The Price Of Frozen Yogurt

The relevance of demand and supply in economics cannot be overstated given that the two are considered some of economics' most fundamental concepts. In this text, I explain both the demand and supply for Anheuser-Busch's products. Further, I identify some of the substitute and/or complementary goods for Anheuser-Busch's products.

This graph is specific to an oligopoly and shows the change in quantity demanded in relation to the change in price for both elastic and inelastic goods. Total Revenues will be increased, if the firm decreases their price but increase their quantity. Due to the fact that the costs remain the same, the revenue line on the graph can be seen to be steeper than the costs meaning that the profit is higher. The graph therefore also indicates the point where the firm is able to make the most amount of profit, in relation to the price they set and the quantity they produce.

            One reason that could have led the ice cream sale to fluctuate could have been due to Price of Related goods. For example, frozen yogurt is a substitute for ice cream, so when the price increases, more ice cream is demanded. However, hot fudge is a compliment for ice cream, therefore when its price goes up, less ice cream is demanded. Second reason leading for the ice cream sale to fluctuate could be due to income. For normal goods, the higher your income, the more you buy. For inferior goods, the higher your income, the less you buy. Taste is another factor. When taste changes, the quantity demands change.  For example, our taste for ice cream might depend on the weather. Expectations are also an important factor.  Expectations about future income or prices affect the quantity demanded today.

1. When the price of a product is increased 10 percent, the quantity demanded decreases 15 percent. In this range of prices, demand for this product is ( )

Law of Demand: Downward slope, and inverse relation of price and quantity demand. When price of oranges goes up, the quantity demand will decrease, because of higher price, and substitutes.

Explain the corresponding impact on total revenue for each of the three price ranges identified in part G.

Supply and demand lies in the heart and soul of economics. The concept is perhaps the single most driving force in an economy, specifically a capitalist economy. Supply and demand is based on two concepts: The law of demand and the law of supply. The law of demand states that the demand of a product rises as its price falls, therefore the demand of a product falls as its price rises. A good example of this occurs in grocery stores. If the price of a case of Coca-cola drops from $6.99 to $2.99 the demand for the product will rise because more people are willing to pay $2.99 rather than $6.99. Not only will typical consumer of Coca-cola purchase more but consumers who are not normally willing to pay $6.99 will make the purchase. Substitution also plays a role in the equation. Substitution occurs when consumers substitute one good for another based on price levels. In the Coca-cola scenario, some Pepsi drinkers will purchase the Coca-cola given the case of Pepsi is price higher.

The rate of growth for PepsiCo has been pretty much more as compared to that of Coca Cola. The rate of increase in revenue of both the Coca Cola and PepsiCo was 6.26% and 11.11% respectively. In 2004, the cost of goods sold was $11031 while it was $12314 in the year 2005. The increased in sales lead to an increase in the cost of goods sold. In comparison to 2004’s data, the cost of goods sold stood at 111.63%. On the other hand Coca Cola had the cost of goods sold in 2004 at $7674 and in 2005 at $8195; and if seen in terms of percentages, for Coca Cola, the total cost of goods sold was $ 106.79%, which shows that an increment of 6.79% was seen in the year 2005 as compared to that of 2004.

The new audio greeting message affects the demand for greeting cards. The demand for greeting cards decreases because greeting cards and audio greeting cards are substitutes. The demand curve for greeting cards pads shifts leftward, from D0 to D1 in Figure 4.6. Simultaneously the fall in the cost of producing a greeting card affects the supply. The fall in the cost of producing greeting cards increases the supply and the supply curve shifts rightward, from S0 to S1 in Figure 4.6. At the initial price of a greeting card, $5.00 in Figure 4.6, there is a surplus of 60 greeting cards per week. The surplus forces the price lower, so the equilibrium price of a greeting card

Economists have created a theory of demand which states the following. Demand curve has a downward slopping which shows the relation between price and quantity while all other factors are equal. At higher prices the demand will decrease, while at lower prices demand will increase.

Understanding the fundamental concepts of economics allows us to analyze laws that have a direct bearing on the economy. These laws and theories are essentially the backbone of how economics is used and studied. The law of demand can be expressed by stating that as long as all other factors remain constant, as prices rise, the quantity of demand for that product falls. Conversely, as the price falls, the quantity of demand for that product rises (Colander, 2006, p 91). Price is the tool used that controls how much consumers want based on how much they demand. At any given price a certain quantity of a product is demanded by consumers. As the price decreases, the quantity of the products demanded will increase. This indicates that more individuals demand the good or service as the price is lowered. This can be illustrated using the demand curve. The demand curve is a downward sloping line that illustrates the inversely related relationship of price and quantity demanded.

The change in prices also had an impact on the Italian region’s expected and actual profit because the €7 total sales variance represented an increase of €7 profit for the actual profit. The €7 variance was calculated by the favorable €20 variance for ice cream sales and an unfavorable variance of €13 for specialty sales (€20-€13=€7). This proves that the Italian region can charge slightly more for their ice cream sales given the increase in demand, while the increase in demand of the specialty product could be more attributed to the decrease in price. Overall, the change in pricing came out to make a positive impact on the Italian region’s profit.

One of the most notable patterns of sales in regards to total sales volume is that it increases drastically when the average price of soup is low (Average price is calculated by dividing Category Volume by Category Dollars). Total sales volume had significantly increased when either Rocket Soup or competitors (or both) offer low price for promotion. In other words, soup consumption is relatively elastic to price, meaning that customers are highly sensitive to price. See below graphs showing the inverse relationship between the total volumes sold and average price of soups.

A set of graphs shows the relationship between demand and total revenue (TR) for a linear demand curve. As price decreases in the elastic range, TR increases, but in the inelastic range, TR decreases. TR is maximized at the quantity where PED = 1.

The following graph demonstrate the demand curve of how many items of a product or service a consumer would like to purchase at different prices. Now by having the product at a lower price, the more a consumer is likely to buy. For that same reason it can be concluded that the price is one major factor of the product demand.