# Supply and Demand

analytical Essay
1363 words
1363 words

Compute the elasticities for each independent variable. Note: Write down all of your calculations. An independent variable is a variable that is not affected by other variables. F = 4.88 xi = the independent variable in the regression Quantity demand = (3units )/4.88 . (d(4.88))/(d(3))= 3/4.88 . 1/26=0.024 Price of product = \$5/4.88 . 1/26=0.039 Price of leading competitor products = \$5/4.88 . 1/26=0.047 Per-capita income = \$5500/4.88 . 1/26 43.35 Monthly advertising expenditure = \$10000/4.88 . 1/26=78.81 Number of Microwaves dinners sold = 5000/4.88 . 1/26=39.40 Determine the implications for each of the computed elasticities for the business in terms of short- term and long-term pricing strategies. Provide a rationale in which you cite your results. Short-term pricing defines a short period of time, usually within a year of which products maturity or returns are expected. Each independent variable calculated has an effect to the short-term pricing strategy for the product. The low demand quantity elasticity will impact short-term pricing by forcing it to reduce with the hopes of boosting demand and thus selling the product fast. The low price of product elasticity will impact short-term pricing strategy to ensure that the pricing is kept at equilibrium in accordance to the demand of the product. In this manner, consumers may develop the need of the product having compared the favorable price. The price of the leading competitor’s elasticity will affect the short term pricing strategy by forcing the company in the scenario to adjust its prices to the leading competitor in order to gain some edge and increase its market share. The mid-sized per-capita income elasticity will determine this pricing strategy by regulating it to the level of affordability to the majority of the population. The high advertising expenditure elasticity would directly affect the short term pricing strategy by given the margins of profits. Finally, the elasticity for the number of microwave dinners sold during that specific period will influence its short time pricing in a way that would boost sales (Nicholson & Snyder, 2007). Long term pricing strategies define the expected price of products sold in a long agreement usually done in multiple deliveries and exceeding a period of one year since short term is typically within a year. The low quantity demand elasticity would mean that little would change with the long time pricing despite the change of demand for the good.

#### In this essay, the author

• Explains that an independent variable is a variable that is not affected by other variables.
• Analyzes the implications of each of the computed elasticities for the business in terms of short-term and long- term pricing strategies.
• Explains that long-term pricing strategies define the expected price of products sold in multiple deliveries and exceeding a period of one year. the low quantity demand elasticity would ensure that the long term pricing strategy considers not much on this aspect.
• Recommends that the firm should not cut its prices to increase its market share. pricing does little to change the dynamics of products in that category, including the high prices for the leading competitors.
• Calculates the price at 100q = -7909.89 + 79.0989(100) = 0, and the prices at 200q are 15819.78 237.
• Describes the demand and supply curves of the equilibrium price and quantity demand.
• Analyzes factors that could cause changes in demand for the product, such as income, price of related goods, and expected future income.
• Explains that demand rises with a bulging population and vice versa. preferences differ with the market trend and product range.
• Explains that discovery of lower future prices after vast researches could dip the supply of goods to avoid impending losses.
• Explains that short-term changes are changes that are expected not to last for a long duration of time. these changes set in and fade away as immediately as they did appear.
• Explains that long-term changes are slow to be discovered but could adversely affect the demand of goods with reasons ranging from shift of trend, better substitute products or a drop of per-capita income.
• Explains that change in buyers’ planned purchases affects the price, which will result in a change of demand.
• Explains that any change affecting the suppliers’ strategies apart from change of price usually causes a shift of the supply curve to the right.
• Cites mcgraw-hill/irwin, mcconnell, brue, s. l., and flynn.