Price Elasticity of Market Demand- Free-Samples for Students

Questions: 1.Describe three factors influencing the Market Demand and three Factors Influencing Supply curves for the chosen firms Product or Service. 2.Illustrate and explain, using Comparative Statics, the Impact of the following shock in the market in which the chosen firm Operates. Answers: Introduction 1.Concept of demand Demand is the willingness or the wants and necessities made by the consumers or the customers. It means the willingness to purchase a commodity in exchange of money at a place called market. It includes the factors of price and quantity. Law of demand says that with the rise in price creates less demand, on the other side fall in price will create more demand and purchasing power for the product. Demand is downward negatively sloping curve, movements in demand is dependent on other economic variables like price, income ( Market demand Market demand includes the summation of or addition of all the individual demands of the consumers. Adding the collection of individual demands gives the market demand. When the market demand is in table format, it is market demand schedule. Elasticity of demand Price Elasticity of demand on the other hand states the relation between price and the quantity demanded that is demand varies with respect to a change in prices. In order to calculate price elasticity mathematically, it is the ratio between percentage changes in quantity demand with respect to change in price. There are five types of demand elasticity and they are perfect elastic, perfect inelastic, relative elastic, and relative inelastic and unit elastic (Kattuman, Ibragimov Ibragimov 2017). Factors affecting demand Various factors create fluctuations in the movement in the demand curve. Income of the consumers or customers- demand for the product directly depends on consumer daily living standards and income. High income creates strong demand for the product whereas average or low income discourages buyers for the demand of products. Price of a product- High price creates low demand for the purchase of the product, whereas reasonable rates create high demand for the product. It also depends on product substitution effect. Tastes and preferences- Taste and preferences for the product includes customs, daily habits and way of living , individual preferences gives the response on the demand for the product. Quality and production- Standard quality product with updated technology and modern utilization of resources in the production of the products creates more demand. 2.Market demand of Yalumba Company and impact of a change in government policy on the chosen firm/industry (200) The demand on the consumption of the wine of Yalumba Company depends on government plans and policies. There is more encouragement in the environment friendly production of wines therefore with good quality materials in the production of wine will create more market demand (Goncharuk 2017). Government policy must include those policies that include sustainability and planting of more trees and plants for the growth of fruits. This will enhance the demand and the productivity of quality wine that will increase the growth and profit of the company. Figure1: Market demand Given diagram gives the market demand structure for the product when price P remains the same in the market, S is the supply for the product with respect to change in output. Increase in demand creates increase in the output. When d1, d2 and d3 summed together, it gives the market demand. References Goncharuk, A.G., 2017. Wine Value Chains: Challenges and Prospects.Journal of Applied Management and Investments,6(1), pp.11-27. Kattuman, P., Ibragimov, R., Ma, J., Ibragimov, M. (2017). Income inequality and price elasticity of market demand: