When Demand Is High and a Scarce Resource Is in Short

question 56

True/False

When demand is high and a scarce resource is in short supply, a company should decide how much of each product to produce by ranking products by the contribution margin per unit of the product.

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Definitions:

Utility Maximization

Utility maximization is the process by which individuals choose the consumption of goods and services to achieve the highest level of satisfaction.

Budget Constraint

The limit on the consumption bundles that a consumer can afford based on income, prices, and wealth.

Prices Change

The variation in the cost of goods and services over time, which can be influenced by factors like supply and demand, inflation, and market competition.

Inferior Good

An inferior good is one whose demand decreases as the income of the consumer increases, inversely related to income.