ECO 550- Managerial Economics
March 8, 2015
Low calorie microwaveable meals can be a healthy food option for those individuals that are watching their weight or suffer aliments like diabetes. These meals have less calories, sugar and fat and can be prepared in minutes. The more nutritional and inexpensive these types of meals are the more they are desired. They are a reflection of our society in which individuals understand that they need to eat healthier and the time required to prepare a healthy meal from scratch can be difficult to fit in a busy schedule. Understanding the market and the company’s ambitions to earn a significant share of it is why long term capital budgeting decisions have to made in order for the company to gain market share and maintain control of that share.
By keeping the microwaveable meals inelastic (ensuring that the pricing of the product does not affect the way customers feel about the product) customers will continue to purchase them because they are needed to support the customer’s lifestyle. People can live without these food products, but would prefer not to, so pricing is important to maintain demand. The demand function this product directly related to price for the product, any suitable substitutes, advertising costs and the economic viability of its customer base. Understanding the demand function and the product inelasticity provides a target for the company to market its product. “Alberta therefore needs to focus on those variables it can control and underlines the importance of developing new technologies to increase the cost competitiveness of the sector so oil sands development can become price inelastic.” (Yedlin, 2015)
A monopolistic competitive market is outlined by a solid number of consumers and retailers that can be influenced to move from one brand of this type of product to another if prices are increased substantially. . As a result people can change to...