Economics Assignment: Strategies for Biscuit Demand Inelasticity

This economics assignment analyzes the concept of inelastic demand, specifically focusing on the biscuit market in England. The paper begins by outlining the economic state of England, highlighting its developed economy and high consumption expenditure. It then delves into strategies to make the demand for biscuits more inelastic, which means that changes in price have a smaller effect on the quantity demanded. The assignment suggests that supermarket sellers should focus on controlling the price of raw materials, reducing marketing costs, and offering healthier biscuit options to maintain consumer demand. The analysis includes a discussion of the law of demand, the importance of product differentiation, and the impact of healthy alternatives on consumer choices. The conclusion emphasizes the need for effective business strategies to maintain biscuit sales in the face of competition from substitute products. The assignment also includes references to support the arguments presented, and diagrams to explain the concepts of demand and inelasticity.

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Economics Assignment
Name of the student
Name of the University
Author note

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Table of Contents
Introduction................................................................................................................................3
Economic state of England.........................................................................................................3
Strategies to make the demand of biscuits of England more inelastic.......................................3
Conclusion..................................................................................................................................6
Reference List............................................................................................................................7

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Introduction
As per the economic principle, the demand and the purchasing of the goods would be
changed very less compared to the changing of the price level of that item, this characteristic
is referred as the inelastic demand for a particular product. More specifically, it can be stated
that in case of inelastic demand, the changing of price level would lead to the changes of the
small percentage of the demand for the goods. This paper would shed the lights on the
recommendation for increasing the demand of biscuits more inelastic.
Economic state of England
The economy of England is highly developed, which is in the sixth position as per the
measurement of gross GDP (Jawad et al., 2018). On the other hand, the purchasing power
parity of the nation is also at the higher position; the country is in ninth place as per the
measurement of this macroeconomic indicator. It has a clear indication that the consumption
expenditure of the economy is also high and hence, the residents of England are eligible to
afford the price of the goods. However, it can be argued that the affordability of the price
level of the products is not only dependent upon the income statement of the residents of
England, but also depend upon the demand for the purchasing of goods.
Strategies to make the demand of biscuits of England more inelastic
As per the statistical report, the sales of biscuits are chiefly driven by the supermarkets,
bakery retailers and wholesalers across the country of England. In addition, the UK market
research shows that the specific industry is capable to earn approximately 36% revenue to the
country’s GDP in 2018 (IBIS World, 2019). It is noted that biscuits are normal goods and the
people of the country to have it with tea or coffee or in their evening or morning snacks.
However, if the price of the goods would be increased much, then the people feel reluctant to
have biscuits and would like to replace their preferences with the purchasing of other
substituted goods such as cookies, pastries etc.

P2
P1
Price
Quantity
Demand
Q1 Q2
4
Figure 1: Demand for biscuits
(Source: Drawn by author)
Based on the above drawn diagram, it is clearly observed that with the rising of the price
level from P1 to P2, the demand of biscuits and the quantity purchased by the customers is
declined from Q1 to Q2. Therefore, for maintaining the demand and for making it inelastic,
the sellers of the supermarkets need to take some required strategies.
 In order to maintain the price level of the biscuits over the substituted goods, the
supermarket sellers need to be focused about the price of the raw materials. If the
price of the raw materials or the intermediaries would be increased, then the overall
price of the biscuits would be increased unnecessarily. However, if the economy
would suffer from the inflationary situation, then the price level of the raw materials
would be increased unnecessarily. In this context, it can be suggested that the
supermarket sellers need to concise the budget for the advertisement or marketing
purpose since it would be lying under the operational cost (Fredman and Wikström,
2018). For maintaining the net revenue earning apart from increasing the demand and
sales of biscuits, the sellers need to consider to control or lowering down the
unnecessary marketing as well as operational cost. It is an essential way to control the
rise of the price level of the final goods and hence, the demand for the biscuits can be
improved over the years.

Price
P2
P1
Demand
Quantity Q2 Q1
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 It is noted that the cookies or pastries are not so good for health since the
manufacturers use excessive sugar and high calorie content for preparing it for
enhancing its taste. In order to subsidise the demand and sales of these items, the
biscuit sellers start to sell healthy and organic biscuit, which contains high fibre and
low calories. As per the law of demand, the people are seeking of varieties of foods
(Guerrero-López, Unar-Munguía and Colchero, 2017). If the supermarket sellers will
be able to bring and sell differentiated but healthy biscuits in the market, it will
positively attract the awareness of the customers. Therefore, demand for the items will
be maintained and then the demand for biscuits will be inelastic, which refers that
with the rising of the price level of the biscuits, demand for the items will not be
changed much.
Figure 2: Inelastic demand
(Source: Drawn by the author)
As per the depicted diagram, it is clearly observed that in case of inelastic demand for a
product, the demand for the good would not be changed or varied with the change of the level
of price of the product. Therefore, if the sellers of the supermarkets would start to sell the
organic or herbal healthy biscuits, then demand for the good would not be affected with the
rising of the price level and the customers would prefer more this biscuits over the unhealthy
substituted products.

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Conclusion
It can be recommended that the supermarket sellers need to implement some effective
business strategies for maintaining the sales of biscuit high over the substituted products.
Apart from selling the herbal and organic biscuits, the sellers need to be focused to control
the price of the marketing or advertising cost, so that the price of the final good would not be
so high. Consequently, the consumers would not switch their preferences to purchase the
substituted goods.

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Reference List
Fredman, P. and Wikström, D., 2018. Income elasticity of demand for tourism at Fulufjället
National Park. Tourism Economics, 24(1), pp.51-63.
Guerrero-López, C.M., Unar-Munguía, M. and Colchero, M.A., 2017. Price elasticity of the
demand for soft drinks, other sugar-sweetened beverages and energy dense food in
Chile. BMC public health, 17(1), p.180.
IBIS World, 2019. Biscuit Production - UK Market Research Report. [online] Available at
<https://www.ibisworld.co.uk/industry-trends/market-research-reports/manufacturing/
manufacture-of-food-products/biscuit-production.html> [Accessed 1 October 2019].
Jawad, M., Lee, J.T., Glantz, S. and Millett, C., 2018. Price elasticity of demand of non-
cigarette tobacco products: a systematic review and meta-analysis. Tobacco control, 27(6),
pp.689-695.