Castillo_F_HWA2_Memo

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Feb 20, 2024

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To: Dr. von Nostran From : Fausto Castillo Date : February 6, 2024 Re : Heirloom Kidney Bean After a thorough examination of the supply and demand models provided, it has been ascertained that, in the various scenarios presented the price of heirloom kidney beans (HKB) will change. For example, a shift in the income level from $100.00 to $90.00 will decrease the price for the case of HKB from $17.77 per case to $9.15 per case. In comparison, a decrease in the price of ground antelope from $4.47/pound to $2.00/pound will increase the price of HKB by less than a $1/case. In the scenario of an increase in ground antelope price by almost 5 times ($10.40/pound), will decrease the price of HKB to $15.51/case. If two producers fail to supply HKB, the price of HKB will increase to $23.93/case but the quantity will drop to 137 cases. It is expected that Funky Beans is going to produce 175 cases of HKB that can be sold at $17.77/case. On the other hand, a decrease in income is going to have an important impact on the price ($9.15/case) with a produce quantity of 169 cases. While a change in the price of ground antelope, impacts the price and quantity of HKB, is not going to produce a big impact on prices and quantities. Equilibrium quantities and prices were calculated for each of the five possible outcomes, allowing for a comprehensive understanding of the expected price for the product based on supply and demand dynamics. For a visual representation, refer to the attached graphs labeled Chart 1 where you can find a representation of the market with shifts in income level, Chart 2 with a representation of the market with a decrease in the price of ground antelope, Chart 3 shows the representation of the market with an increase of prices of ground antelope, and Chart 4 with a representation of the market if two firms leave the market.. On every chart is possible to appreciate plots of supply as well as demand, where the intersection of supply and demand lines denotes the equilibrium price and quantity. A summarized overview of the anticipated prices and quantities can be found in the table below.

Situation Price Quantity Standard $17.77 174.79 Income decrease $9.15 168.59 Ground antelope price decrease $18.71 175.47 Ground antelope price increase $15.51 173.17 Two firms leave the market $23.93 137.23 Average $17.01 $165.85 Median $17.77 $173.17 An intriguing observation in the analysis of various scenarios is the notably higher prices observed if two of the firms leave the market. However, it's crucial to note that the corresponding demand quantities are lower (137.23 cases). While elevated prices, if two suppliers leave the market, can be appealing, it is essential to recognize that lower sales volumes can cast uncertainty on the overall impact on profitability. Additional information is required to conduct a thorough analysis of profitability. Based on the Survey Data provided, satisfied customers are willing to spend $27.33 on Funky Bean products, while unsatisfied customers spend $17.54 on products. On the other hand, is important to mention that most of the consumers (58.33%) are satisfied with Funky Beans products. In summary, you can sell HKB for $17.77 for a case if the income level is $100. Also, it is important to maintain the satisfaction of the customers, because they are willing to spend more on products.

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