A firm produces three types of computers (small, medium, and large). Demand for the computers is such that 100 small, 200 medium
, and 300 large computers must be scheduled for produetion to satisfy orders. This can be represented by a row matrix called PRODUCTION PRODUCTION100 200 300 small medium large Certain units of direct materials and direct labor go into the production of each of these computers. This can be expressed as follows: mall computers UNITS: 3_medium computers arge computers direct materials direct labor The unit cost of direct materials and direct labor is given by the following matrix $2000 ← direct materials (per unit) $3000 direct labor (per unit) Problem #1 Use the data to set up a Production Requirement Matrix that represents the total number of units of direct materials and direct labor needed to meet production requirements. For the sake of uniformity call this matrix TOTAL UNITS Problem #2 set up a TOTAL COST MATRIX that reflects the firm's total cost of direct materials and direct labor. For the sake of uniformity call this matrix TOTAL COST
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Answer:
An increase in the production leads to decline in the price. Producers are likely to supply more at the lower price or the existing price, considering the increase in production. If there is a 20 percent increase in the production, then it tends to increase the supply. An increase in supply will have a negative impact on price.
The effect of the increase in production on price is shown in the above figure. A twenty percent increase in the production causes an increase in the supply. Excessive supply causes a reduction in the price. Hence, when the supply increases from P1 to Q2, the price decreases to P2 from P1.
