Miss Essay

1809 Words Nov 2nd, 2013 8 Pages
BUSINESS ECONOMICS

Assignment 1

Case study: Mintel batteries report

a) What happened to sales of batteries in the period 2004-8? Provide a quantitative estimate. How do you explain the fact that over that period the amount of batteries sold increased whereas the value of sales declined? From figure 20 we can see that the volume of sold batteries from 2004 (584 million batteries) to 2008 (611 million batteries) has increased by 27 million batteries. During that period of time the volume has slightly raised, where in 2006 was the highest volume of batteries sold 620 million batteries. Being a difference the value at 2004 to 2008 prises has decrease, started
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b) Using the data supplied for that period show how it can be calculated that the price elasticity of demand for batteries is about -0.46. Interpret this figure and explain what it implies about the behaviour of consumers.

Percentages change in price: P = (2008 price -2004 price) / (2004 price) To find value, current price has to be added with 2009 price and divided by 2 P_1 = (415 + 450) / 2 = 432.5 P_2 = (389 + 391) / 2 = 390 P_% = (390-432.5)/432.5 x 100 = - 9.8 Percentages change in quantity: Q_1 = 584 Q_2 = 611 Q_% = (611-584)/584 x 100 = 4.6 E = (% change in quantity demand) / (% change in price)

E = 4.6 / (- 9.8) = 0.46938 These days’ people tent to buy more at lower prices instead of higher however depending on availability and importance in goods. The reaction to the price change shows demand elasticity. If the prices increase the consumer purchases less and then the prices go down the purchases increase. This is a logical reaction of consumer; however it depends on particular needs. There are products in the market which consumer has to buy it even the price has increased.
The calculation above shows that consumer behaviour is not responsive to the price change. The elasticity is low and it has only a little influence on demand. As it can be seen price elasticity of batteries is less than 1 and quantity of batteries is not

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