Analysis on the Price of Gardenia Breads

Topics: Supply and demand, Price elasticity of demand, Consumer theory Pages: 2 (598 words) Published: March 14, 2011
Based on the research that we had done in 10 different places, we found out that the price of Gardenia white bread are standard. The price of Gardenia white bread all are selling at same price RM2.30 because the Gardenia Bakery has no price discrimination. Price discrimination is sellers charge different price to different consumers for the same good or service when the cost of providing that good or service does not differ among customers. Besides that, Gardenia white bread is not separate selling to different classes. No matter the consumer’s income are high or low, which are living in urban or rural area also can get the Gardenia white bread easily. It is because Gardenia white bread is under monopolistic competition market. There are many seller and buyer and easy market entry and exit. Moreover, the company Gardenia Bakery also spend money in advertisement to convince consumer or customer. As a price maker with some power of market control, Gardenia white bread reacts to demand conditions, especially the price elasticity of demand, when setting the price and corresponding to quantity produced. The key is the price elasticity of demand. Gardenia white bread operates in a market control that allows it to manipulate and work on the demand curve. Meanwhile, buyers are sensitive to the price (more elastic demand curve), less responsive to price (less elastic demand curve), so the firm will control the price so that the consumer would not buy other brand’s white bread. The market price of a good is determined by both the supply and demand for it. Demand refers to how much (quantity) of a product or service is desired by buyers. The quantity demanded is the amount of a product people are willing to buy at a certain price; the relationship between price and quantity demanded is known as the demand relationship. Supply represents how much the market can offer. The quantity supplied refers to the amount of a certain good producers are willing to supply when receiving...
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