Motorcycle shop business plan
Q1. Demand and Supply Essay Question:
- Please consider those factors which could influence the demand for your product. Consider actual changes and projected changes. You should investigate and consider relevant factors, at the following levels:
International level - The demand of a product is what is perceived as being the driver of economic growth. In order to improve profits, always business struggles to increase demand its products. Economically, the factors that affect the demand of a product are always the subject of investigation in the strategic and marketing management as well as in micro-economics. As a result of that, the amount of money that potential investors have and willing to spend on the company’s product and international suctions are the one which influences both the international demand as well as the business opportunities (Ball & Seidman, 2012). The growing standards of living, rising economies, and the increasing westernized lifestyle also have the capacity of driving the demand of the company’s products.
National level - As far as the demand for the company’s products is concerned, it implies that an increase in consumers’ income is the one which will impact the amount of goods demanded. Ideally, when the income of the consumers decreases, a fall in demand of the products will be encountered. Likewise, change in preferences also results to the changes in demand.
State level - At the state level, it implies that the size of the market the company will have is the one which will negatively or positively impact demand. For instance, in case the size of the population increases, it means that the number of people demanding such products will increase and vice versa (Cai et al., 2017).
Regional/local level - At this level, the general decrease in the price of the existing initially manufactured product has the potential of negatively impacting its demand and vice versa. This will also affect its demand curve as the price the product will be sold at will depend on the price at which it will be sold after manaufacturing.
- Please consider those factors which could influence the supply for your product. Consider actual changes and projected changes. You should investigate and consider relevant factors, at the following levels:
International level- When the price of a product changes, basically, the quantity of that product to be supplied will also change. Ideally, this is the movement along the product’s supply curve. At the international level, the price and the quality of the products manufactured by other international market will negatively impact the amount of products to be supplied by the domestic producer. For instance, in case price and quality of the products manufactured by the domestic producer is high and of low quality, less of it will be demanded hence reducing its supply and vice versa (Ball & Seidman, 2012). The supply will also be affected by technological advancements and other international suctions or restrictions imposed.
National level- at the national level, the size of the population, substitutes, and the number of competitors in the industry is the one which will affect supply. For instance, with the increase in population implies that there will be an increase in the number of consumers demanding that product and vice versa.
State level – Economically, the goals of business organizations entails profit maximization. This is to imply that when the production cost of the company’s product increases, it will hinder supply because of the low profits to be generated. Wage rate, the price of inputs, state regulations and taxes, and so on impacts production cost hence impacting supply either negatively or positively (Cai et al., 2017).
Regional/local level - the number of suppliers of such a product impacts the quantity of the product to be supplied by the company.
- Although it can be difficult to anticipate the magnitude of potential impacts on the future Supply and/or Demand for your product, please provide a summary view of the combined impacts on the demand and supply for your product.
The law of demand and supply suggests that when the demand of a product increases, its supply also increases and vice versa. Economically, the future price of the product is the one which will impact its equilibrium price. In case the management authority desires to hike the price of the product in the near future, it means that only few buyers will have the potential of purchasing it. Other than the existence of other sellers in the market, if the company anticipates supplying more units, it is important to consider understanding the choices and preferences of the customers. Moreover, other than altering its price, it is important to increase the price until the equilibrium price have been obtained (Mark, 2013). The idea here entails balancing its consumer demand with product supply.
Q2. Elasticity of Demand Essay Question:
While determining the exact elasticity of demand facing your product or service is not possible without specific pricing and sales data, it is also not essential for utilizing the general concept of elasticity of demand.
- Utilize your understanding of the determinants of Elasticity of Demand to state whether you believe the demand for your product or service is elastic, or whether it is inelastic.
A product that has several substitutes has the potential of having a higher elasticity. Therefore, since the product seems to have a higher percentage of consumers spending their income to purchase it, it means that it will have a higher elasticity. Considering that this is a durable product, longer price changes will hold hence maintaining its elasticity. Other factors affecting its elasticity include the nature of the commodity, number of uses, range of prices, and joint demand (Graham, 2013). Since currently these factors have the potential of drastically changing the quantity demanded as it prices decreases or increase, it means that its demand is elastic.
- How strongly elastic (or inelastic) do you believe the demand for your good or service is? Please support your answer.
As the law of elasticity suggests, a product is perceived to be elastic in case the amount of that commodity demanded changes drastically as its price decreases or increases. As the current market condition indicates, the potential consumers of this product will opt to purchase it in case its price is low. The reason for that is because this is not a necessary product that consumers will crave for. As a result of that, in case its price is anticipated to increase in the near future, there will a decrease in the quantity demanded (Taylor & Houthakker, 2010). Likewise, in case the price of the company decides to decrease its price, there will be a decrease in the quantity demanded.
- Discuss which specific determinants of elasticity of demand were the basis of your answer to part one, and how they apply to your good or service.
Consumer income – consumers’ income have the potential of affecting the elasticity of demand of a commodity. For individuals with high income, it means that it will keep on making its demand to be elastic. The reason for that is because the decrease or increase in its price will not induce a drastic on the quantity demanded of such a product. Likewise, for those individuals with low income, its demand will still be elastic because the rise and fall in its price will also have a significant impact on the quantity to be demanded by such buyers (Graham, 2013). That suggests that when the price increases the demand decreases and vice versa.
The proportion of income spent – the amount of consumers’ income usually affects the elasticity of demand of a product. Therefore, this implies that in case the product will be consuming a large percent of the consumers’ budget, it will make it to have a higher elasticity. Such a higher cost for the product will ultimately make consumers to pay a close attention to that product and opt seeking for substitutes (Taylor & Houthakker, 2010). On the contrary, the demand for the product will remain to be elastic in case it represents a considerable amount of the consumers’ budget.
- How could the elasticity of demand you determined in part one impact your pricing decisions? Hint: This addresses the relationship between elasticity of demand and total revenue.
As the law of elasticity of demand suggests, when the price of a commodity increases, potential consumers will end up buying less of it. When the price of the same commodity decreases, consumers will utilize that opportunity in buying more of it. Because of that, in case the management authority acknowledges that its demand is price elastic, then it implies that the fall in its price is the one will result to an increase in total consumer spending hence increasing producer revenue too (McEachern, 2017).
- Is there any potential for you to influence the elasticity of demand for your good or service? Why might you want to? Please explain.
The price elasticity assists in measuring the changes in demand of a product in reaction to the changes in its price. Therefore, the rationale here entails first understanding what other producers charge for the same product in the market. The reason for that is because it is the one which assist in determining to what percentage the price of the product will be reduced to so as to enable consumers purchase more of it (Graham, 2013). In so doing, there is the potential of its elasticity of demand which in return translates to the increase in the total revenues to be generated from it.
Q3. Market Structure Essay Question:
There are four types of market structures which we addressed in ECO 251 - Principles of Microeconomics: Pure competition, monopolistic competition, oligopoly, and pure monopoly.
- Which type of market structure does your good or service most closely align with? Please support your answer by addressing those characteristics which distinguish these market structures, and how they apply (or don’t apply) to your good or service.
Pure competition – in our market structure, all producers sell homogenous commodity. They are also price takers implying that each producer does not have the potential of influencing their product’s market price. The market share does not influence the price of the product. Potential buyers have perfect information about the commodity as well as the price charged by each company (Kolmar & Hoffmann, 2018). Economic resources, for instance, labor and raw materials are perfectly mobile. Likewise, the can either opt to enter or exit their industry without incurring any cost.
- How does your awareness of the market structure you’re operating within impact your pricing strategies and your decisions regarding advertising?
In pure competition, the high profit a firm makes is only possible in a short period of time. Despite that, the market dynamics are the ones which will assist in canceling out the impacts of negative or positive profits. Therefore, in order to enhance the marketing strategies of this product in this market structure, it is important to take into account the forces of demand and supply so as to achieve its equilibrium price. Due to the fact that this market does not have information asymmetry, it is important to rump up the company’s level of production. To boost its advertising strategies, it is important to come up with non-competitive means of ensuring that the product’s information has reached the potential market (William & Alan, 2015).
- Would you prefer to be in a different market structure? If so, which one, and why? Are there any realistic steps you could take to move towards a more advantageous market structure? Please explain.
No. the reason for that is because in the long run, adjustment in demand and supply of the commodity assist in ensuring that losses or profits made will tend towards zero. For instance, there will be the need of taking advantage of the absence of the economies of scale in the market. The limitation to zero profit margins implies that other firms will not be able to expand their manufacturing capabilities because of little cash to invest. Equally, it is important to take the opportunity of those firms that exit the market and expand the firm so as to enjoy more economies of scale (Norman, 1979).
- What role, if any, could economies of scale play in your business operation?
The economies of scale occur when larger outputs are linked with low costs per unit of product manufactured. The internal economies that firm will be enjoying will mainly enable the firm increase its scale of production. External economies will enable the firm to make independent decisions regardless of the actions other companies will take (Norman, 1979).
‘
References
Ball, M. K., & Seidman, D. (2012). Supply and demand. New York: Rosen Pub.
Cai, J., Leung, P. S., & Food and Agriculture Organization of the United Nations,. (2017). Short-term projection of global fish demand and supply gaps. Rome : Food and Agriculture Organization of the United Nations
Graham, R. C. (2013). Managerial economics for dummies. Hoboken, N.J: Wiley Press
Kolmar, M., & Hoffmann, M. (2018). Workbook for principles of microeconomics. Springer Press
Mark, A. M. (2013). Demand and Supply Integration: The Key to World-Class Demand Forecasting. FT Press
McEachern, W. A. (2017). Microeconomics: A contemporary introduction. Cengage Learning Press
Norman, G. (1979). Economies of Scale, Transport Costs and Location. Dordrecht: Springer Netherlands.
Taylor, L. D., & Houthakker, H. S. (2010). Consumer demand in the United States: Prices, income, and consumption behavior. New York: Springer Press
William, J. B & Alan, S. B. (2015). Microeconomics: Principles and Policy. Cengage Learning press
