The Effects of Change to Demand

There are a number of factors that can cause a change in the demand.  These factors include a change in the price of the product, the consumers' income, the price of related goods, the tastes and preferences of consumers, and the number of consumers in the market. 

When there is a change of one of the factors of there is a change in the demand curve. For example, if someone's income grows, then their demand for goods will increase, shifting their demand curve to the right. This will lead to a higher quantity being consumed at a higher price. But there can be a negative effect that shifts the supply curve to the left where a lower quantity is consumed at a lower price.

An example of this is my recent experience was this past christmas.  I received a christmas bonus just before christmas which increased my income for that month.  Then on boxing day when the prices of high end clothing goes down I now had a higher demand for more expensive items that are of sale for a lower price, due to the prices being lower but also the increase in my income.  This causes my demand for higher priced clothing items to increase or the demand curve to move to the right if it was charted.  (See example of the demand curve increasing - moving to the right in the image below)

Demand and Supply Chart

Unit 2 Excercise 2-2 Reflect

Tips for managing a business in a dynamic market and mixed economy.

The McDonalds game that I played was very involved it just showes you one aspect of a business.  There was a lot involved in the production of just one of thier products the burger.  You had to grow the right amount of grain for the cows and you had to raise the correct number of cows to supply the consumers.  If you had too much of anything then things would go to waste and you would loose money if you did not have enough then the customers were unhappy and would not come.  It was difficult to manage all these aspects. 

My Tips would be to not bite off more than you can chew.  It would be more cost efficient if you could produce and manufacture each part of your business, or so you would think but sometimes you need to outsource certain items and let another business take care of certain aspects.  Especially when you are dealing with limited resources.  Lets say for instance that you live in a part of the world that does not have the land and space to raise cattke to butcher and produe meet.  To try and do this on your own would no longer be a cost effective idea.  In this case you would be smart to try to outsource this aspect of your business to someone who can do this at a reduced cost. 

The tips to suceed in this game is to experiment just like in real life.  I had to create a balance between all the aspects of the game.  When you have reduced customers entering the store up your add campaign and try to get your brand out there.  When you had a lot of customers ensure that you have a good turn over of beef and grain to feed them.  It is all trial and error just like in real life.  You have to take a chance and see how it pans out and learn from your sucesses and failures.