Determinants of a Change in Demand

The demand for a particular product can increase or decrease for the following various reasons;

- A consumer's preference toward a good or service plays a large part in the demand for it and can be swayed by things like advertisements, reviews, seasons, celebrities, ect.
- The increase or decrease in a buyer's income will affect their capacity to purchase a product. A normal product will show an increase in demand when income increases and an inferior product will increase in demand when income decreases.
- A change in the price of a related product will also influence a consumer's desire and capability to consume particular goods. Substitute products, which are very similar to one another, will have a direct affect on each others demand, depending on their price. Complimentary products tend to be purchased together, therefore their demands are also inter-related.
- The future expectations of prices, sales, shortages, or incomes will alter when and how much of a good or service is demanded at a particular time.
- The final determinants that can change demand are an increase or decrease in the population or a change in the distribution of who is earning income in a specific demographic.

In the past five years, the demand for Mp3 players has dramatically decreased. Due to a change in the preference of consumers, who are now listening to music on their Blackberrys or iPhones, the need for a portable music device is becoming obsolete. The following table and graph will illustrate the decrease in the monthly demand from 2007 to 2012.


 

Price	Demand in 2007	Demand in 2012
175	100	10
150	200	20
125	300	30
100	400	40
75	500	50

Game On: Managing a Business in a Mixed Economy

    The price of a product or service is the most influential factor in determining a consumer's desire or capability to purchase it. Demand for a product increases when the price is low, and the supply of a product increases when the price is high.. Therefore, in order for buyers and sellers to reach a compromise, the equilibrium price is determined. This is the financial value at which, the quantity demanded is equal to the quantity supplied. (Sayre & Morris, 2009, p.43).
    Much like the McDonald's Game, a mixed economy makes production decisions with the intention of making the highest profit, while abiding by government policies and social standards. Any successful company should realize that to maintain growth over an extended period of time, scarce resources must be managed efficiently. My experience with the McDonald's corporation showed me that by initially over using resources such as; money, pastures, soy production, beef, employees, and advertising, in the beginning of the game, is a recipe for bankruptcy. Consistently striving towards an increase in both supply and demand will further accumulate growth. Some strategies you can use to achieve this are; maintaining competitive and comparable pricing, creating innovative products, advances in operating technologies, adding advertising campaigns, increasing employment to accommodate demand, decreasing the price of production, developing a good reputation, ect.
     As I mentioned earlier, the most important factor in achieving success in this game is how you initially distribute your resources. Specifically, I began with 5 pastures and 1 soy field, to maintain a consistent level of supply. A decreased number of cows on each pasture allowed me to ensure efficient use of raw materials, avoiding over grazing. Adding hormones to the fodder allows for higher levels of production, while hiring one employee for the grill and one person at the register allows you minimize costs and accumulate a higher net profit. This model will allow you to build growth and assets over time and once you are established you can begin playing with other elements for continued development in your market.







References;

- Image retrieved from McDonald's Video Game

http://www.mcvideogame.com/game-eng.html

- Sayre, J.E. & Morris, A.J. (2009). Principles of Economics (6th ed.). Toronto, ON: McGraw- Hill Ryerson