Econs Proj Qn2!

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Econs Proj Qn2! (PDG 29/12)

SUPPLY FACTORS

Goods in Competitive Supply

When price of eg. cheese increases, producers might switch to the production of cheese instead of producing yogurt. With the same resources (milk is the raw material for cheese and yogurt), the producers are able to generate higher revenue from the sale of cheese (higher price) compared to the sale of yogurt (lower price). Hence, with the increase in price of cheese, quantity supplied for cheese will increase while the supply of yogurt will fall.

Natural Factors

Milk is one of the main raw materials, so if there is a widespread of diseases among cows, there will be a fall in supply of milk as the milk of diseased cows cannot be used.

Size of the Industry

When more yogurt icecream stalls enter the industry, there will be an increase in supply and vice versa.

Price of the Product

A higher price of milk will lead to a higher supply of milk being supplied. thus there will be more yoghurt ice cream being produced.

Cost of Production

State of Technology (quality of raw materials, performance of machines and labour, organisation and management of the stall)

An improvement in production techniques will increase the productivity of the factors of production, hence there will be an increase in supply and vice versa.

Cost of Raw Materials (milk, sugar, butter, etc needed to make yogurt icecream)

Cost of Production will rise when raw materials prices rise, hence there will be a fall in supply and vice versa.

Cost of Land (the rental prices for the stall)

Cost of Production will rise when rent rise, hence there will be a fall in supply and vice versa.

Cost of Labour Services (wages given to the manpower needed to serve customers and clean + take care of the stall)

Cost of Production will rise when wages rise, hence there will be a fall in supply and vice versa.

DEMAND FACTORS

Population

When there is a higher population, for example, a baby boom in ang mo kio, more people might buy and consume the yoghurt ice cream. thus, increasing demand for the yoghurt ice cream.

SUBSTITUTES ( GOODS IN COMPETITIVE DEMAND)

There are substitutes like ice cream from Andersen’s Ice cream , Ice cream at My dessert house and Ice cream from MacDonald. A fall in the price of these substitutes may result in the fall of quantity demand of yogurt ice cream as consumers are likely to switch away from purchasing relatively more expensive goods

TASTE AND PREFERENCES

everyone's tastes and preferences are different. thus, not everyone will have a liking for yoghurt ice cream and might only want to consume plain ice cream. thus this will lower the demand for yoghurt ice cream.

INCOME

Singaporeans have been earning higher income relative to the previous year . Thus Singaporeans are getting wealthier and more affluence. Hence the demand for yogurt ice cream will increase. Demand for normal good is positively related to a change in income