Demand Analysis of low-calorie microwavable food Essay Example for Free

Demand Analysis of low-calorie microwavable food EssayQD = 20,000 10P + 1500A + 5PX + 10 ISince R2 is considerable high, the model explains the pick out quite well. Putting the values of P, A, Px and I in the supra equation, we get, Converting all price into dollars, we get,QD = 20,000 (108000) + (150064) + (59000) + (105000) = 131000Now, own price ginger nut (ep) = = -10, P = 8000, Q = 131000Own Price elasticity (ep) = 10 = 0.61 (approx.)Cross price elasticity (exy) = = 5, Px = 9000, Q = 131000Cross price elasticity (exy) = 5 = 0. 34 (approx.)Income elasticity (eI) = = 10, I = 5000, Q = 131000Income elasticity (eI) = 10 = 0.38 (approx.)Advertisement elasticity (eA) = = 1500, A = 64, Q = 131000Advertisement elasticity (eA) = 1500 = 0.73 (approx.)From the above results, we john see that the own price elasticity is 0.61. Thus the demand for the low-calorie microwavable food is inelastic in nature. This implies that an subjoin in the price of the food leads to the issu e forth of the quantity demanded by less than proportionate amount. Income elasticity of the candid calculated is 0.38. This implies that the good selected is normal good. The cross price elasticity is 0.34. Therefore the two goods are almost substitute goods. Finally, coming to the advertisementelasticity, we can see that the advertisement elasticity is 0.73. Thus advertisement has an primary(prenominal) impact on the sales of the product.Since price elasticity is less than 1, total revenue get out fall if price falls. Moreover the cross price elasticity of the product is almost close to zero. So, if the firm will never lower its price to increase its market share.i) The demand curve s drawn underii) At these prices there is always an excess give. Thus market forces cannot determine the equilibrium.iii) The factors can influence demand and egress areDemand Advertisement, Income, price of the competitors product, etc. Supply technological improvement, supply shocks, etc.Inc rease in advertisement expenditure can increase the demand this will evoke the demand curve rightward.Similarly any reduction in advertisement expenditure will transmit the demand curve leftward. Similarly, a rise in per capita income will shift the demand curve rightward and viceversa. Now, the supply curve can shift rightward if there is any improvement in the technology. On the other hired man any supply shock can shift the supply curve leftward.ReferencesVarian, H. R. (2011). Intermediate Microeconomics A modernistic Approach (8th ed.). NY Norton Walter Nicholson, Christopher Snyder (2012). Microeconomic Theory Basic Principles and Extensions (11th ed.). USA Cengage Learning TR Jain, VK Ohri (2010). Introductory Microeconomics and Macroeconomics (7th ed.). India V.K.Publications