1. Suppose the price of coffee beans increases by $0.20 per pound. What is the effect of this raw material price increase on the demand for roasted coffee? If one pound produces 50 cups of coffee, would the price of a cup of coffee rise by $0.01? Explain.
The law of demand states that when the price of an item goes up, the quantity purchased of that item goes down (Boyes, 2012, p. 202). When the price of coffee beans is increased by $0.20 per pound, this increase in the price of coffee beans will definitely have an impact on the price of roasted coffee in the form of higher prices for the product on store shelves. Another scenario is that if coffee prices are anticipated to increase in the future, there will be an increase in demand, as consumers …show more content…
189). The brand name of a product offers information to consumers as well as giving a product an indication of being reliable and high-quality product. The objective or purpose of producing a brand name is to strengthen loyalty by consumers in regard to their products and this will cause a reduction in the price elasticity of demand. The greater the unwillingness by consumer’s to change brands, or shift their loyalty to a certain product, the lower the price elasticity of demand for that product. Consumers loyal to a brand or to a firm will purchase that brand or purchase from that firm even if the price is above the prices of substitute products (Boyes, 2012, p. 189). The brand loyalty is great as a result of tradition, quality of the product, or loyalty to the product as the quality supplied cannot be matched by its competitors. If this is the case, brand loyalty is high and the consumers that purchase products of J.M. Smucker will not leave the company and purchase comparable products. The profits of J.M. Smucker will not increase by the 9 percent as stated, but by a lower percentage. This is dependent on the elasticity of demand. Alternatively, if the brand loyalty is low and consumers begin to purchase products from its competitors, the revenues of the company may essentially decrease. In such a situation the price elasticity of demand is high. The amount of profit or loss of revenue is dependent on the price elastic of demand for the coffee it is selling. Consumers will purchase a product from a company that has proven over the years to provide superior products and customers are willing to pay for quality. There will always be those who will purchase a cheaper product from a competitor, but many times will go back to that company as the products
The law of demand states that when the price of an item goes up, the quantity purchased of that item goes down (Boyes, 2012, p. 202). When the price of coffee beans is increased by $0.20 per pound, this increase in the price of coffee beans will definitely have an impact on the price of roasted coffee in the form of higher prices for the product on store shelves. Another scenario is that if coffee prices are anticipated to increase in the future, there will be an increase in demand, as consumers …show more content…
189). The brand name of a product offers information to consumers as well as giving a product an indication of being reliable and high-quality product. The objective or purpose of producing a brand name is to strengthen loyalty by consumers in regard to their products and this will cause a reduction in the price elasticity of demand. The greater the unwillingness by consumer’s to change brands, or shift their loyalty to a certain product, the lower the price elasticity of demand for that product. Consumers loyal to a brand or to a firm will purchase that brand or purchase from that firm even if the price is above the prices of substitute products (Boyes, 2012, p. 189). The brand loyalty is great as a result of tradition, quality of the product, or loyalty to the product as the quality supplied cannot be matched by its competitors. If this is the case, brand loyalty is high and the consumers that purchase products of J.M. Smucker will not leave the company and purchase comparable products. The profits of J.M. Smucker will not increase by the 9 percent as stated, but by a lower percentage. This is dependent on the elasticity of demand. Alternatively, if the brand loyalty is low and consumers begin to purchase products from its competitors, the revenues of the company may essentially decrease. In such a situation the price elasticity of demand is high. The amount of profit or loss of revenue is dependent on the price elastic of demand for the coffee it is selling. Consumers will purchase a product from a company that has proven over the years to provide superior products and customers are willing to pay for quality. There will always be those who will purchase a cheaper product from a competitor, but many times will go back to that company as the products