Long Term Investment Decision

Running Head: LONG TERM INVESTMENT DECISION
Long Term Investment Decision
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1LONG TERM INVESTMENT DECISION
Table of Contents
Answer 1..........................................................................................................................................2
Answer 2..........................................................................................................................................3
Answer 3..........................................................................................................................................4
Answer 4..........................................................................................................................................5
Answer 5..........................................................................................................................................6
References........................................................................................................................................8

2LONG TERM INVESTMENT DECISION
Answer 1
In the modern world, health has become one of the increasing concern for people. In
order to achieve a stable health condition people are shifting their food habit towards a more
healthy diet. In the healthy diet, low calorie food takes place of earlier unhealthy and high
calorie food. With changing food habit, demand for low calorie frozen microwaveable food
items have increased. Apart from personal consumption, demand for low calorie food is coming
from restaurant business, schools and other places (Kramer, 2016). The increased preferences
give the firm opportunity to earn a greater profit. The immediate response to an increased
demand is to increase the price. Revenue of a firm depends on both price and quantity sold.
Therefore, before selecting pricing strategy the company should have knowledge about the
elasticity of their product. If demand is elastic, then increasing price means a greater
proportionate reduction in demand, which reduces company’s revenue.
To have a successful price increment of their product, firm should focus on strategy to
make the demand inelastic with respect to price. Food is considered in the category of necessary
goods and hence likely to have a relatively inelastic demand. It becomes difficult to adjust the
demand for these goods (Foxall et al., 2013). However, the demand for low calorie frozen
microwaveable food is relatively elastic. The estimated own price elasticity of demand is -1.19.
An elasticity measure greater than 1means demand changes exceeds change in prices. Therefore,
unless the demand has made relatively inelastic the price hike is not a feasible strategy as it then
adversely affect revenue.
The low calorie frozen microwaveable food industry is now operate in a monopolistically
competitive market. The availability of substitute make product demand more elastic. One way