Question 1
Coffee and coffee shops are not something new. this article talks about how there is a sudden increase in the number of coffee chains in so many different countries, due to an increased demand for coffee/iced-drinks, ect…we will see how this effects the demand curve and the price.
First of all, this is an oligopoly market, which means the firm has control over quantity of output, but it must take into consideration their competitors reaction by avoiding price competition (example Pepsi and Coca Cola). In an Oligopoly market, if two companies decide to secretly do agreements together, they 'll set a price and output such that MR=MC for the whole industry. Without this, firms will lower their prices to gain more clients, which would …show more content…
The demand curve varies of course, depending on the price of the product, the price of the substitute or complementary products, income and taste and preference of the customer. Once this is understood, we can start talking about the relation between the demand curve and the price, because an individual 's demand curve shows us the relation between the price of the product and how much of it they desire to by over a specific period of time, and it goes without saying that the lower the price, the more a consumer will want to buy. This is known as THE LAW OF DEMAND. An increase in the demand curve can be caused by; a rise in the price of a substitute, a decrease in the price of a complement, in increase in the consumers income, most importantly a change in taste that favours the product. This drives companies to strive to offer something new or better or different from their competitor in order not to lose its clients. To always provide the consumer with something new, or have special offers every now and …show more content…
price control), this would suggest that they 're trying to turn the U.A.E into a command system to determine how much is produced, what goods are produced and the price. The government price will change only after a long political process and it will effectively never be an equilibrium price, this means that the government price will either be too high or too low. Serious problems can also result from this, it causes consumers to want more of the product than the producers have available (this can happen if the government sets prices below the equilibrium level). When the price is too high however, companies will find themselves with excess product and not enough people willing to buy or would want to buy at that price, which allows the government to come in and buy them at the set price. In both cases, serious welfare loss is resulted because not enough of the product is sold, resulting in something called “deadweight loss” which represents income that’s lost forever. It’s safe to say that price control on a well-functioning and competitive market, harms society by reducing the amount of trade; it can also reduce
Coffee and coffee shops are not something new. this article talks about how there is a sudden increase in the number of coffee chains in so many different countries, due to an increased demand for coffee/iced-drinks, ect…we will see how this effects the demand curve and the price.
First of all, this is an oligopoly market, which means the firm has control over quantity of output, but it must take into consideration their competitors reaction by avoiding price competition (example Pepsi and Coca Cola). In an Oligopoly market, if two companies decide to secretly do agreements together, they 'll set a price and output such that MR=MC for the whole industry. Without this, firms will lower their prices to gain more clients, which would …show more content…
The demand curve varies of course, depending on the price of the product, the price of the substitute or complementary products, income and taste and preference of the customer. Once this is understood, we can start talking about the relation between the demand curve and the price, because an individual 's demand curve shows us the relation between the price of the product and how much of it they desire to by over a specific period of time, and it goes without saying that the lower the price, the more a consumer will want to buy. This is known as THE LAW OF DEMAND. An increase in the demand curve can be caused by; a rise in the price of a substitute, a decrease in the price of a complement, in increase in the consumers income, most importantly a change in taste that favours the product. This drives companies to strive to offer something new or better or different from their competitor in order not to lose its clients. To always provide the consumer with something new, or have special offers every now and …show more content…
price control), this would suggest that they 're trying to turn the U.A.E into a command system to determine how much is produced, what goods are produced and the price. The government price will change only after a long political process and it will effectively never be an equilibrium price, this means that the government price will either be too high or too low. Serious problems can also result from this, it causes consumers to want more of the product than the producers have available (this can happen if the government sets prices below the equilibrium level). When the price is too high however, companies will find themselves with excess product and not enough people willing to buy or would want to buy at that price, which allows the government to come in and buy them at the set price. In both cases, serious welfare loss is resulted because not enough of the product is sold, resulting in something called “deadweight loss” which represents income that’s lost forever. It’s safe to say that price control on a well-functioning and competitive market, harms society by reducing the amount of trade; it can also reduce