Preview

Supply Demand Elasticity

Better Essays
Open Document
Open Document
1181 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Supply Demand Elasticity
Supply, Demand and Price Elasticity
Anjni Kumar
Jennifer Marciel
Me Mai Nou Yang
Rosina Hughey Eco/212
December 14, 2010
Zack Zardo

Supply, Demand and Price Elasticity
Consumers and economists use the concept of elasticity to measure how an economic variable responds to changes in another economic variable (Hubbard & O’Brien, 2010, p. 168). Supply and demand go together and play an important part in price elasticity. “Price elasticity of demand is the responsiveness of the quantity demanded to a change in price, measured by dividing the percentage change in the quantity demanded of a product by the percentage change in the product’s price” (Hubbard & O’Brien, 2010, p. 168). Price of elasticity of supply is similar to the price elasticity of demand except the difference is that the price of elasticity of supply measures the quantity of supplies. This paper will discuss the commodity of chocolate and identify the causes for shifts in supply and demand. The shifts in supply and demand of chocolate influences price, quantity, and market equilibrium. Chocolate is a luxury product therefore purchasing any other products without the cacao will affect the price elasticity of the product.
Shifts in supply and demand occur daily for a variety of reasons. Some of the factors that have affected supply and demand for the Hershey Chocolate Bar throughout the years include holidays, availability of substitutes, and the cost of the cocoa bean ("The Hershey Company - Introducing the World of Chocolate - Part 1", 2008). During Holidays, such as Valentines, the demand for chocolate rises. When the demand rises, Hershey manufactures a greater supply to meet the demand and maximize available profits. Another area that affects demand is substitute chocolate bars. Substitutes include such brands as Nestle or Dove, each of which gives the consumer the option to purchase chocolate other than Hershey, therefore driving demand downward.
The Cocoa bean working as a


References: Cocoa Bean Exportation. (2010). Retrieved December 9, 2010 from http://web.duke.edu/~cz8/chocolate/beans.html Hubbard, R. & O’Brien, A. (2010). Economics (3rd ed.). Boston, MA: Pearson Hall. Retrieved December 12, 2010 from EBook. Keystone Marketing Services. (n.d.). How supply and demand determine commodities market prices. Retrieved from http://futures.tradingcharts.com/learning/supply_and_demand.html The Hershey Company - Introducing the World of Chocolate - Part 1. (2008). Retrieved December 9, 2010 from http://www.washingtoniv.com/?p=65
Continue Reading
View Writing Issues

You May Also Find These Documents Helpful

  • Good Essays

    ECO365 Week 2 Simulation
    • 729 Words
    • 3 Pages

    ECO365 Week 2 Simulation

    References: Colander, D. C. (2010). Economics (8th ed.). New York, NY: McGraw-Hill. Retrieved April 11, 2013 from The University of Phoenix eBook Collection database.…

    • 729 Words
    • 3 Pages
    Good Essays
    Read More
  • Good Essays

    Egt Task 309.1.2-08, 09
    • 2481 Words
    • 10 Pages

    Egt Task 309.1.2-08, 09

    References: McConnell, C. R., & Brue, S. L., Flynn, S. (2012). Economics (19th edition). New York, NY: McGraw-Hill.…

    • 2481 Words
    • 10 Pages
    Good Essays
    Read More
  • Powerful Essays

    Rogers' Chokolates
    • 1755 Words
    • 8 Pages

    Rogers' Chokolates

    The suppliers of chocolate raw materials bargaining power is moderately high, thus, this decreased the attractiveness to think about switching suppliers or trying to get substitute products.…

    • 1755 Words
    • 8 Pages
    Powerful Essays
    Read More
  • Better Essays

    Eco/365 Week 3 Lt Paper - Current Market Conditions Competitive Analysis
    • 1277 Words
    • 6 Pages

    Eco/365 Week 3 Lt Paper - Current Market Conditions Competitive Analysis

    References: Colander, D.C. (2010). Economics (8th ed.). Retrieved from The University of Phoenix eBook Collection database…

    • 1277 Words
    • 6 Pages
    Better Essays
    Read More
  • Good Essays

    Hershey Swot Analysis
    • 510 Words
    • 3 Pages

    Hershey Swot Analysis

    Hershey is giving opportunity to the cocoa farmers to increase their income. This is a strength because Hershey believe in CSR and they help the cacao farmer by improving their community and living standard. By believing in fair treatment to farmers, it strengthen Hershey’s image.…

    • 510 Words
    • 3 Pages
    Good Essays
    Read More
  • Best Essays

    Milton Hershey Research Paper
    • 2527 Words
    • 11 Pages

    Milton Hershey Research Paper

    Hershey’s soon mass- produced its chocolate, and in 1947 it produced 90% of the nation’s milk chocolate (Brenner). Following the success of his business, Milton Hershey turned his attention to charitable causes by establishing the Milton Hershey School, which provided free housing, medical care, and education to children in need. Moreover, he gave the majority of voting power within the Company to the Milton Hershey School Trust (Klick). Hershey continued to dominate the U.S. market in the twentieth century by leveraging on its strong American brand image. As the domestic market matured, however, Hershey’s was pressured to expand globally to remain competitive. The following analysis details Hershey’s subsequent problems and presents recommendations for moving…

    • 2527 Words
    • 11 Pages
    Best Essays
    Read More
  • Good Essays

    Hershey's Food Corporation
    • 599 Words
    • 3 Pages

    Hershey's Food Corporation

    Hershey's takes advantage of many different types of advertising. Television commercials and ads are very common. Sponsorships is also another very common way Hershey advertises. Hershey sponsors everything from ice skating shows, to racecars. The Hershey Food Corporation is very competitive so they need this type of advertising. However, the only other major corporation to compete with is Mars. The chocolate industry is diffidently not pure competition. Mars and Hershey's form an oligopoly. Hershey's has so many different kind of products that they have a lot of competition. The company has branched out to where they're not only competing against other chocolates but also for fruit candies, and baking chocolate and chocolate drinks as well. The fact that so many products are offered, extends the corporation to different divisions. Mexico and Canada have manufacturing plants. Seventeen manufacturing plants include Hershey, Pa (Hershey plant, Reese plant, West Hershey plant0, Hazleton, PA, Lancaster, PA, Memphis, Tenn., Naugatuck, Conn., New Brunswick, NJ, Oakedale, CA, Palmyra, PA, Reading, PA, Robinson, Ill., Stuarts Draft, VA, Wheatridge, CO, Dartmouth, Nova Scotia, Montreal, Quebec, Smiths Falls, Ontario, and Guadalajara, Mexico.…

    • 599 Words
    • 3 Pages
    Good Essays
    Read More
  • Powerful Essays

    Price Elasticity of Demand
    • 1385 Words
    • 6 Pages

    Price Elasticity of Demand

    When the price of a good falls, the quantity consumers demand of the good typically rises; if it costs less, consumers buy more. Price elasticity of demand measures the responsiveness of a change in quantity demanded for a good or service to a change in price.…

    • 1385 Words
    • 6 Pages
    Powerful Essays
    Read More
  • Good Essays

    Price Elasticity of Demand
    • 1541 Words
    • 7 Pages

    Price Elasticity of Demand

    The price elasticity of demand is a factor for an industry, which is existing and the ones emerging in the market, of what is to be the price of the product; considering the demand of the same in the market and whether or not to increase the price to make any more profit sacrificing a marginal amount of sales or a shortfall in the revenue. In an effort to understand the price elasticity of demand concept, a small study was done on the general public across the town Manipal. The study reflected the tendency of people in the town in making varying choices, which helped in the study of price elasticity of demand of Cigarettes. The price elasticity of demand in Cigarettes shows an elastic behaviour with select group of people and some show inelastic behaviour. Thus generalisation of such a concept would be neglecting significant number of population for studying the price elasticity of demand of Cigarettes. Also there were situation wherein we found infinitely elastic behaviour of demand. Though these were fewer in number, it signifies that there exists a mix of various price elastic behaviour of demand. Estimating a threshold value, over which an individual would sacrifice the consumption of cigarettes, by the individual themselves, was easier to analyse the peculiar behaviour of the price change and change in demand of cigarette. The report also gives a brief idea about the substitutes and compliments of cigarettes. The role of price change influences to a greater extent in the demand for these substitutes and compliments. This suggests that the elasticity of demand also is significant when considering compliments and substitutes that also play a role in the market trends. The study clearly explains the various sectors of the society being sensitive to the price change and so is the demand. Two sectors, mainly; 1) Age wise and 2) Gender wise have…

    • 1541 Words
    • 7 Pages
    Good Essays
    Read More
  • Better Essays

    Demand, Supply, Market Equilibrium and Elasticity
    • 1308 Words
    • 6 Pages

    Demand, Supply, Market Equilibrium and Elasticity

    Elasticity of Demand is shown when there is a percentage change in the quantity demanded to the percentage change in the price. When the coefficient is greater than 1, the demand is elastic. When the coefficient is less than 1, the demand is inelastic. When the coefficient is equal to 1, the demand is of unit-elasticity. Cross-price elasticity is demonstrated when there is a percentage change in the demand for one good relative to a percentage change in the price of another good. When the coefficient of cross-elasticity is positive, the two products are positive; when negative, the products are complements. (McConnell, p.89) Income elasticity is the demand to changes in income due to a percentage change in income. Normal goods are indicated by positive coefficients, while inferior goods are indicated…

    • 1308 Words
    • 6 Pages
    Better Essays
    Read More
  • Powerful Essays

    Demand Analysis of Ray-Ban Sunglasses
    • 674 Words
    • 3 Pages

    Demand Analysis of Ray-Ban Sunglasses

    The history of the Ray-Ban aviator dates back to the 1920s, when new airplanes allowed people to fly higher and farther. Many US Army Air Service pilots were reporting that the glare from the sun was giving them headaches and altitude sickness.A new kind of glasses was introduced with green lenses that could cut out the glare without obscuring vision, and the Ray-Ban brand was born.…

    • 674 Words
    • 3 Pages
    Powerful Essays
    Read More
  • Good Essays

    Case Analysis - Hershey's
    • 733 Words
    • 3 Pages

    Case Analysis - Hershey's

    Hershey’s resurgence in the market during the times of recession was due to a WANT of a SUBSTITUTE for an instant delight and satisfaction; a cheaper chocolate for the daily consumption of the American people which propelled the consumers to find comfort in “little boxes of happiness” called chocolates. The recession in America brought depression to the American people because they were not capable anymore of buying and indulging themselves on luxury and premium products. The demand for “sweet solace” increased its production and distribution as the financial crisis lingers up to the present. The Americans ' love for the sweet made the confectionery industry triumph over the recession for the people find comfort in chocolates that bring a temporary bliss in the times of anxiety and insecurity.…

    • 733 Words
    • 3 Pages
    Good Essays
    Read More
  • Satisfactory Essays

    Current Scenario of Import & Export of Tea India
    • 317 Words
    • 2 Pages

    Current Scenario of Import & Export of Tea India

    Thus we shall conclude our presentation by Saying that Price Elasticity is an important factor that help producers in determining the price of the product. The kinked-demand theory of illustrates the high degree of interdependence that exists between demand and price.…

    • 317 Words
    • 2 Pages
    Satisfactory Essays
    Read More
  • Good Essays

    price elasticity of demand
    • 421 Words
    • 2 Pages

    price elasticity of demand

    There three main determinants of price elasticity of demand. One determinant is the existence, number, and quantity of substitutes. The closer the substitutes for a certain product or service exist as well as the amount, the greater the price of the elasticity demanded will be. The second determinant is the percentage of a consumer’s total budget devoted to purchase the commodity. The greater the share of a person’s budget spent of a product or service, the greater the person’s price elasticity of demand is. The third determinant is the length of time allowed for the adjustment to changes in the price of the commodity. When the price of a service or good changes and that price change is consistent, more and more people will learn the trends (Miller, 2013).…

    • 421 Words
    • 2 Pages
    Good Essays
    Read More
  • Good Essays

    Answer to Chapter
    • 2822 Words
    • 12 Pages

    Answer to Chapter

    Quick Quizzes 1. The price elasticity of demand is a measure of how much the quantity demanded of a good responds to a change in the price of that good, computed as the percentage change in quantity demanded divided by the percentage change in price. When demand is inelastic (a price elasticity less than 1), a price increase raises total revenue, and a price decrease reduces total revenue. When demand is elastic (a price elasticity greater than 1), a price increase reduces total revenue, and a price decrease increases total revenue. When demand is unit elastic (a price elasticity equal to 1), a change in price does not affect total revenue. 2. The price elasticity of supply is a measure of how much the quantity supplied of a good responds to a change in the price of that good, computed as the percentage change in quantity supplied divided by the percentage change in price. The price elasticity of supply might be different in the long run than in the short run because over short periods of time, firms cannot easily change the sizes of their factories to make more or less of a good. Thus, in the short run, the quantity supplied is not very responsive to the price. However, over longer periods, firms can build new factories, expand existing factories, close old factories, or they can enter or exit a market. So, in the long run, the quantity supplied can respond substantially to a change in price. 3. A drought that destroys half of all farm crops could be good for farmers (at least those unaffected by the drought) if the demand for the crops is inelastic. The shift to the left of the supply curve leads to a price increase that will raise total revenue if the price elasticity of demand is less than 1. No one farmer would have an incentive to destroy his crops in the absence of a drought because he takes the market price as given. Only if all farmers destroyed a portion of their crops together, for example through a…

    • 2822 Words
    • 12 Pages
    Good Essays
    Read More

Related Topics