\u00a0\u00a0\u00a0
\nContext:
\nIn \u00a0this week\u2019s discussion you are going to be the CEO of a company.\u00a0\u00a0In \u00a0anticipation of the upcoming quarterly disclosure of profits,\u00a0you \u00a0prepare your Board of Directors for the pressure that cost-push \u00a0inflation is having on profits. There will be some erosion of profits.\u00a0 \u00a0Please\u00a0make yourself CEO of only one of these hypothetical companies.
\nProfile of the Companies\u00a0
\nAll America Grocery Inc\u00a0\u2013 \u00a0We serve communities in the middle of the income market providing low \u00a0prices for all basic grocery needs.\u00a0Our modest income consumers expect \u00a0goods deals on good quality foods.\u00a0\u00a0The\u00a0Covid-19 pandemic has put\u00a0upward \u00a0pressure on the price of everything we sell. We are also experience \u00a0rising cost in every aspect of our operation as we have to put extra \u00a0resources in to protecting both our employees and the public.\u00a0 We are \u00a0both fortunate and unfortunate that the price elasticity of demand for \u00a0food is .20.\u00a0\u00a0
\nVery Big US Auto\u00a0\u2013\u00a0Very \u00a0Big US Auto is one of the oldest and one of the largest manufacturers \u00a0of autos in the US.\u00a0\u00a0Very Big US Auto\u2019s supply chain is highly dependent \u00a0components manufactured in China and assembled in the US, (think back \u00a0to our week 1 problem with the seat manufacturer).\u00a0 The Chinese economy \u00a0has rebounded quickly, much of the production capacity is still going \u00a0to\u00a0rebuild inventories, so the supply of components still lag behind \u00a0demand so there is upward pressure on all of our costs.\u00a0 Additionally \u00a0manufacturing facilities like ours must take extra precaution to keep \u00a0workers safe.\u00a0 Costs are rising on all aspects of production across the \u00a0industry.\u00a0\u00a0On the demand side, Very Big US Auto knows that\u00a0demand is \u00a0relatively elastic with a price\u00a0elasticity of demand of\u00a01.2. But we also \u00a0know that pandemic has made some transportation substitutes less \u00a0acceptable.\u00a0
\nBig Time Entertainment\u00a0\u2013 \u00a0Big Time Entertainment is a nationwide firm providing movies, arcades \u00a0and other in person entertainment\u00a0venues such as bowling and roller \u00a0skating.\u00a0 Our operations have been heavily impacted during the\u00a0Covid-19 \u00a0pandemic.\u00a0 On\u00a0reopening we have been faced with a host of regulations \u00a0that have\u00a0greatly increased our cost of operations. We also face \u00a0uncertainty as to the potential for additional shutdowns. Customers are \u00a0fearful plus the\u00a0guidance on\u00a0operating our facilities means we are \u00a0operating far below our optimal number of patron to cover the higher \u00a0cost for cleaning and other measure to protect the public and our \u00a0employees.\u00a0 Price elasticity of demand is 1.6 and we are also faced with \u00a0more competitors,\u00a0online\u00a0entertainment and gaming, that are not \u00a0experiencing these cost pressures.\u00a0
\nNow explain:
\nIs \u00a0the demand curve for your product relatively elastic,\u00a0inelastic or \u00a0unitary elastic?\u00a0\u00a0Demonstrate for your company\u2019s product,\u00a0by how much \u00a0the quantity demanded will change if you pass on a 10%\u00a0increase in \u00a0cost.\u00a0In other words,\u00a0show your calculation of the percentage change in \u00a0the quantity\u00a0demanded if your prices are raised by 10%.\u00a0You must provide a calculations showing the percentage change in quantity demanded.\u00a0\u00a0
\nGiven \u00a0your company\u2019s price elasticity of demand and the industry \u00a0supply\/competitive environment you face, prepare a statement for your \u00a0board as to the potential impact on profits.\u00a0\u00a0\u00a0Who will pay the larger \u00a0share of the cost increases,\u00a0your firm or your customers?\u00a0\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"
\u00a0\u00a0\u00a0 Context: In \u00a0this week\u2019s discussion you are going to be the CEO of a company.\u00a0\u00a0In \u00a0anticipation of the upcoming quarterly disclosure of profits,\u00a0you \u00a0prepare…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-102596","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/academicwritersbay.com\/answers\/wp-json\/wp\/v2\/posts\/102596","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/academicwritersbay.com\/answers\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/academicwritersbay.com\/answers\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/academicwritersbay.com\/answers\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/academicwritersbay.com\/answers\/wp-json\/wp\/v2\/comments?post=102596"}],"version-history":[{"count":0,"href":"https:\/\/academicwritersbay.com\/answers\/wp-json\/wp\/v2\/posts\/102596\/revisions"}],"wp:attachment":[{"href":"https:\/\/academicwritersbay.com\/answers\/wp-json\/wp\/v2\/media?parent=102596"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/academicwritersbay.com\/answers\/wp-json\/wp\/v2\/categories?post=102596"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/academicwritersbay.com\/answers\/wp-json\/wp\/v2\/tags?post=102596"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}