Elasticity And The Law Of Supply And Demand - Essay Example

?Week summary: Week I was a great learning experience. I like the members in Team B. I know that by working and cooperating with each other we willget the job done. Three topics that I learned in week one in the class discussion were normative, positive economics, and market efficiency. I also learned about a lot of other topics from the textbook readings. The China-US-Jamaica article was a great piece of literature. It taught me a lot about business ethics. Week Two DQ1 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. 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. DQ2 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 domestic product per capita in America. The GDP per capita in the United States is $47,200 (CultureGrams, 2011) CultureGrams (2011). United States. Retrieved October 6, 2011 from http://online.culturegrams.com.ezproxy.apollolibrary.com/secure/world/world_country.php?contid=6&wmn=North_America&cid=169&cn=United_States_of_America 5. The demand of commodities and its subsequent behavior in the market is used by investors in their decision making process. Right now silver is a good investment because it is undervalued. The general rule is for gold to be worth 10 times more than silver and currently the price gap is larger. I plan on investing in silver very soon. I think that the demand for eggs stays stable independent of the price because it is basic necessity product. 6. I agree with you that elasticity is an economic concept that can be used in the price setting process for products or services. Products that have a high elasticity of demand will have very volatile prices. An example of a good whose price is very volatile is gasoline. When I go shopping for my weekly groceries I always buy a dozen eggs irrelevant of the price. When I purchase meats I look to buy the ones that are on special. 7. It is true that the law and supply and demand affects all goods and services in an economy as you stated in your response. There are some products that have inelastic demand. These products have an inelastic demand because the product cannot be substituted. Patented drugs are an example of a product that has not substitute if a generic version does not exists. 8. Weekly summary II During week two I learned a lot from my classmates. The classroom discussions were very interesting. Elasticity and the law of supply and demand were some of the concepts discussed during the week. Team B has communicated well all week which provides me with great hope that we are going to perform good work as a cohesive unit throughout the six week course. The CPA review was very challenging. 9. A perfectly inelastic demand occurs when the good been sold does not have a substitute, thus changes in prices do not affect the product’s demand. I still stand by my position that eggs have an inelastic demand. Most eggs consumed in the United States come from chickens, but I guess a substitute for chicken eggs is to eat eggs from other animals such as ducks eggs. Since chicken are mass produced in the United States it is logical that the eggs that are used for human consumption are chicken eggs. 10. A price control that has been used for years in the United States is price controls on petroleum. The gasoline companies can only earned a stipulated cap on profits. This strategy protects the customers against abuse, but it has not been effective at stabilizing the price of the world trade of the crude oil commodity in the open market. Market controls can help efficiency by protecting the customer from greedy corporations. The prices of coffee and milk are often standardizing on many states and territories in the United States. These price ceiling have help keep the prices of these food items stable. 11. I think the coefficient of demand for meat will be very different in the United States in comparison with India, Japan, and Australia. As the biggest exporter of meat in the world there is a large supply of meat in the United States, thus the price of meat in the U.S. is lower than other developed countries. The U.S founded the three largest hamburger chains in the world: McDonald’s, Burger King, and Wendy’s. In India meat consumption is much lower as the cow is visualized as a sacred animal. 12. There are other factors or variable other than price that affect the demand for a product. One of those factors is quality. For instance BMW automobiles are sold at a premium price due to the quality and performance of the vehicles. Having a well developed branding strategy can affect the demand for a product. Another factor that can affect demand is the season. The clothing and toy industry make the majority of their sales during Christmas season. Read More