A shortage in the production of sugar will determine the amount of the Mars bar produced. This is because the unfavorable whether conditions are affecting the production of sugar. The supply of Mars bar depends on the price of the factors of production which in this case are affected by the bad weather. Weather conditions are part of the factor of the production of the Mars Bar because without proper land for the production of sugar, which is an important ingredient to produce it, the supply of the Mars bar will also be affected. For being limited, due to the weather, the price of sugar will consequently increase.
Weather Condition? –> P (sugar)? As a result of the rise on the price of the factor of production (sugar) as an ingredient to produce the Mars bar, the Supply for the main product will fall. P (sugar)? –> S (Mars Bar) ? With the aid of a graph, the rise on the price of sugar produced a shift on the quantity supply of Mars bar is shown below: By shifting to the left, away from the equilibrium point (Qe) it represents that there was a decrease on the supply (S1 to S2). If the supply goes down, it will also affect the price of Mars Bars (P1) which goes up, becoming P2, as demonstrated on the graph.
S( Mars bar) –> P (Mars bar) ? b. The Manufactures Worker Union successfully negotiate an across the board wage rise for workers based at all Mars Confectionery plants. The pay rise granted to the workers at all Mars Bars confectionery will substantially influence on the supply of the product. In this case, the increase of the workers salary will decrease the supply of Mars bar due to the fact that the company could have been investing on the production instead.
Thus: P (labour) –> S( Mars bar) ? The graph below illustrates a shift to the left on the supply: The shift to the left represents that there was a decrease on the supply (S1 to S2). If the supply goes down, it will also affect the price of Mars Bars (P1). Due to the change on the price of the factors of production (labour), the equilibrium point (Qe) is also affected. S ( Mars bar) ? –> P ( Mars bar) ? c. General economic conditions are favourable with average household incomes increasing by 5% in the past year. Considering the Mars bar as a normal product, the households, receiving a pay rise will now tend to spend more buying the product:
Income (Y) –> Buying (Mars bar)? If more goods and services are being purchased, it means that de demand of the product has gone up: Buying (Mars bar)? –> Demand (Mars bar) ? As stated on Law of Demand: all other things being equal, the higher the demand, the higher will be the price of the main product: Demand (Mars bar) ? –> Price (Mars bar) ? This is demonstrated by the graph below:
Here it can be clearly seen that, as the income rises, the demand for the Mars bar (considered as a normal product) will also increase. This causes a shift on demand curve from D1 to D2. The equilibrium point becomes affected because the demand has also changed. Summarizing, the increase on the sales of the Mars bar due to the pay rise granted to the households promoted a rise on the demand and consequently on the price:
Income (as a normal product) –> Demand (Mars bar) d. Rowntree Headley, manufacturers of Violet Crumbles, have undertaken an aggressive marketing campaign, dropping the price of the bar by 10%. The competitor Rowntree Headley have dropped the price of their product. Rowntree H (aggressive marketing campaign)? –> P (competitor product) If the price of the substitute falls, the demand of the main product will also decrease. This is because, people will generally, prefer to choose a cheaper product to buy. Therefore, the demand for the main product will fall:
P (substitute) –> D (Mars bar) Due to the decrease on demand, the price of the product will rise. This is because, according to the Law of demand: other factors being equal, the lower the demand, the higher the price of a product will be. Thus, it can be observed in the graph that the quantity demand has also decreased. e. Researchers at Mars have developed an improved system for manufacturing the bar, which will increase output per hour by 20%. The technology played an important role in manufacturing and more importantly, in speeding up the process of production. It is evident that the more efficient and quicker the systems of manufacturing Mars bars are, the higher the supply of the product will be:
System for manufacturing(Mars bar) ? –> S(Mars bar) The following graph explains the change on the quantity supplied by Mars bar. In relation to the graph, it can be noticed that the increase on the production of Mars bar made the supply curve to shift to the right rising up the quantity supply to Qs2 The quantity of production increased once the price of the product has also gone up. Thus, if the supply goes down first, the price will fall from the equilibrium point Qe. S (Mars bar) –> P (Mars bar).
Harassment of people wearing natural fur coats by environmentalists anti-fur groups has caused fur prices and sales to tumble in recent years. In contrast, prices and sales of luxury woollen and angora coats have gone up. Can the theory of demand and supply explain these two phenomena? Explain with the aid of two diagrams – one for the fur coat market and another for the woollen and angora coat market. The environmentalists anti-fur groups have influence on a change people’s preferences of coats. The harassment contributed to the decrease on sales due to low demand and consequently, the drop of prices.
People are now preferring other products which are more attainable. Therefore the preference here is factor which influenced the change on the demand as shown below: From the equilibrium point Qe, the reduction on the people’s preference for other product caused a shift on demand and also on the quantity demand which became higher than the one from the equilibrium point. Consequently, according to the Law of demand, all things being equal, the lower the demand, the lower the price of the main product is.
In contrast, due to a favourable condition for the market of angora and woollen coats, the demand for this product has increased. People have now a chance to buy coats, even though the price has gone up. People’s preference to the angora and woollen coats has increased the demand of the product and consequently the price: P (in favour of a product) –> D (angora & woollen) Therefore, the graphs clearly shows the shift to the right representing an increase of demand and also in the price of the product. Once people starts buying the angora and woollen coats, the preference for this product contributed for the increase on the demanding and for that reason the prices went up. The more it is sold the higher the price of the product tends to reach. As stated o the Law of demand, everything else being constant, the higher the demand, the higher the price is.
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