Sample Economics Assignment on HBUS 230 The Global Economy

HBUS 230 The Global Economy
Case Study for Week 2
CHANDRA’S CHICKEN SANDWICHES. Chandra Rey owns and operates a chicken sandwich store in New York City. Her
store makes delicious chicken sandwiches that people are crazy about. Block-long lines form outside the store at lunch
time, and she loses a lot of business because she can’t produce enough to meet demand. Her main competition is a
burger joint two doors down, that has great burgers that are priced about the same as her chicken sandwiches.
Her family urges her to make sandwiches in advance and store them in the refrigerator so she doesn’t lose business,
but she refuses, insisting that the freshness of being made to order is what makes them so great.
She does want to make more sandwiches to meet demand, so she does some research. She currently has three
people making sandwiches, and each does all the work of making a sandwich: taking the order, preparing the
ingredients, and assembling the sandwich. She finds out she can increase production by two times by breaking up the
work and having one person take orders, one prepare ingredients, and one assemble. But she needs a new kitchen
counter arrangement to do this, which will cost her $50,000 to purchase and install.
Answer the following questions after reading the lecture slides for Week 2.
1. She is increasing productivity by changing the way the work is done by her people – rather than having each
person do everything – the work is divided so each person can focus and specialize. This is called what?
2. Suppose Chandra takes out a loan for $50,000 to buy the new kitchen counter arrangement, and she has to
pay 4.5% interest each year on the amount of the loan. How much does she have to pay in interest each year?
3. On the next page, draw a supply and demand chart for chicken sandwiches (no numbers required, just the
concepts)
4. Regarding the impact of using the new configuration of people (DRAW IT ON YOUR CHART ON THE NEXT PAGE
– JUST THE CONCEPTS, NO NUMBERS)
• Is this an impact on demand or on supply?
• Does the demand curve or the supply curve shift? Which direction?
• What happens to the price of chicken sandwiches as a result of using the machine?
• What happens to the quantity of chicken sandwiches as a result of using the machine?
5. Suppose the cost to Chandra of chickens (the biggest expense in the components of the sandwich) goes up by
3 times because of a massive fire at the local distributor (DRAW IT ON YOUR CHART ON THE NEXT PAGE – JUST
THE CONCEPTS, NO NUMBERS)
• Is this an impact on demand or on supply?
• Does the demand curve or the supply curve shift? Which direction?
• What happens to the price of chicken sandwiches as a result of the increase in chicken cost?
• What happens to the quantity of chicken sandwiches as a result of the increase in chicken cost?
6. Suppose a bad virus arrives in New York City, that forces many people to stay home and not go out to eat.
Chandra has some customers who still come in but more than 70% of her business stops (DRAW IT ON YOUR
CHART ON THE NEXT PAGE – JUST THE CONCEPTS, NO NUMBERS)
• Is this an impact on demand or on supply?
• Does the demand curve or the supply curve shift? Which direction?
• What happens to the price of chicken sandwiches as a result of the change in customers?
• What happens to the quantity of chicken sandwiches as a result of the change in customers?
DRAW YOUR SUPPLY AND DEMAND CHART HERE (YOU CAN DO IT ALL ON ONE, OR YOU CAN DO A DIFFERENT ONE
FOR EACH SCENARIO