Final Analysis As the economist for the Vanda-Laye Corporation an changes the could possibly occur need to be analyzed and examined in order to aid in the decision making process of how to maximize profit. The supply and demand curve must be computed so the firm can set price and output at appropriate levels that ensure profit is made. Different alternatives for new operating structures must be analyzed to forecast the potential profit involved in adopting these structures. New investments can help to increase the firm’s profitability. In order to understand which option generates the best return on investment the alternatives must be investigated. Supply and Demand As an economist for Vanda-Layne Corporation the supply and demand for …show more content…
A substitute good or complementary good can be entered into the market and will cause a change in the demand of the firm’s product. If a substitute good enters the market this means that this good can replace the firm’s. For example the firm’s good is Good B, well the substitute good is Good A. If the price of Good A increases the demand would decrease for Good A and Good B can substitute this good. So when the demand for Good A decreases, the demand for Good B increases due to the substitution. When a complementary good enters the market this creates a dependent relationship between the two goods. For example, there are two goods, Good B and Good C and they are both complementary to one another. If the price increases for Good B this causes a decrease in demand, so the demand curve for both Good B and Good C would decrease. This is due to their directly proportional relationship. Knowing the relationship between the product and the market will help this firm to understand how changes will affect revenue. It is important to study the supply and demand curve to ensure that the maximum profit will be made. Operating Structures Understanding how different operating structures will affect the firm’s performance. Vanda-Laye Corporation proposed two alternative operating structures and only one must be recommended to adopt. After extensive examination Alternative One would be the best operating structure to adopt. This is due to the fact that this alternative has more profitability than the other. The potential profit of Alternative One is shown in Graph 2.0 well Graph 3.0 demonstrates profit of Alternative