Assessment Economy Harvard Case Solution & Analysis

Assessment Economy Case Study Solution

Introduction:

Schmeckt Gut the owner of Schmeckt energy bar which is a recognisable firm is planning to launch a new substitute product by the name of Schmeckt besser bar within few months in Atollia. Schmeckt Gut intends to sell the product by importing to Atollia from its country Industry. The target market of its product are the athletes, bodybuilders and sportsman. The source of the product distribution is through various gyms.

It will be one of a dangerous product since there is no awareness regarding this new product among the consumer. If it becomes as a complementary product, it can capture the market among other of energy bar products.

Problem Statement

The problem of launching the product is that there is a various economic factor that would cause issues in the selling of this new product. The factors are such as the personal income of people, the country’s inflation rate, the number of gyms which acts as retail shops on their distribution of the product, the demand for the product depending on its price and tax imposed by the government issued on the product.

Analysis of Demand of 2016

Looking at the projections given by the data provided in the excel file, it is estimated that the overall demand for the product will significantly increase in 2016 Q1 by about 442.85. The reason for the demand increase is because of inflation which is about 2.91% whereas the distribution of their product by targeting gyms is also rose to 23. Also, the tariff rate charged on the product is about 7.5%

Supply

Supply refers to the overall goods and services available for sale to the consumers. There are two factors affecting supply, the first one being the producer who will manufacture and sell the product and the other being the customer who will buy it. Supply has an inverse relationship with price from a consumer's perspective, if the provision of goods, services and labour is high and are able in every location in which consumer can buy which would cause the price to fall.

Looking from the view of the manufacturer, if the prices of the commodity are high that they will increase the manufacture of that individual product which will cause to enhance the supply of that product.

The law of supply is one of the micro economic law in which it explains the relationship between the price and quantity of product. It is said that if the price of a product increases then, it will cause the supplier to take advantage of the situation and will try to maximise its profit by increasing the quantity of the product.

The Price Elasticity of Supply measures the relations among the change in supply and its effects to price. It is one of the processes in which how a manufacturer can respond to market condition changes such as price changes. The equation used to determine the price elasticity of supply is by % change in supply divided by % change in price. Some of the factors which impact the price elasticity of Supply are:

  • Availability of Resources
  • Technology
  • Overall Manufacturers

Demand:

Demand refers to the consumer’s desire to buy goods and services and how much is he willing to pay for it. The two forces which affect demand are the customer needs and wants of the products and service which have an impact on demand, and the other factor is the price. The person's needs generate a person's demand and want. Needs are the human basic food, shelter and clothes, while wants are depended on the will and buying the power of a person.Demand is significantly affected by the buying power of a person as in its earning income, its family and other factors.

The relationship among demand and price has an inverse relation. If the demands of a good and services are increased then it will also cause the price to rise. From consumers point of consideration, if the product price is increased, most of the people would either switch to a different substitute product, whereas some will refrain from buying that product. But looking from the manufacturer point of view, if they see a demand for a product is high then this will cause them to increase their price for to maximise the profit.

The law of demand is also the micro economic law in which it explains the relationship between demand and price. If the price of goods is increased then it will cause the demand for that group to decrease, as most of the people would try to get opportunity cost and would rather switch to a substitute of that product.

The price elasticity of demand measures the relations among the change in demand fora certain good and its effects to price. It explains how the demand for products by consumers are decreased if the price of that product or service increases. The reason is that many of the customers would switch to a different product or service.  The equation used to calculate the price elasticity of demand is the % change in demand divided by the % change in price. There are many factors which have impacted on the elasticity of application, some of those factors are:

  • Substitute Products
  • Personal Income
  • Inflation
  • Price..................

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