Question

a. Suppose you manage a factory that has two plants. Your data shows that plant X produces more output per day compared to plant Z. As a result of this data, you decide to place all new hires at plant X. Have you made the right decision? If you made the right decision explain why. If you did not make the right decision, explain how you should make the decision.

b. Suppose the prices of some goods goes up. Does this mean that all consumers will spend more on their day to day living? Explain.

Answer 1

a) Yes, my decision is definitely right, because the plant X is producing more output, so placing all the new hires at the plant X will be more profitable as compared to plant Z.

For eg: A person has started an industry which produces jute bags. He has 2 machines X and Y, the machine X has the capacity to produce 500 bags in an hour, whereas the machine Y has the capacity to produce 300 bags per hour. The price of 1 bag is 2$, so machine X gives $1000 in an hour, and machine Y gives $600 per hour. It is clear from the data that machine X is giving more profit so it is better to allot more staff members to machine X.

In this case the same happened, plant X is producing more output, so in order to get more profit , it is better to provide the plant X with the new hires. If the plant Z is given all the hires they will not give the same amount of profit that plant X gives.

b) If the prices goes up, some customers might start spending more on their day to day living, but some customers might discontinue the product.

The reasons for customers to spend more

1. Good quality product: If the customers are spending more on the product , it means that the quality they are getting is very good and it is nearly impossible for them to get the same quality in some other brand.

2.Preference: There are people who do not like to switch and change their preferences no matter how much increase happens, So the customers who are willing to spend more might have preference for the product and do not want to switch it.

The reasons for customers to discontinue

1. Better product in market with less price: It is possible that the same kind of product may be available in the market that too in a low price, so some of the customers who cannot affort the higher prices might switch to some other brand.

2. Poor families: The customers might stop buying the product as they will be unable to bear the expenses because they belong to middle class family.