Case Study

The Ambitious Baker's Dilemma

A baker has developed a new specialty cake and wants to maximize their profit. Their initial goal is to sell 200 cakes per week at a price of $50 each. However, after setting this price, they find they are only selling 30 cakes per week. When they later experiment by lowering the price to $35, their weekly sales increase to 120 cakes. Based on this scenario, explain the fundamental economic constraint that prevents the baker from achieving their initial goal. What does this situation reveal about the relationship between the price a firm sets and the quantity it can sell?

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Updated 2025-09-14

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