Finance and Accounting Essay
Demand and Supply are two crucial elements of a business’ success. Demand is the amount of the product/service that is required to meet need. Supply, is the amount of a product/service that is available to fulfill that need (at a specified price). As the service offered by the business is one of luxury, the amount demanded by customers will be highly influenced by the economic state. Therefore the main factor that will affect demand for it is price i.e. ticket, food and merchandise prices. This means that in times of recession and during periods of wide spread financial difficulty, the business is likely to see a decrease in demand for their service. As stated in (Mintel 2010) ‘Half of those who participate in leisure …show more content…
Price Elasticity of demand is the amount the demand for a product is affected by change in price. PED = (% Change in Quantity Demanded)/(% Change in Price) (Sloman and Wride, 2009: 57). If the demand for a product decreases massively due to a change in price, it is said to be elastic. Adversely, if the demand for a product changes only slightly, or not at all, the product is inelastic. In the case of this business, it would be how much would the price of tickets affect the amount of people that attend the games which is shown in appendix 1.
Price Elasticity of supply is the amount a supplier can react to a change in price. PES = (% Change in Quantity Supplied)/(% Change in Price) (Sloman and Wride, 2009: 66). For this business e.g. if the overall price of basketball tickets rose, how much would the business be able to change their supply i.e. supply more. In this case, the answer is not much, as there is a set supply of seats in a stadium. Therefore, unless the price rose dramatically, for a long period of time, it wouldn’t be wise for the business to try to move to another venue with more seats to extend their supply.
Income elasticity of demand is a measurement of the