Questions and Answers
What is the meaning of Demand?
The quantity of goods and services that consumers are willing and able to purchase at various prices during a given period of time
What determines Demand?
Consumer's tastes, preferences, and income
What is the Law of Demand?
As the price of a good or service increases, the quantity demanded decreases, and vice versa
What is the difference between Movement along the Demand Curve and Shift of the Demand Curve?
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What is Elasticity of Demand?
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What will help Aroma Tea Limited better understand how to price and position their brand in the market?
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Which concept is used to describe how the demand for green tea will affect the demand for black tea?
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In the context of Aroma Tea Limited, what would be a key determinant of the demand for green tea?
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What will help Aroma Tea Limited differentiate between a luxury good and a necessity in the context of green tea?
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What would be a crucial consideration when deciding whether to enter the green tea business?
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Study Notes
Understanding Demand
- Demand refers to the quantity of a good or service that consumers are willing and able to purchase at a given price level, during a particular period of time.
Determinants of Demand
- The determinants of demand include consumer preferences, income, price of related goods, advertising, and seasonality.
The Law of Demand
- The Law of Demand states that as the price of a good increases, the quantity demanded decreases, ceteris paribus (all other things being equal).
Demand Curve Analysis
- Movement along the Demand Curve occurs when there is a change in the quantity demanded due to a change in price.
- Shift of the Demand Curve occurs when there is a change in the determinants of demand, resulting in a new demand curve.
Elasticity of Demand
- Elasticity of Demand measures how responsive the quantity demanded is to changes in price or other determinants of demand.
- Elasticity is classified into three types: Elastic (high responsiveness), Inelastic (low responsiveness), and Unit Elastic (unitary responsiveness).
Pricing and Positioning Strategies for Aroma Tea Limited
- Conducting market research to understand consumer behavior, preferences, and willingness to pay will help Aroma Tea Limited better price and position their brand in the market.
Cross-Price Elasticity
- Cross-Price Elasticity is the concept used to describe how the demand for green tea will affect the demand for black tea.
Determinants of Green Tea Demand
- Consumer income, taste, and preferences are key determinants of the demand for green tea in the context of Aroma Tea Limited.
Luxury Goods and Necessities
- The price elasticity of demand will help Aroma Tea Limited differentiate between a luxury good and a necessity in the context of green tea.
Entering the Green Tea Business
- Conducting market research, analysing consumer behavior, and considering the competition are crucial considerations when deciding whether to enter the green tea business.
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