Case Study - Bodyline

1250 Words5 Pages
Piyatida Choomchaiyo Business HL Ms. Brennan 12/02/11 Case Study – Bodyline a) Supply and demand is one of the most fundamental concepts of economics that is also very useful to pricing in business. Demand refers to how much (quantity) of a product or service is desired by buyers. The quantity demanded is the amount of a product that people are willing to buy at a certain price. Supply represents how much the market can offer (price). The correlation between price and how much good/service is supplied to the market is known as supply relationship. In the case of Bodyline in Table 6, as the price goes up, the quantity of Californians would go down. This seems to be logically correct because as the price of a good goes up, people would naturally avoid buying a product that will force them to abstain expenditure of something else they value more. The data in Table 6 is plotted in the graph shown below. According to Price (£) vs. Demand of Californians graph, it shows the negative relationship between price and quantity demanded. The higher the price of the product, the lower the quantity demanded would be. Or the lower the price, the higher quantity of Californian would be demanded. b) Elasticity of demand is a measure of how much the demand for a product changes when the price changes with all other factors held constant. It varies among products because some products may be more essential to the consumer. Products that are necessities or ‘need’ are more insensitive to price changes because no matter what happen, consumers would continue buying these products despite prices increases, even though, consumers might buy less, but overall, it’s least affected by these changes compared to the products that may not be necessary in daily life. Elasticity of demand for Californians for reduction in price from: I. £18 to £16 Price elasticity = %
Open Document