Economics Examination Of Demand AND OFFER Economics Essay

This research is targeted at considering the demand and supply effect of a specific product on the marketplace of the product over another couple of years. This study actually considers all the microeconomic and macroeconomic factors that are likely to influence the purchase price and output of this product over the next five years. This research considers the existing, retrospective and possible effects of the market of the merchandise on the product in the returning years. How the price and end result of the merchandise will get settled in the future for the merchandise. For a satisfactory evaluation of the product's performance in the approaching years, both macro and micro- monetary analysis have been made.

For the purpose of this study we have used something as a guinea pig. In order to understand the impact of the merchandise in its related market and the impact of the market on the merchandise, we have carried out further evaluation using the proven ideas of economics about the near future viability of the merchandise. Here for the sake of this analysis we've used the poker chips product made by the Coca Cola Company called LAYS.

Price Elasticity of Demand

The price elasticity of demand is defined as the magnitude of the proportionate change in demand and the proportionate change in cost of the merchandise. Therefore, elasticity is the measure of responsiveness.

Price elasticity of demand is a very important concept that relates to the pricing decisions of a product. If an organization wants to create the maximum amount of earnings from its products and it is unable to regulate how much increase in the purchase price can be produced by them so the overall demand of the merchandise does not reduce. This decision is used based on the research of price elasticity of demand.

The price elasticity of demand serves as a the speed of response of volume demanded credited to a price change. Which means that if a device change in the price tag on the product is made then the number demanded will also change up to the level to which the demand of the merchandise is dependent on the price of the product. In this case, Lays is something which is highly loved product of a very reliable company of the world and has an extremely large market all around the globe. Through the in depth evaluation of the product's features and the price elasticity of demand on this particular product, it offers come to the attention that because the product has been sold in the perfectly competitive market, any decisions regarding the product or its feature make a difference its current market.

From the application of the idea of price elasticity of demand on this product, we've come to the final outcome that the demand of the merchandise is price elastic. This means that if the price of the merchandise is changed then the demand of the merchandise is also transformed. The main feature of the examination is that the purchase price can be altered up to some extent and a change can be utilized by the current demand of the product whereas a significant rise in the price of the product is seriously going to threaten the marketplace demand of the merchandise.

However, on the other hand, if the price of the product is reduced from its current price level then your demand of the merchandise will probably increase resulting in the overall upsurge in the level of sales that can be achieved in the year. But this may well not be feasible for the business as the business may lose some income because of the reduction in the price when the purchase price charged may well not be sufficient to cover the costs necessary to manufacture the product. The price of which the quantity demanded and the quantities supplied are identical is the price that should be charged for this product.

In the case of lays we've come to know through our thorough analysis that particular product is highly price stretchy because the demand is significantly going to change following the change in the price tag on the product. Hence, the product is very hypersensitive to price changes. One best feature of the price elasticity of demand is the fact that is shows how much a person consumer is happy to pay at maximum for a product.

Cross Elasticity of Demand

Cross elasticity of demand as defined available dictionary is

Proportionate change in the demand for just one item in response to a big change in the price of another item. It really is 'positive' where in fact the two items are shared substitutes, and any increase in the price tag on one (say butter) will boost the demand for the other (say margarine). It is 'negative' when the things are complementary and any increase in the price of one (say vehicles) will reduce the demand for the other (say tires). See also elasticity. Also known as combination price elasticity.

Cross elasticity of demand is the result on the change in the demand or supply of one good as a result of your change in something related to some other product. In simpler conditions, it means that how much a change in the price of one product changes the sales level of another product. Here, the analyzed product, a potato chip, is making it through in the competitive market and the bring about the price of other chips or snacks have an impact on the sales of Lays significantly. Therefore, the merchandise is also deemed to get damaged by the change in the price of other products that are considered to be its substitutes.

Income Elasticity

Income elasticity is the concept that pertains to the change in income and the effect it is wearing the demand of the particular product. Income elasticity of demand actions the relationship between the change in the income and the number demanded of the product.

Since the product is the consumable product and is also a comparatively cheap product, it is therefore evaluated that the change in the income of an individual consumer won't significantly change the demand of the product.

Macroeconomic Analysis

Macroeconomic analysis of the complete economy of the whole markets within the product has been made and the impacts of the macroeconomic factors on the merchandise are evaluated. Macroeconomics take into account all the factors that are relevant to the decision and coverage making of the entire economy and this are reliant on the entire factors influencing the economy not on the individual factors that impact the people of the economy.

National Income

The first factor that is considered is the factor of national income or gross home product. Since it is widely known that the globe is going through the worldwide financial meltdown and is recovering from the recession. Government authorities all over the world are trying their finest to recoup from that monetary crisis with the help of economic helps and bail out ideas supporting the best companies of their countries to get of the insolvency situations. To be able to boost the demand of the market governments around the globe took some drastic steps that happen to be dependant mainly on the upsurge in demand in the neighborhood economy. But this worldwide downturn is less likely to impact the consumable product like Lays because people are used to eat plus they have to consume even if their income is reduced. The question here arises that at what price individuals are willing to acquire the product. This problem is resolved by setting up the satisfactory price for the product that's not going to impact the demand of the merchandise in the economy.


Another macroeconomic problem is the problem of inflation. Inflation means the ongoing rise in the costs of products throughout the market. Inflation is a major driving make in determining the demand and usage of something throughout the market. If any country is subjected to high inflation rate then that country is less likely to settle the problem of price balance that will eventually lead to the unrest in the markets leading to the less intake of recycleables and manufacturing of other products in the economy due to increased degree of prices. Regarding Lays; this product is also regarded to get damaged by the ever growing prices of recycleables on the globe. If the price tag on raw materials is going to increase like this then people are more likely to negotiate to other products for eating and will ignore the products that are available in the market at higher rates even though they are available in proper hygienic format with program of world criteria in their making.

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