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Elasticity And The Law Of Supply And Demand - Essay Example

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The price elasticity of eggs is very low. The reason that the price elasticity is low is because there are no substitutes for eggs. The consumption of eggs continues to occur if prices rise because eggs are needed as part of a balance diet of 2000 or more calories…
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Elasticity And The Law Of Supply And Demand
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Download file to see previous pages The USDA established prices control whenever prices rise to unreasonable levels due to a smaller supply of goods. The rules of supply and demand apply to both eggs and beef products. The United States is one of the biggest exporters of meat in the world. The elasticity of beef is of affected by the income of the person because beef can be eliminated during dinner for other food products or a pizza night with the family. The vegetarian population would be an anomaly in a statistical study of for testing how much meet a person consumes on a daily basis due to their personal belief that beef consumption is not good for the body. Most Americans love to go out and eat a good steakhouse. If the favorite restaurant of a person gives them a 10% coupon for their next purchase the chances of that person coming back are higher than normal.
If the price of Coca-Cola double it would create panic in the consumer markets. Customer would begin to boycott Coca-Cola because their soft drink has become a necessity to provide fluids to entire global population of 6.96 billion people. The sales of the company would go down a lot and the company would not be able to generate breakeven sales due to its high overhead and fixed which are common among industry leaders in any market. A 30% decrease would affect the sales of Coca-Cola but not at the same level because the relationship is not linear. The Coca-Coca sales might go down a few percentage points, but by lowering prices the company can minimize the damage. The primary reason Coca-Cola sales are not going to diminish by a factor equal to the loss in income is because sodas are a basic food necessity product. The brand value of Coca-Cola is very strong and is going to continue to become a social icon as the company is spending over $2 billion yearly to advertise its products and improve its corporate image and brand value. DQ3 Five determinants of demand are: income, consumer preferences, number of buyers, substitutes & complement products, and future expectations. The income variable is very important. Companies should expand to countries that have a high gross domestic product per capita such as develop economies whose population is above $9000 per capita. The customer preferences are another factor. For instance sell meat in India is a hard proposition to accept for the local population since the cow is considered a sacred animal. A large number of buyers is good in a concentrated areas because the company can be more effective at implementing mass media company’s at a lower cost due to the its great locations. Substitute products are product that can interchange the consumption of another good. For example soft drinks can be substituted by water which is worth a fraction per 10 ounces that a Coca Cola can. 4. I agree with your definition of elasticity of demand. When I go shopping for clothing I am persuaded to purchase clothes that are on special at retail stores. The same behavior affects most of my buying decisions. You mentioned that certain products or services have a demand that is more sensitive which is true. The income of the population also affects a lot whether the customers suffer from consumerism. The majority of U.S. citizens suffer from this syndrome due to high gross domest ...Download file to see next pagesRead More
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