From the scenario for Katrina’s Candies, examine the key factors affecting the demand for and the supply of a good in general and Katrina’s Candies specifically. Distinguish between a change in demand and a change in the quantity demanded (movement along the demand curve). Propose two (2) methods in which organizations that provide the goods may utilize this information.
One of the most fundamental concepts of economics is supply and demand. Demand refers to how much of a product or service is desired by consumers while supply represents how much the market can offer (Investopedia, 2016). While Katrina’s Candies has experienced an increase in revenue, they want to make certain this increase is sustainable. From the scenario for Katrina’s Candies, there are several key factors that affect the demand for and the supply of a good in general and Katrina’s Candies specifically. The determinants used for the demand model consist of the following:
(1)The price of sugar free chocolate
(2)The price of caffeinated coffee
(3)The price of water
(4)The median income of consumers
(5)The number of buyers in the market
In the demand theory, the law of demand states that the price and the quantity demanded are inversely related meaning if Katrina’s Candies was to lower the price of one of its chocolate products, consumers would purchase more. However, if Katrina’s Candies increased the price of one of its chocolate products, the amount of chocolate consumers purchase would decline (Week 1 Scenario, 2016). It is the business owner’s responsibility to find the pricing that will capture as much of a profit as possible without causing demand to retract (Dowell, 2016).
Movement denotes a change along the curve. Movement along the demand curve occurs when a change in the quantity demanded is caused only by a change in the price, and vice versa (Investopedia, 2016). Whenever a change in the quantity demanded occurs when no change in price has occurred, a shift in a demand or supply curve takes place. This implies that the quantity demand is affected by a factor other than price. For example, this would occur if sugar free chocolate suddenly became the only type of chocolate available for sale.
According to one online article, “A shift in the demand curve to the left or right represents a change in consumer preferences. A shift to the right indicates that an item has become more commercially desirable and that a larger number will be sold at a given price. A shift to the left is just the opposite, indicating that a marketplace good is less desirable and that fewer items will be sold at a given price” (Dowell, 2016).
There are a wide variety of reasons that can cause a shift in the demand curve. A negative review can reduce consumer demand for an item, which would cause the demand curve to shift to the left. Similarly, competition, a recall or health warning about a product can also reduce the demand causing the curve to shift.
The information provided by the results of formalized models could be utilized to help business heads make informed business decisions concerning sales and production levels. This can be done with the marketing orientation method. With this method, the company would react to what the customers want. Most successful businesses use this approach. This can also help them better determine prices in a competitive market.
Bonina, D. (2016). ECO 550: Week 1 scenario. Retrieved from
Dowel, D. (2016). How supply and demand impacts decisions in business. Houston
Chronicle. Retrieved from http://smallbusiness.chron.com/supply-demand-
Investopedia. (2016). Economic basics: Supply and demand. Retrieved from
Sarokin, D. (2016). What causes the demand curve to shift to the left? Houston
Chronicle. Retrieved from
http://www.tutor2u.net/business/reference/marketing-marketing-orientation (for response one)
The five demand determinants were: