COMM 491 Study Guide - Final Guide: Fokker E.Ii, Taco Bell, Economic Surplus
Document Summary
Case study: should chipotle use fair trade tomatoes in their food: bad news scenario: cost goes up a lot, benefit goes up very little. Minimal diff benefit to consumers: good news scenario: cost goes up minimally, benefit goes up a lot. Benefit goes up a lot: another scenario: cost does up a little, but quantity sold goes up. But in actuality, demand is not constant because consumer"s have different preferences (heterogenous consumers): Consumers who just like burritos might still go to chipotle if price is the same as other burrito retos but . If chipotle charges a higher price, consumers who care about ethical foods will still buy chipotle because they still derive a consumer surplus from it. But consumers who don"t care, will have utility that is below chipotle"s price and will therefore go else for burritos. If chipotle and taco bell both pay more/lb , both charge higher price = most profit.
