of 2015, labor productivity and unit labor costs have increased in the manufacturing, business, nonfinancial corporate, and nonfarm business sectors. Generally, the cause for a rise in productivity can be attributed to “changes in technology; capital investment; level of output; utilization of capacity, energy, and materials; the organization of production; managerial skill; and the characteristics and effort of the work force.” [1] In this case, there was an increase in the output per hour of all workers and a decrease in the number of hours that they have worked. Consequently, these sectors have been able to increase their annual production. Regarding the rise in unit labor costs, the employers compensated the workers for the increased output, and this causes the slight increase in costs. [1]
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Therefore, ham is a normal good and spam is an inferior good. The demand for a normal good, like ham, will go up. People see an increase in their income as an incentive to buy more preferable goods. The demand for an inferior good, like spam, will decrease when income rises. People usually see that they’re able to pay for the higher price of a normal good compared to an inferior good, especially since they have more money. There’s a negative relationship between income and the preference of an inferior good.The more the income a worker receives, the less they prefer an inferior good. The supply for spam (and ham) will not change. Income changes do not affect supply as there aren’t any incentives for the suppliers to change how much spam they decide to supply. It does not matter to them (and they most likely wouldn’t know) if a person’s income increases or decreases. They simply care about supplying spam at any given price. This is a non-price item as there was a shift in demand for spam. The prices of spam did not change but the amount of spam demanded at any time change.

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