New England College Substitution Effect and Consumer Behaviors Paper Discussion Board – Substitution Effect When the price of a good changes (decreases),

New England College Substitution Effect and Consumer Behaviors Paper Discussion Board – Substitution Effect

When the price of a good changes (decreases), it becomes less expensive which allows consumers to increase their satisfaction (purchase) for that good. Just the opposite happens when the price of a good changes increases. When the price of a good changes (increases), it become more expensive which changes the consumer satisfaction for that good causing the consumer to seek a substitution. This concept is the substitution effect of the price change. In this discussion forum, identify a consumer product that has decreased in price and discuss the increase in consumer demand for this product. What have consumer substituted because of this decrease in price.

-250 words ( 2 paragraphs)

Example Format : ( Use this as example )

Note – The topic of example is different so its just a reference .

According to McGuigan, Moyer, and Harris (2017), the demand function is a relationship between quantity demanded per unit of time and all the determinants of demand (p. 34). Economist develop the demand schedule (curve) which captures the relationship between prices and quantity demanded if all other factors are held constant. Therefore, demand function becomes all the other factors management will consider: design and packaging of products, the amount and distribution of the firm’s advertising budget, the size of the sales force, promotional expenditures, the time period of adjustment for any price changes, and taxes or subsidies (McGuigan, Moyer, and Harris, 2017 p. 34). Each product has its demand function with managers determining what needs to be considered.

Similarly, Michael Baye and Jeffrey Prince suggests that demand function is a function that describes how much of a good will be purchased at alternative prices of that good and related goods, alternative income levels, and alternative values of other variables affecting demand (p. 36). Basically, it is all factors that influence demand. These factors include a number of things – substituted goods, complementary goods, competitor advertising and promotions, and size of the target market.

Economist use a simple formula to calculate the demand function for consumer good X. Once the demand function is defined, economist can do a number of things like shifts in Demand based on substituted or complementary goods.

What has your research shown to be the basics of demand function.

Reference:

Baye, M. & Prince, J. (2017). Managerial Economics and Business Strategy. New York, NY: McGraw-Hill.

McGuigan, J., Moyer, C., & Harris, F. (2017). Managerial Economics: Application, Strategy, and Tactics. Boston, MA: Cengage Learning.