Demand, Supply and Price Interrelation- example "quinoa"
International Marketing
Home Assignment 1
21/ 09/ 2013
Question 1)
Quinoa as a little known food product fulfills the dietary needs of a small group of customers, health-aware consumers in rich countries, for whom the retail price is not an issue.
As health benefits of quinoa are immense, The United Nations have ambitious plans to market it to a wider range of customers on a bet to fight world hunger.
Presently, however, there are no indicators to support the idea that demand for quinoa will increase: It is little known, its taste bland and its retail price currently too high for it to appeal to a wider range of customers.
Assuming that demand will be restricted to the above mentioned niche for the near foreseeable future, growing supply will eventually lead to a saturation of the market. If we further assume that price elasticity for the product is high while demand is stable, prices will eventually decrease and it will become unattractive for farmers to grow the product. This trend could only be reversed by efficiently marketing quinoa and growing different varieties with lower production costs and thereby introducing it to a new group of customers beyond the traditional niche.
“for linear demand curves, when P is high, the price elasticity of demand is large […] As we move down the demand curve, P is decreasing and Q is increasing. This causes the price elasticity to monotonically increase. As we approach the horizontal axis, by definition, P is low and Q is high, so the demand is inelastic.”i
(See graph 1)
Question 2)
Increasing supplies are a challenge for farmers because “Farmers will also need a broader consumer base for a dish that’s so far popular mostly with vegetarians and gluten-free aficionados”ii. Furthermore, quinoa crops are only grown in specific areas in Bolivia and Peru, and due to the specific requirements of the plant, its harvesting cannot be extended infinitely. If supplies are extended while customers’ demand remains
Home Assignment 1
21/ 09/ 2013
Question 1)
Quinoa as a little known food product fulfills the dietary needs of a small group of customers, health-aware consumers in rich countries, for whom the retail price is not an issue.
As health benefits of quinoa are immense, The United Nations have ambitious plans to market it to a wider range of customers on a bet to fight world hunger.
Presently, however, there are no indicators to support the idea that demand for quinoa will increase: It is little known, its taste bland and its retail price currently too high for it to appeal to a wider range of customers.
Assuming that demand will be restricted to the above mentioned niche for the near foreseeable future, growing supply will eventually lead to a saturation of the market. If we further assume that price elasticity for the product is high while demand is stable, prices will eventually decrease and it will become unattractive for farmers to grow the product. This trend could only be reversed by efficiently marketing quinoa and growing different varieties with lower production costs and thereby introducing it to a new group of customers beyond the traditional niche.
“for linear demand curves, when P is high, the price elasticity of demand is large […] As we move down the demand curve, P is decreasing and Q is increasing. This causes the price elasticity to monotonically increase. As we approach the horizontal axis, by definition, P is low and Q is high, so the demand is inelastic.”i
(See graph 1)
Question 2)
Increasing supplies are a challenge for farmers because “Farmers will also need a broader consumer base for a dish that’s so far popular mostly with vegetarians and gluten-free aficionados”ii. Furthermore, quinoa crops are only grown in specific areas in Bolivia and Peru, and due to the specific requirements of the plant, its harvesting cannot be extended infinitely. If supplies are extended while customers’ demand remains