(ii) (A) In your opinion, is the product elastic or inelastic in demand? Why?

After went for relevant research and critical thinking, I found out that our product,
Munchys Lexus cream sandwich is elastic in demand. This can e explain y the three
determinants of demand elasticity which is !availaility of sustitutes, proportion of income
spent on goods and time dimension"#$arl,%ay and &haron,.
'irst of all, the availale sustitutes in the market are too much and markets are highly
competitive. &o, consumer tends to switch easily when there is a price change towards the
products. I had done some comparison of our products with other availale sustitutes in the
market. As result, our product price seems to e high among the sustitutes chosen. (elow
will e comparison tale of products and prices for iscuits which I otain from Tesco
Malaysia wesites. At the same time, I had done some analysis with prices and )uantity we
can get with the same price we giving out to our product.
*roducts *rices
Muchys Lexus +egetale ,alcium ,racker -..g
%M/.01 each
#rounded up to %M/./.2
3ulies ten 4. orange cream sandwich 4-.g %M4.11 each
#rounded up to %M-2
-54-.g6-/.g
%M- for each5-6 %M/
7wa Tai anana treat sandwich iscuits 4..g %M4.11 each
#rounded up to %M-2
-54..g6-..g
%M- for each5-6 %M/
The analysis result show us that we can get the same )uantity or even more in a much
cheaper price with other rands compare to Munchys rand. As a result, if there is a change
in price of Munchys Lexus cream sandwich, the demand will gradually fall off.
Then, the proportion of income spent on the goods is large for a snack. ,onsumer
tends to pay more attention on purchasing when they need to pay out a large lump sum of
money for particular goods. 8ith price of %M/./. per pack, you can either uy the pack of
iscuits or went for a meal with the same price. ,onsumer always wish to get more pay less
and follow up y the high standard of living in Malaysia, consumer tend to e efficient in
spending. Thus, the demand will e elastic when the price increases y some portion.
Lastly, the time dimension provided for consumer to respond. The more the time
given, the more elastic the demand will e. ,onsumer had more time to finding sustitution
for the current goods they purchase. Instead of long run spending with the same price, they
will more willing to spend less to en9oy the same satisfaction. In this case of matter,
consumer had more time to do so as the company will not going for li)uidation in the future
ecause of the high rand recognition and good competitive advantages among other rands.
Thus, demand is possile to e elastic as the time pass y.
(ii) (B) If you were the owner of the company, what price should you charge on the
product so that your companys revenue can be increased !"plain
(efore proceed to the answer, let us took a look into the total revenue formula which
is e)ual to price multiply y )uantity demanded. *rice and )uantity demanded are the two
ma9or elements of the formula. The increase or decrease in the amount of total revenue is
relying on the amount of changes of the oth elements. According to the law of demand,
when price decreases, )uantity demanded increases thus this will increase the total revenue
ut why there are still a fall in total revenue when the price of goods decrease: After
economist had studied the market, they found the theory of elasticity. ;lasticity is a measure
on how responsive the )uantity demanded when some of factor changes. 'or example,
changes in price of goods or changes in income of consumer.
In this case, our product is elastic in demand which is the )uantity demand will highly
affected when there was a changes in price of goods or income of consumer. Therefore in
case to increase the total revenue, we need to decrease the price. In the current market now,
the product was sale with a price of %M/./. for a -..g Munchys Lexus cream sandwich.
After price ad9ustment had een made, now the market will sales with a new price of %M0.11
for a -..g Munchys Lexus cream sandwich. *romotion also can e made y introduce the
uy 4 free 4 method or pay extra %M4 for an extra of 4..g method. These will tempted the
consumer to uy more than normally.