Reference no: EM1364174

"Read "A personal story." and then answer the following questions.

(1) in the subsequent week, the price of eggs is unchanged on the sheet that comes in the mail, but the price of feed has gone up a lot. What should I do?

(2) How will my family's consumption of omelets change this week and why? Chickens by the way do not respond to published prices in their decision as to lay eggs.

(2) What would you predict will happen to the price off eggs as shown on the sheet in coming weeks and why?

A Personal story

When I was a young teen, I sold eggs from a flock of chickens for which i was responsible. Mostly I sold around the neighborhood. My customer of course had the option of buying eggs in one of several stores in the vicinity. As they would sometimes remind me, they were keenly aware of how my price compared to that in the supermarket. they did not seem to attach much importance to the fact that eggs were both fresher than the supermarket variety and delivered by what I hope appeared to be a deserving young man learning the ways of business. (Little did they know.)

My late father was a high school teacher and I recently found among his things a 40- year old sheet with which I was once very familiar. He had used this sheet as an example of the kind of services provided by the federal government. I have attached the one from his files.

He had subscribed to this free service for my benefit. This sheet arrived every day at our house in the mail. I eagerly looked at one line in the sheet-- the price for large Grade A eggs in cartons-- which is what I was selling. The prices quoted are wholesale--prices to retailers--and I was selling retail, so I could charge a little more than the listed price, but the sheet gave me a good idea of day-to-day movements in egg prices.

My family, of course, ate eggs, too. Although I paid for chicken feed, i was vaguely aware that my Mom and Dad were paying some of the other costs of my business, so they got some of my eggs each week. It seems as if when prices were low they got more eggs.

When, years later, I studied economics and heard about perfect competition I recalled my egg business. It seemed like a rare example of this type of competition."