Qd X = f (P x, O x, A x, St x, P z, O z, A z, St z, Y, T, E, C r, G,
Where Qd x = the qty. demanded of good x in a given time period
P x = the own price of the product or service x
O x = the number of outlets through which x is
A x = the level of advertising or promotion for x
St x = the style or design of x
P z = the price of a related good, a substitute or complement
O z = the number of outlets for a competitor product/service As = the level of advertising for the related product St z = the style or design of related product. Y = the income of consumers and distribution. T = the tastes or preferences of consumers E = the expectations of consumers with regard to price, etc. C r = the cost and availability of credit G = government policy Pop = the change in the population composition W = weather conditions
An economic consultant for x corporation recently provided the firm’s marketing manager with this estimate of demand function for the firm’s product.
Qd x = 12,000 – 3P x + 4P y – 1Y + 2A x
Suppose X sells for Rs. 200 per unit, Y for Rs. 15 per unit, the company utilizes Rs. 2,000 of advertising and consumer income is Rs.10,000. How much of good X do consumer purchase? Are goods X and Y substitute or compliments? Is good X a normal or an inferior good ?
C = character of the firms in the industry T = time lag E = firm’s expectations about future prospects for prices, costs, sales and the state of economy in general. C n = Porter- Consumer’s sophisticated and knowledgeable demands at home (Japanese cameras, Nokia of Finland, Ericsson of Sweden)
N = number of firms N r =natural shocks (weather, diseases, wars, machine breakdown, industrial disputes, fire, flood, earthquake)
Find out possible reasons for increasing supply of butter
Do you see a relationship between the markets of nitrogen and butter?
Find out demand and supply functions for real estate market
Qs x = 200 + 80P – 20a 1 – 15a 2 + 30j Where Qs x - quantity supplied of X, P is price of X, a 1, a 2 are profitability of two alternative goods that could be supplied instead, and j is the profitability of a good in joint supply. Explain why P and j terms have a positive sign, whereas a 1 and a 2 have a negative sign? Exercise