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Mooncakes – Demand and Supply

Mooncakes – Demand and Supply. 4S Gigi Leung (25) Florence Li (27) Konny Tang (33) Cherry Yeung (39). UFO Mooncake. Content. Introduction – What Are Mooncakes ? Demand – Mooncakes before/during Mid-Autumn Festival

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Mooncakes – Demand and Supply

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  1. Mooncakes – Demand and Supply 4S Gigi Leung (25) Florence Li (27) Konny Tang (33) Cherry Yeung (39)

  2. UFO Mooncake Content • Introduction – What Are Mooncakes? • Demand – Mooncakes before/during Mid-Autumn Festival • Comparison of Different Mooncakes– Traditional Mooncakes VS. Jelly Mooncakes • Case Study– Mooncakes Sellers’ Profit/Loss (Law of Demand & Elasticity of Demand)

  3. Introduction Mooncakes • Traditional food eaten during the Mid-Autumn Festival • The most important item in the Festival

  4. Mooncakes during normal days P($) S1 D1 P1 Q/t 0 Q1

  5. Mooncakes during normal days P($) Before Mid-Autumn Festival, there is no change in both the demand and supply for mooncakes. As shown in the diagram, the supply S and demand D remain constant. The equilibrium price is P1 and quantity transacted is Q1. S1 D1 P1 Q/t 0 Q1

  6. Mooncakes during Mid-Autumn Festival P($) D2 S1 D1 S2 P2 P1 Q/t 0 Q1 Q2

  7. Mooncakes during Mid-Autumn Festival During Mid-Autumn Festival, people will buy mooncakes for both self-consumption and gifts, leading to an increase in demand for mooncakes, the demand curve shifts rightwards from D1 to D2. Mooncake suppliers will also increase their supply of mooncakes, leading to an increase in supply of mooncakes, the supply curve shifts rightwards from S1 to S2. Since the increase in demand is greater than the increase in supply, the price of mooncakes rise from P1 to P2. The quantity transacted increases from Q1 to Q2. P($) D2 S1 D1 S2 P2 P1 Q/t 0 Q1 Q2

  8. Mooncakes during Mid-Autumn Festival During Mid-Autumn Festival, people will buy mooncakes for both self-consumption and gifts, leading to an increase in demand for mooncakes, the demand curve shifts rightwards from D1 to D2. Mooncake suppliers will also increase their supply of mooncakes, leading to an increase in supply of mooncakes, the supply curve shifts rightwards from S1 to S2. Since the increase in demand is greater than the increase in supply, the price of mooncakes rise from P1 to P2. The quantity transacted increases from Q1 to Q2. D1 increase to D2 S1 increase to S2 P1 increase to P2 Q1 increase to Q2 D2 S1 D1 S2 P2 P1 Q/t 0 Q1 Q2

  9. Traditional Mooncakes vs. Jelly Mooncakes • Jelly (冰皮) mooncakes are becoming more popular • due to the change in trend, e.g. advertisement/ fashion • Its demand has greatly increased in the previous years • We are going to look into the relationship between traditional mooncakes and modern jelly mooncakes DERIVED DEMAND SUBSTITUES

  10. Number of Mooncake Products Provided by the Major Producers*1 in the Market *1 Wing Wah, Maxim's, Tai Pan

  11. HAHA, jelly mooncakes are more popular now. I am selling more mooncakes than you, so I am gaining more profit than you! Not necessarily… Cherry A seller of jelly mooncakes Henry A seller of traditional mooncakes, also an expert in Economics

  12. Jelly Mooncakes P($) D2 S1 D1 P2 P1 0 Q/t Q1 Q2

  13. Jelly Mooncakes P($) D2 The demand for jelly mooncakes increases. As shown in the diagram, the demand curve for jelly mooncakes shifts rightwards from D1 to D2. The equilibrium price for traditional mooncakes increases from P1 to P2, and the quantity transacted increases from Q1 to Q2. S1 D1 P2 P1 0 Q/t Q1 Q2

  14. Jelly Mooncakes P($) D2 The demand for jelly mooncakes increases. As shown in the diagram, the demand curve for jelly mooncakes shifts rightwards from D1 to D2. The equilibrium price for traditional mooncakes increases from P1 to P2, and the quantity transacted increases from Q1 to Q2. S1 D1 increase to D2 Supply remains unchanged P1 increase to P2 Q1 increase to Q2 D1 P2 P1 0 Q/t Q1 Q2

  15. Traditional Mooncakes P($) D1 S1 D2 P1 P2 0 Q/t Q2 Q1

  16. Traditional Mooncakes P($) Since jelly mooncakes are substitutes for traditional mooncakes, people now buy fewer traditional mooncakes. There is a decrease in demand for traditional mooncakes. As shown in the diagram, the demand curve for traditional mooncakes shifts leftwards from D1 to D2. The equilibrium price for traditional mooncakes drops from P1 to P2, and the quantity transacted decreases from Q1 to Q2. D1 S1 D2 P1 P2 0 Q/t Q2 Q1

  17. Traditional Mooncakes P($) Since jelly mooncakes are substitutes for traditional mooncakes, people now buy fewer traditional mooncakes. There is a decrease in demand for traditional mooncakes. As shown in the diagram, the demand curve for traditional mooncakes shifts leftwards from D1 to D2. The equilibrium price for traditional mooncakes drops from P1 to P2, and the quantity transacted decreases from Q1 to Q2. D1 S1 D1 decrease to D2 Supply remains unchanged P1 decrease to P2 Q1 decrease to Q2 D2 P1 P2 0 Q/t Q2 Q1

  18. See? Both of price and quantity transacted of jelly mooncakes increases while those of traditional mooncakes decrease, and that means I earn more than you! However, I can lower the price of the mooncakes to attract more buyers, so the quantity demanded will increase according to the law of demand. Cherry A seller of jelly mooncakes Henry A seller of traditional mooncakes, also an expert in Economics

  19. Quantity Demanded The amount of good or service consumers are willing to buy at a given price over a period of time, other things being constant. However, I can lower the price of the mooncakes to attract more buyers, so the quantity demanded will increase according to the law of demand. Law of Demand A decrease in the price of a good will result in an increase in its quantity demanded over a period of time and other things being constant, or vice versa. Henry A seller of traditional mooncakes, also an expert in Economics

  20. Traditional Mooncakes P($) D P1 Loss P2 Gain 0 Q/t Qd1 Qd2

  21. Traditional Mooncakes P($) Traditional mooncakes have an elastic demand. As the price goes down from P1 to P2, the quantity demanded for traditional mooncakes will increase from Qd1 to Qd2. The percentage increase in quantity demanded is greater than the percentage decrease in price. The gain in the increase in quantity demanded is greater than the loss in decrease in price. Therefore, the total revenue of traditional mooncakes increase. D P1 Loss P2 Gain 0 Q/t Qd1 Qd2

  22. Traditional Mooncakes P($) Traditional mooncakes have an elastic demand. As the price goes down from P1 to P2, the quantity demanded for traditional mooncakes will increase from Qd1 to Qd2. The percentage increase in quantity demanded is greater than the percentage decrease in price. The gain in the increase in quantity demanded is greater than the loss in decrease in price. Therefore, the total revenue of traditional mooncakes increase. P1 decrease to P2 Qd1 increase to Qd2 Increase in Qd > Decrease in P Gain in Qd > Loss in P Total revenue increases D P1 Loss P2 Gain 0 Q/t Qd1 Qd2

  23. So in this case, my total revenue increases because I lowered the prices of my products. And since we are in competitive demand, the demand for jelly mooncakes will fall. So how does it affect my total revenue? Henry A seller of traditional mooncakes, also an expert in Economics Cherry A seller of jelly mooncakes

  24. Jelly Mooncakes P($) D1 S1 D2 P1 Loss P2 0 Q/t Q2 Q1

  25. Jelly Mooncakes P($) Since the two products are in competitive demand, the increase in the quantity demanded of traditional mooncakes will lead to a decrease in the demand for jelly mooncakes. There will be a leftward shift in the demand curve from D1 to D2. Thus, there will be a decrease in the sales revenue of jelly mooncakes. D1 S1 D2 P1 P2 0 Q/t Q2 Q1

  26. Jelly Mooncakes P($) Since the two products are in competition, the increase in the quantity demanded of traditional mooncakes will lead to a decrease in the demand for jelly mooncakes. There will be a leftward shift in the demand curve from D1 to D2. Thus, there will be a decrease in the sales revenue of jelly mooncakes. D1 Substitutes for each other D1 decrease to D2 Supply remains unchanged P1 decrease to P2 Q1 decrease to Q2 Total revenue decreases S1 D2 P1 P2 0 Q/t Q2 Q1

  27. Oh my! This is so confusing! So who is earning more? No worries, let me summarise all the ideas. Cherry A seller of jelly mooncakes Henry A seller of traditional mooncakes, also an expert in Economics

  28. Conclusion Since jelly mooncakes are becoming popular, demand for traditional mooncakes will decrease while the demand for jelly mooncakes increases. The price and quantity transacted of traditional mooncakes will decrease. Conversely, the price and quantity transacted of jelly mooncakes increases. Henry A seller of traditional mooncakes, also an expert in Economics

  29. However, the traditional mooncakes suppliers may lower their to attract more customers to increase their sales revenue. Then the demand for jelly mooncakes will decrease, so is the sales revenue of jelly mooncakes. The total revenue of both kinds of mooncakes are constantly affecting each other. There are also many other factors influencing the revenues. Therefore, it is hard to tell who is gaining more profit. I finally get it! Thanks Henry! Cherry A seller of jelly mooncakes Henry A seller of traditional mooncakes, also an expert in Economics

  30. References • http://www.jetsoguide.com/mooncake/ • SPCS economics notes

  31. The End

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