Income elasticity measures how a good's quantity demanded responds to change in the goods price. producers' incomes. change in t
1 answer:
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Answer: A - nominal wages are slow to adjust to changing economic conditions
Explanation:
In the short run, the costs of many of the factors used in the production process are fixed. For example labours wage is fixed for a number of years because of labour contracts. Also the raw materials used in the production process have long term agreements that fix their prices.
As a result of factors of production been fixed in the short run, when general price level rises and the cost of production remains constant, profit also rises.
Firms take advantage of this rise in price and increase production and the quantity of aggregate supply increases. This is why the short run aggregate supply curve is upward sloping.
1-a. The total time available on the plastic injection molding machine is the constraint in the production process. What is the contribution margin per unit of the constrained resources for Ski Guard, Golf Guard and Fishing Guard?
Answer:
We need to need to find the contribution margin for each product.
Then we need to find contribution margin per unit of constrained resources with the following formula:
Constraint: Time available on plastic injection moulding machine
Ski Guard Golf guard Fishing guard
Selling Price per unit 200 300 255
Less: Variable Cost 60 140 55
Contribution Margin 140 160 200
Processing time per unit (minutes) 2 5 4
Contribution Margin unit of constraint 70 (140/2) 32 (160/5) 50
1-b. Which product would be the most profitable use of this constraint?
Manufacturing the <u>Ski Guard</u> would be the <u>most profitable use</u> of this constraint since it has <u>the maximum contribution margin per unit of constraint, ($70 per unit).</u>
1-c. Which product would be the least profitable use of this constraint?
The <u>Golf Guard</u> would be the least profitable use of this constraint since it has the <u>least contribution margin per unit of constraint, at $32 per unit</u>.
2a. A severe shortage of plastic pellets has required the company to cut back its production so much that the plastic injection molding machine is no longer the bottleneck. Instead, the constraint is the total available pounds of plastic pellets. What is contribution margin per unit of the constrained resources for Ski Guard, Golf Guard and Fishing Guard?
We need to need to find the contribution margin for each product.
Then we need to find contribution margin per unit of constrained resources with the following formula:
Constraint: Pounds of plastic pellets
Ski Guard Golf guard Fishing guard
Selling Price per unit 200 300 255
Less: Variable Cost 60 140 55
Contribution Margin 140 160 200
Plastic pellets per unit (pounds) 7 4 8
Contribution Margin per pound 20 (140/7) 40 (160/4) 25 (200/8)
2-b. Which product would be the most profitable use of this constraint?
The <u>Golf Guard</u> would be the <u>most profitable use</u> of this constraint since it has <u>the maximum contribution margin per unit of constraint, ($40 per unit).</u>
2-c. Which product would be the least profitable use of this constraint?
The <u>SkiGuard</u>, with a contribution margin of <u>$20 per pound</u> of plastic would be the <u>least profitable</u> use of this constraint.
3. Which product has the largest unit contribution margin?
Answer : The <u>fishing guard</u> has the <u>largest per unit contribution margin </u>at <u>$200.</u>