Analyzing the Factors Influencing the Demand and Supply of Katrina�s Candies
Analyzes supply and demand.
Elijah Nelson
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Analyzing the Factors Influencing the Demand and Supply ofKatrina’s Candies"Fundamental Economic Concepts" Please respond to the following:From the scenario for Katrina’s Candies,examine the key factors affectingthe demand for and the supply of a good in general and Katrina’s Candiesspecifically.Answer–The key factors affecting the demand for a good in general andKatrina’s Candies specifically are:-a.Price of substitute goods–Substitute goods are the ones which can beused in place of the similar other good. For eg, Tea and coffee aresubstitute of each other.If the price of substitute goods rises, then itwill lead to rise in the demand of other good. Similarly, if the price ofthe substitute of Katrina’s candy rises, then it will lead to rise in thedemand of Katrina’s candies.b.Price of complementary goods-complimentary goods are the onewhich are used with the consumption of the other good. For examplecar and petrol are used side by side. Similarly,Katrina’s candiesareused with theother complementary good such as chocolate shake orstrawberry shake. When the price of complementary goods rises, thequantity demanded of the other good falls.c.Income-When the income of an individual rises, the quantitydemanded of Katrina’s candy rises because people can afford more ofcandies now at same price.d.Preference or tastes, advertising expenditures–As preferences ortastes of an individual changes towards Katrina’s candy and morepeople would like to buy Katrina’s candy, then the quantity demandedof Katrina’s candy will rise.e.Number of buyers–As the number of buyers in the market for aparticular product increases, there will be rise in the quantitydemanded of the candy.Distinguish between a change in demand and a change in the quantitydemanded (movement along the demand curve).From the above, indicate the factors that are responsible for a shift indemand; and explain how the change is effected by these factors.Answer–Change in demand consists of two things–a.Change in quantity demandedb.Change in demand.Change in quantity demanded means when there is change in price ofthe Katrina’s candy, then there is movement along the demand curve.Only factor affecting the quantity demanded is the price, keepingother things constant.Next is change in demand, it means that there is change in demand ofa Katrina’s candy due toother factors affecting demand such as:-The price of the sugar-free chocolate;The price of caffeinated coffee;The price of water;The median income of consumers; andThe numberofbuyersin the market.PRICEPRICEQUANTITYQUANITYMOVEMENTALONGTHESAME DEMAND CURVESHIFT IN THE DEMAND CURVE
