Elasticity of demand in a bakery is very important to know. If the price of ingredients goes up, the bakery owner must adjust for this increase. The higher the price elasticity of the product the less volume of the product that will be output, if for instance the demand for the product was highly elastic, then it wouldn’t make sense to increase the price of the product. The company would lose business because of this.
Below in figures 1A and 1B is data that has been taken from the Bureau of Economic analysis from three different industries that are related to the niche bakery business. Between the years of 2007 to 2011, there shows a decrease in the earlier years but an increase within the year of 2011of growth in the food service and food and beverage industries. The retail industry has show a sharp increase and decrease in these years. Taking into consideration the growth in each of the food industries though, I can make the assumption that this is a business that could flourish and grow with the right type of marketing, promotion, and sales products. In looking at this type of business for my area, I have talked to some of the local residents and have found that they were amenable to a new specialty bakery in the area. This impromptu survey showed that the residents in the area expressed an interest in purchasing baked goods that were of homemade quality rather than mass produced market products. Figure 1A
Percent Changes in Chain-Type Quantity Indexes for Gross Output by Industry Release Date: November 13, 2012
Line| Industry| 2007| 2008| 2009| 2010| 2011|
80| Food services and drinking places| 1.1| -2.7| -4.6| 1.9| 4.4| 26| Food and beverage and tobacco products| 0.6| -1.5| 0.7| -0.7| 0.9| 35| Retail trade| 0.8| -5.6| -7.2| 10.8| 1.4|
Chart of Percent Changes in Chain-Type Quantity Indexes for Gross Output by Industry
In order to increase revenue in this business, there are several things that would be necessary. Below...