Acres, whose grandmother gave her a family recipe for making pies, loved to cook

Question

Acres, whose grandmother gave her a family recipe for making pies, loved to cook, and she decided to staft a business she called Mrs. Acres Homemade Pies. The company produces specialty
pies and sells them in local supermarl<ets and select family restaurants. ln each of the first six months,
Shelly and three part-time employees sold 2,000 pies for 54.50 each, netting $1.50 profit per pie. The pies were quite successful and Shelly could not l<eep up with demand. The companys success results from a quality product and productive employees who are motivated by incentives and who enjoy being parl of a successful new business. To meet demand, Shelly expanded operations, borrowing money and increasing staff to four f ull-time employees. Production and sales increased to 8,000 pies per month, and profits soared to $12,000 per month, However, demand for Mrs. Acres Homemade Pies continues to accelerate beyond what Shelly can supply. She has several options:
(1) maintain current production levels and raise prices; (2)expand the facility and staff while maintaining the current price; or {3) contract the production of the pies to a national restaurant chain, giving Shelly a percentage of profits with minimal involvement.
Discussion questions:
1.- Explain and demonstrate the relationship between supply and demand for Mrs. Acres Homemade pies.
2. - What challenges does Shelly face as she considers the three options?
3. - What would you do in Shelly's position?

Explanation / Answer

as price increases demand decreases and supply increases

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