Cost and Price

965 Words4 Pages
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
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For companies that lower the price it’s okay for them to increase the prices wants the economy is back to a recovery state. Consumers will not hold it against the company for increases the prices because they know that when times get tough they will do what they can to help each customer out by lowering the prices again.
Companies slashing prices to maintain a marker share is okay because they will do what they can to stay ahead of the competition. Market shares are a part of the company’s financial support. When customers by the shares in a company they are investing in that company for the long haul and hoping to make some extra money along the way. When they lower prices it draws customers to their company name because they want to get a better deal then they possible are at the company they at. On the flip side is that a company lowering their prices could mean that they have increased the price because they want to get more profits. This could cause concern by customers that the company has more room to move the price down because they have just increased it over time because they wanted profits and might not know what the bottom price really is.

Reference:

Boyes, W. (2012). Managerial economics: Markets and the firm (2nd Ed.). Mason, Ohio: South-Western
Cengage

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