Change In Quantity Demanded Elastic B example essay topic

Market demand is best defined as each consumers demand for a particular product, or each firms demand for a particular factor. The law of demand specifies that the amount demanded varies inversely with price. The following table can best demonstrate this. The table shows the maximum rate of purchase. That is, where the price is 40, consumers will buy 200 units and no more, where the price is 60, consumers will buy 160 and no more, etc. Price Quantity Demanded 20 240 40 200 60 160 80 120 100 80 120 40 Movement along the demand curve is caused only by a change in price.

An Increase in price results in a move upward in the demand curve. This is known a contraction in demand (or a decrease in the quantity demanded). Conversely, if the price falls, then there is an expansion in demand (or an increase in the quantity demanded). Some conditions result in a shift of the curve itself (or in this case line). It is important to understand that unlike a movement along the demand curve, this change as nothing to do with price, and in fact has a number of contributing factors. A shift to the right of the original curve represents an increase in demand, and a shift to the left, represents a decrease in demand.

An increase in demand means that consumers are more willing and able to purchase a given quantity of the product in question at the same price. Possible reasons for increase in demand Increased income levels Higher price of substitutes (e.g. Chocolate and Carob) Expected future price rises (consumer expectation causes increase) Changes in fashion, preference and taste Increase in population A decrease in demand means that consumers are less willing and less able to purchase a given quantity of the good at the original price. It also means that consumers are able to buy a given quantity at a lower price than before. Possible reasons for a decrease in demand Decreased income levels Lower price of substitutes Expected future price falls (consumer expectation causes decrease) Changes in fashion, preference and taste Decrease in population 2) A. a famous TV chef demonstrated a new way to cook potatoes which became very popular.

In that case, the demand for potatoes would certainly rise, since one of the reasons for the increase in demand is present here - changes in fashion, preference and taste. A lot of people nowadays watch Television, and it can be said that TV forms and shapes peoples perception. Thus, if in some sort of the TV show, chef demonstrates a new way to cook potatoes, it means that a lot of people are likely to follow his advise, and the demand for potatoes would rise, if not significantly, than to at least some extent. It is not that easy to predict whether the price will go up significantly, since the other factors that can affect demand for potatoes might change in the less favorable way. B. poor weather in the growing season led to a reduced crop of potatoes. That certainly means an increase in demand for potatoes, since there will be less potatoes available at the market, and the quality might also go down because of the rain that influenced the crop. The price will go up, and the increase in price would be more significant than in the first case discussed above.

3) Elasticity of demand is the sensitivity of the customers to the change in price of a product. The degree of elasticity of demand is measured by the coefficient Ed which is Percentage Change in Quantity Demanded / Percentage Change in Price Percentage Change in Price = Change in Price / Original Price 100 Types of Elasticity a. If %change in Price is %change in Quantity Demanded = Elastic b. If %change in Price is = infinite change in Quantity demanded = Perfectly Elastic c. If %change in Price is %change in Quantity Demanded = Inelastic d. If %change in Price is = 0 Change in Quantity Demanded = Perfectly Inelastic e.

If %change in Price is = %change in Quantity Demanded = Unit Elasticity Total Revenue Test for Elasticity: Total Revenue = Unit Price Quantity Sold. 1. If Price and Total Revenue Change inversely = Elastic 2. If Price and Total Revenue Change Directly = Inelastic Determinants of Elasticity: 1. Necessary Goods e.g. Medicines 2. Availability of Substitutes 3.

In the long run more Elastic 4. Inexpensive Goods The price elasticity of potatoes is approximately 0.16. There are a number of factors that explain that fact. First of all, potatoes is one of those products that are needed by most of the households, however supplies of that product are mostly abundant, and there is not that much diversity in quality if we try various suppliers. The potato market is thus rather calm, since only some really devastating events can ruin the crop completely, thus making the companies that sell potatoes import and raise their prices due to the additional expenses they have to bear. Those who harvest potatoes in the first place then have to sell it to the retailers, large companies that have potatoes as one of the commodities in their price lists.

Before potatoes reaches the final customer, it has to go through a couple of stages, however the mechanism works quite smoothly by now, and usually there is little or no fluctuation in potato price. Assignment 5 The questionnaires are taken from the reference source # 5. Questionnaire 1 (name, address, etc. questions omitted): Pink Dot Food Delivery Service. The company specializes in food delivery to households from the restaurant. 1) Is that the first time you have ordered from us?

2) If no, how many times you have already ordered from us? 3) How many times you order food from various outlets in the average month? 4) How many of those orders come from us? 5) How many meals do you usually order? 6) How would you characterize delivery time (fast; fair enough; slow; as usual, not on time)? 7) Are there any particular restaurants you want us to add to our service?

8) What is your favorite restaurant and why? 9) What do you think about our delivery rate? 10) Do you have any recommendations as to how we can improve our service? Questionnaire 2 (name, address, etc. questions omitted): Child Care, Inc. Company specializes at providing services to those parents that are not able to take care of their children during the day.

1) Have you been using similar services before? 2) How old is your child? 3) Do you find our working hours suitable for your needs? 4) If not, what would you suggest? 5) Do you have any alternatives to using our services (if yes, what are they? 6) What are the most important things you expect from our service?

7) Would you like the opportunity to choose a person who will take care of your child? 8) Do you have any complaints or suggestions concerning our service? 9) When do you usually take your child home? 10) Where would you want us to locate an affiliate?

Both questionnaires intend to collect as much useful information as possible, however I believe that the first one (Pink Dot Food Delivery) is more efficient in doing so. The questions flow smoothly one after the other, and the company is trying its best to find reasonable ways to improve the performance. After reading and filling in the questionnaire, the customer gets an impression that he / she is taken well care of, and that the company at issue tries its best to satisfy his / her demands. The question # 2 does not really fit into the overall picture though. First of all, not all the customers will remember how many times they have already ordered. Then, it might give some of the customers an impression that those who have ordered more are accordingly more important to the company at issue.

Question #7 conveys a positive message to the customers they believe that they can actually influence the companys decisions concerning the restaurants it cooperates with. The intended target market for the first questionnaire is upper middle class people, those who can afford ordering food at home from the restaurant (some of ten restaurants on the menu are quite expensive). The questionnaire is not that big and it does not take much time to fill it in, which is a plus.