The paper 'Sustainable Growth in a Post-Scarcity World: Consumption, Demand, and the Poverty Penalty' is a great example of a Macro and Microeconomics Assignment. The Australian market is composed of many groceries supermarket though Woolworths and Coles dominate the market. There is also a large number of customers such that no single buyer can influence the prices of the groceries. The prices of the products are neither controlled by Woolworths nor Coles though they dominate the market. These supermarkets sell at prices determined by the market no wonder Woolworth is losing their customers because they have not lowered theirs to match the decline in the prices of the groceries in the market. Homogeneous productsWoolworth and Coles offer the same products; groceries, buyers have no special preference when it comes to buying groceries.
No supermarket is expected to raise the price above the prevailing market price or lower below the current market price. Woolworths is selling their groceries at a price higher than the prevailing market price no wonder Woolworths are losing their market share to Coles. Perfect knowledgeBoth the supermarkets and their customers have knowledge regarding the conditions of the market.
This is the reason customers are opting not to buy from Woolworths as it has not lowered its prices as the prevailing market price. Woolworth has dropped its prices by 1.9 percent while Coles has dropped its prices by 3.1 percent. This is implying that the two supermarkets have got knowledge of the market trend of reducing the prices of the products. According to the research carried out by Macquarie Securities the lowering of the prices of the products emanates from the seasonal drop in fruit and vegetables from the producers. No attachmentThe products are the same, and the customers would buy from either the supermarkets as the prices ought to be the same.
Since the prices are supposed to be the same, the customers are opting to buy from Coles is offering a lower price compared to Woolworth. Question 2.Considering the demand and supply curve when Woolworths lower their prices, the demand, and supply of groceries increase. According to economic theory, a decrease in price leads to a consequential increase in demand. An increase in demand leads to an increase in supply as the producer is obligated to increase production to match the increased demand for equilibrium to be attained.
The rise in demand and supply results in higher sales made at a given time. If the price is such, that profit is made the total income increases. Woolworths should lower its selling price to that price prevailing in the market. The results would be that it will regain its market share and avoid losing its customers to its competitors especially its rival Coles. 3.
Short-run and long-run behavior of substitutes in the marketIn a competitive market, when the prices of pears go up the prices of apples also increase. In the short run, when the prices of pears go up the demand for apples goes up, and eventually, the prices of the apples will rise. The consumers will demand more of apples than pears to substitute the need for apples. The sellers will increase the prices of apples because despite raising their prices their demand is still high since the price of pears is high.
Consumers have no choice but to go for the apples as the apples are becoming unaffordable. There will be lots of pears in the market but the sale made will below as the prices are high than usual. There will be fewer apples as the customers who use to buy pears have now turned to apples. The little number of apples will now be sold at a higher price as their demand is still high.
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