How much the quantity demanded will change

Reference no: EM132995411

All America Grocery Inc -

We serve communities in the middle of the income market providing low prices for all basic grocery needs. Our modest income consumers expect goods deals on good quality foods. The Covid-19 pandemic has put upward pressure on the price of everything we sell. We are also experience rising cost in every aspect of our operation as we have to put extra resources in to protecting both our employees and the public. We are both fortunate and unfortunate that the price elasticity of demand for food is .20.

Very Big US Auto -

Very Big US Auto is one of the oldest and one of the largest manufacturers of autos in the US. Very Big US Auto's supply chain is highly dependent components manufactured in China and assembled in the US, (think back to our week 1 problem with the seat manufacturer). The Chinese economy has rebounded quickly, much of the production capacity is still going to rebuild inventories, so the supply of components still lag behind demand so there is upward pressure on all of our costs. Additionally manufacturing facilities like ours must take extra precaution to keep workers safe. Costs are rising on all aspects of production across the industry. On the demand side, Very Big US Auto knows that demand is relatively elastic with a price elasticity of demand of 1.2. But we also know that pandemic has made some transportation substitutes less acceptable.

Big Time Entertainment -

Big Time Entertainment is a nationwide firm providing movies, arcades and other in person entertainment venues such as bowling and roller skating. Our operations have been heavily impacted during the Covid-19 pandemic. On reopening we have been faced with a host of regulations that have greatly increased our cost of operations. We also face uncertainty as to the potential for additional shutdowns. Customers are fearful plus the guidance on operating our facilities means we are operating far below our optimal number of patron to cover the higher cost for cleaning and other measure to protect the public and our employees. Price elasticity of demand is 1.6 and we are also faced with more competitors, online entertainment and gaming, that are not experiencing these cost pressures.

Now explain:

Question 1: Is the demand curve for your product relatively elastic, inelastic or unitary elastic? Demonstrate for your company's product, by how much the quantity demanded will change if you pass on a 10% increase in cost. In other words, show your calculation of the percentage change in the quantity demanded if your prices are raised by 10%. You must provide a calculations showing the percentage change in quantity demanded.

Question 2: Given your company's price elasticity of demand and the industry supply/competitive environment you face, prepare a statement for your board as to the potential impact on profits. Who will pay the larger share of the cost increases, your firm or your customers?

Reference no: EM132995411

Questions Cloud

Monitoring and evaluation methods : Consider best practice monitoring and evaluation methods and provide recommendations for the below risk identification:

How should you respond to a clients phone call : How should you respond to a clients phone call, inquiring about a product or service?

Business strategy of an organization : What function does Information System play in the business strategy of an organization?

How is the job market for administrative professionals : Why and how is the job market for administrative professionals growing or declining? What effect do you think the economy and technology have had on this field?

How much the quantity demanded will change : How much the quantity demanded will change if you pass on a 10% increase in cost. In other words, show your calculation of the percentage change

Advocated for clients during work placement : Give me two examples how you or a colleague have advocated for clients during work placement

What is a balanced scorecard in a healthcare organization : What is a balanced scorecard in a healthcare organization? How is the balanced scorecard utilized to lead and manage the organization? How can the balanced scor

Question concerning the wsj article entitled ge appliances : Answer the following question concerning the WSJ article entitled GE Appliances turn up the speed on supply-chain upgrade. Analyze the article utilizing the mat

How the internet of things benefits organizations : Analyze two examples of how the Internet of Things benefits organizations (public sector, private sector, for-profit, or not-for-profit).

User Account

All Pages