Case Assignment Module 7 Case 1

Module 7 Case 1

Out of every 1,000 products, how many do you think have a demand curve where if they lower their prices, sales fall and when they raise their prices, sales increase? Name such a product or brand?

The demand for a product is the amount that buyers are willing and able to purchase. Quantity demanded is the demand at a particular price, and is represented as the demand curve. The supply of a product is the amount that producers are willing and able to bring to the market for sale. Quantity supplied is the amount offered for sale at a particular price. The main determinant of supply/demand is the price of the product. The Law of Demand states that other things held constant, as the price of a good increase, the quantity demanded will fall. Usually how this works is if the price of a product is lowered, demand will increase, and the more sensitive consumers are to price, the more demand will increase. Very rarely a company discovers that when it lowers its prices, sales do not increase but, instead, decrease. The reason this might occur is because some consumers use price to judge the quality of a new product. It might also occur when conspicuous consumption occurs that is when consumers have been buying a premium-priced product to display their wealth and the “display” value of the product goes down when its price goes down. The product starts to become dead common, which has very low utility to conspicuous consumers, although this will not happen with a well-established brand with an established reputation.

In the world of supply and demand in a competitive market the golden rule states that when the price of a service or product falls then the demand goes up. Well, as we all know there can always be an exception to every rule. One example of this exception is the automaker BMW. BMW is such a well-known and reputable brand that even if the prices of their vehicles go up their demand would still go up. The reason this occurs is because consumers...