August 29, 2016
Unit 2 Application Assignment
1. According to the video clip, Aldi sells only prepackaged products, 95 percent of which bear their own private brand labels. How does the law of demand apply to Aldi's private labeling of 95% of its products?
The quantity demanded for Aldi good rises as the price falls, all else being equal, as the price of a product increases, why buy name brand when you can buy from ALDI at half the price. Aldi’s store brand labels are a lot cheaper than other stores, and just because the food is cheaper does not mean that they cater to low income. These are other things that can affect demand besides price. Incomes, tastes or preferences, and how much money you want to save for other things.
2. What are some of the marginal benefits of shopping at Aldi?
You have given up name brand items, and your choices are very limited, you have also forgone bags and baggers. Also you save money because on average, the cost to shop at ALDI is 50% cheaper than supermarkets.
3. What are some of the marginal costs of shopping at Aldi?
Aldi gains from not paying for having plastic or paper bags. The chain does not have to pay for baggers as the groceries are prepackaged. Also they don’t have to pay for pharmacist, or bakers in the store.
4. Who decides which is greater; the marginal costs or marginal benefits?
Consumers have to make choices as to what goods will be purchased or not purchased. Purchasing one item means that fewer funds are available to purchase other items. Economists believe that consumers make decisions at the margin. For example, should one more unit of the good be obtained or not? The consumer will compare the additional utility to be achieved by consuming one more unit of the good, to the additional utility that must be given up in order to obtain the good.
5. If the marginal costs are greater than the benefits to an individual consumer, what does the consumer do?...