Understanding Demand and Supply in Business
Many restaurants don’t take reservations. You simply arrive and wait your turn. If you arrive at 7:30 in the evening, you have at least an hour's wait. Notwithstanding that fact, a few people arrive, speak quietly with the maître d’, hand over some money, and are promptly seated. At some restaurants that do take reservations, there may be a month wait for a Saturday evening, three weeks for a Friday evening, two weeks for Tuesday through Thursday, and virtually no wait for Sunday or Monday evening. How do you explain these events using demand and supply?
Market demand is the demand by all the consumers of a given good or service. In the case of a restaurant, the demand for meals on a Friday and Saturday night is very high, as traditionally, these are evenings where people are more likely to go out and have a good time, as it is the end of the week. Therefore, the demand on these nights is significantly higher as we can see by the fact that there is a 3 week wait and a month reservation wait respectively, at many top end restaurants.
On the contrary, the demand for dinner on a Sunday and Monday night, at the same restaurants, is significantly lower, as usually these nights are not traditionally seen as times to go out, possibly because it is at the beginning of the week, and probably not such an enjoyable period of the week.
Quantity demanded can be defined as the amount of a good or service that a consumer is willing and able to purchase at a given price. This is interesting, as there is a significant difference in the quantity demanded of this particular service, even though the price is the same, the service is likely the same, the good provided is likely the same, however it is just at different times of the week.
The amount of a good or service that a firm is willing and able to supply at a given price, is coined the quantity supplied. The restaurant is likely to have a set menu, and therefore set prices for most of the options on that menu.
Market demand is the demand by all the consumers of a given good or service. In the case of a restaurant, the demand for meals on a Friday and Saturday night is very high, as traditionally, these are evenings where people are more likely to go out and have a good time, as it is the end of the week. Therefore, the demand on these nights is significantly higher as we can see by the fact that there is a 3 week wait and a month reservation wait respectively, at many top end restaurants.
On the contrary, the demand for dinner on a Sunday and Monday night, at the same restaurants, is significantly lower, as usually these nights are not traditionally seen as times to go out, possibly because it is at the beginning of the week, and probably not such an enjoyable period of the week.
Quantity demanded can be defined as the amount of a good or service that a consumer is willing and able to purchase at a given price. This is interesting, as there is a significant difference in the quantity demanded of this particular service, even though the price is the same, the service is likely the same, the good provided is likely the same, however it is just at different times of the week.
The amount of a good or service that a firm is willing and able to supply at a given price, is coined the quantity supplied. The restaurant is likely to have a set menu, and therefore set prices for most of the options on that menu.