Two Posts Have To Be Different: Think About A Product

Two Posts Have To Be Different1think About A Product That You Have Pu

Two posts have to be different 1)Think about a product that you have purchased recently (e.g. soda, diapers, takeout meals, milk, shoes, manicure/pedicure, video game, etc.). Explain how the law of demand affected your purchase. Give specific examples of how the determinants of demand and supply affect this product. What happens to the demand curve and the supply curve when any of these determinants change? Give examples of scenarios that would cause a change in demand versus a movement along the same demand curve and supply curve for this product. Discuss the new equilibrium price and quantity that result from these changes. Can you demonstrate some of these changes graphically? 2)Think of another good that you have purchased recently (or could be the continuation of the first question). Be specific (e.g. is it breakfast cereal in general or Cheerios cereal specifically). If the price of this item increases, how would this affect the quantity of the good that you consume? Is the Demand for this good Price elastic or Price inelastic? Justify your classification by talking about the determinants of elasticity as they apply to this product. Say price is on the rise for this product and you are the manager of a store, would you be thrilled to be selling this product? Under what circumstances would you want to own a business that sells this product? In other words, how does an increase in price for this good affect your Total Revenue? Using specific examples, relate the concepts of Cross Elasticity and Income Elasticity to this product.

Paper For Above instruction

Understanding the laws of demand and supply is fundamental to comprehending market dynamics, especially how decisions by consumers and producers affect prices and quantities. This paper explores these economic concepts through real-life examples of recent purchases, examining how determinants influence demand and supply, and analyzing the effects of various changes on market equilibrium. Additionally, it evaluates the elasticity of demand for a specific product and considers strategic implications for business operations under changing price conditions.

Impact of the Law of Demand on a Recent Purchase

Recently, I purchased a carton of organic milk. The law of demand postulates that, all else being equal, an increase in the price of milk would lead to a decrease in the quantity demanded, and vice versa. This inverse relationship was evident during a sale where the price dropped 10%. Consequently, my purchase increased because the lower price made the product more attractive, illustrating a movement along the demand curve driven by a change in price. Conversely, a hypothetical scenario where the price of milk increases sharply due to increased production costs might cause consumers to reduce their purchases or switch to cheaper alternatives, like soy milk, reflecting a movement along the demand curve due to price change.

Determinants of demand such as consumer preferences, income levels, and the prices of related goods influence the demand for milk. For instance, if health consciousness rises and organic milk gains popularity, demand shifts outward, increasing both equilibrium price and quantity. Similarly, if the supply of milk decreases due to seasonal factors or supply chain disruptions, the supply curve shifts leftward, raising prices and reducing quantity. Conversely, technological advancements in dairy farming can shift the supply curve rightward, lowering prices and increasing availability.

When a determinant causes a change in demand (e.g., a health trend favoring organic dairy), the entire demand curve shifts. In contrast, a change in price results in a movement along the same demand curve. Graphically, demand shifts outward or inward indicating a new relationship between price and quantity demanded, whereas movement along a demand curve represents a change in quantity demanded due to price variation.

Changes in Equilibrium and Graphical Demonstrations

If demand increases while supply remains constant, the demand curve shifts rightward, leading to a higher equilibrium price and quantity. Conversely, if supply increases with demand stable, the supply curve shifts rightward, resulting in a lower equilibrium price and higher quantity. These shifts can be illustrated graphically by plotting the original and new curves, demonstrating how equilibrium price and quantity adjust.

Analyzing a Second Product: Breakfast Cereal

Consider Cheerios cereal, purchased regularly. If the price of Cheerios increases by 20%, the quantity demanded is likely to decrease, assuming demand is price elastic. Elasticity depends on the availability of substitutes, the proportion of income spent on the good, and whether the good is a necessity or luxury. Cheerios, being a staple breakfast item with close substitutes like cornflakes or oatmeal, tends to have relatively elastic demand.

As a store manager, a price rise can be advantageous if demand is inelastic, as total revenue could increase despite lower sales volume. If demand is elastic, however, increasing prices may reduce total revenue. For instance, if consumers switch to alternatives, the drop in quantity demanded could outweigh the higher price, decreasing total revenue.

Elasticity and Business Strategies

Price elasticity of demand for Cheerios is influenced by the availability of substitutes and consumer preferences. Cross elasticity with other cereals is positive—if the price of cornflakes rises, demand for Cheerios may increase as consumers switch. Income elasticity is also relevant; if consumer incomes rise, demand for premium cereals like Cheerios may increase, reflecting positive income elasticity.

Implementing this understanding, a business owner might favorably increase prices when demand is inelastic or when cross and income elasticities suggest a strategic opportunity to maximize revenue. Conversely, lowering prices could be more effective when demand is elastic, especially during competitive market conditions.

Conclusion

In conclusion, the principles of demand and supply directly shape market outcomes. Real-world examples underscore how determinants like consumer preferences, income, and related goods influence market curves. Elasticity concepts further refine strategic decisions regarding pricing and product positioning, essential for optimizing revenue and market share amidst dynamic economic conditions.

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