Logout Open In App
Open In App
Warning: foreach() argument must be of type array|object, bool given in /var/www/html/web/app/themes/studypress-core-theme/template-parts/header/mobile-offcanvas.php on line 20

Chapter 2: Q17PA (page 72)

Question.. G.R. Dry Foods Distributors specializes in the wholesale distribution of dry goods, such as rice and dry beans. The firm’s manager is concerned about an article he read in this morning’s Wall Street Journal indicating that the incomes of individuals in the lowest income bracket are expected to increase by 10 percent over the next year. While the manager is pleased to see this group of individuals doing well, he is concerned about the impact this will have on G.R. Dry Foods. What do you think is likely to happen to the price of the products G.R. Dry Foods sells? Why?

Short Answer

Expert verified

Answer:

The price ofG.R. Dry Foods’ productswill increase.

Step by step solution

01

Price of the products: 

When the consumer's income rises, the demand curve moves rightwards, indicating that the good is in high demand.

When a consumer's income rises, the demand for inferior goods decreases.

02

Price of the products G.R. Dry foods sells: 

When a good is inferior, the demand curve shifts to the left when come of people increases. According to the Figure 1, as the income of consumers rises, the demand curve shifts to the left. This situation is happening to the G.R. Dry Foods currently.

The Journal notifies that low earners’ income will increase in coming decades. This news will affect. As shown in Figure 2, anew equilibrium level is attained. Assuming that the items are normal, the cost of goods will increasethe price ofG.R. Dry Foods’ products.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Question.. Seventy-two percent of the members of the United Food and Commercial Workers Local 655 voted to strike against Stop ’n Shop in the St. Louis area. In fear of similar union responses, two of Stop ’n Shop’s larger rivals in the St. Louis market—Dierberg’s and Schnucks’s—decided to lock out their union employees. The actions of these supermarkets, not surprisingly, caused Localunion members to picket and boycott each of the supermarkets’ locations. While the manager of Mid Towne IGA—one of many smaller competing grocers—viewed the strike as unfortunate for both sides, he was quick to point out that the strike provided an opportunity for his store to increase market share. To take advantage of the strike, the manager of Mid Towne IGA increased newspaper advertising by pointing out that Mid Towne employed Localunion members and that it operated under a different contract than “other” grocers in the area. Use a graph to describe the expected impact of advertising on Mid Towne IGA (how the equilibrium price and quantity change). Identify the type of advertising in which Midtown IGA engaged. Do you believe the impact of advertising will be permanent? Explain

Viking InterWorks is one of many manufacturers that supplies memory products to original equipment manufacturers (OEMs) of desktop systems. The CEO recently read an article in a trade publication that reported the projected demand for desktop systems to be Qd desktop 1,600-2Pdesktop+0.6M(in millions of units), where P desktop is the price of a desktop system and M is consumer income. The same article reported that the incomes of the desktop systems’ primary consumer demographic would increase 4.2 percent this year to\(61300and that the selling price of a desktop would decrease to\)980, both of which the CEO viewed favorably for Viking. In a related article, the CEO read that the upcoming year’s projected demand for 11,200-100Pmemory-2Pdesktopdesktop memory modules is Qd memory 2Pdesktop (in thousands of units), where Pmemory is the market price for a512MBmemory module and Pdesktop is the selling price of a desktop system. The report also indicated that five new, small start-ups entered the 512 MB memory module market, bringing the total number of competitors tofirms. Furthermore, suppose that Viking’s CEO commissioned an industrywide study to examine the industry capacity for512MBmemory modules. The results indicate that when the industry is operating at maximum efficiency, this competitive industry supplies modules according to the following function: QS memory1,000-2Pmemory+N(in thousands), where Pmemory is the price of a512MBmemory module and N is the number of memory module manufacturers in the market. Viking’s CEO provides you, the production manager, with the above information and requests a report containing the market price for memory modules and the number of units to manufacture in the upcoming year based on the assumption that all firms producing512MBmodules supply an equal share to the market. How would your report change if the price of desktops were$1080? What does this indicate about the relationship between memory modules and desktop systems?

You are an assistant to a senator who chairs an ad hoc committee on reforming taxes on telecommunication services. Based on your research, AT&T has spent over $15million on related paperwork and compliance costs. Moreover, depending on the locale, telecom taxes can amount to as much as25percent of a consumer’s phone bill. These high tax rates on telecom services have become quite controversial, due to the fact that the deregulation of the telecom industry has led to a highly competitive market. Your best estimates indicate that, based on current tax rates, the monthly market demand for telecommunication services is given byQd=300-4Pand the market supply (including taxes) isQs=3P-120(both in millions), where P is the monthly price of telecommunication services. The senator is considering tax reform that would dramatically cut tax rates, leading to a supply function under the new tax policy ofQs=3.2P-120. How much money per unit would a typical consumer save each month as a result of the proposed legislation?1

You are the manager of a midsized company that assembles personal computers. You purchase most components—such as random access memory (RAM)—in a competitive market. Based on your marketing research, consumers earning over $80,000purchase1.5times more RAM than consumers with lower incomes. One morning, you pick up a copy of The Wall Street Journal and read an article indicating that input components for RAM are expected to rise in price, forcing manufacturers to produce RAM at a higher unit cost. Based on this information, what can you expect to happen to the price you pay for random access memory? Would your answer change if, in addition to this change in RAM input prices, the article indicated that consumer incomes are expected to fall over the next two years as the economy dips into recession? Explain

Rapel Valley in Chile is renowned for its ability to produce high-quality wine at a fraction of the cost of many other vineyards around the world. Rapel Valley produces over 20million bottles of wine annually, of which5 million are exported to the United States. Each bottle entering the United States is subjected to a\(0.50 per bottle excise tax, which generates about\)2.5 million in tax revenues. Strong La Niña weather patterns have caused unusually cold temperatures, devastating many of the wine producers in that region of Chile. How will La Niña affect the price of Chilean wine? Assuming La Niña does not impact the California wineproducing region, how will La Niña impact the market for Californian wines?
See all solutions

Recommended explanations on Business Studies Textbooks

Business Operations

Read Explanation

Change Management

Read Explanation

Managers

Read Explanation

Organizational Behavior

Read Explanation

Human Resources

Read Explanation

Influences On Business

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free