Microeconomic Analysis of Samuel Adams, ECO 201 Report

This report presents a microeconomic analysis of Samuel Adams, focusing on supply and demand dynamics, and price elasticity of demand. The analysis explores the factors influencing market demand, including income, price of related goods, taste, and consumer expectations. The report examines the company's net income trends and the impact of input costs, technological advancements, and competitor pricing. It also delves into the concept of price elasticity of demand for beer, considering factors like the availability of substitutes, time, and the nature of the good. The report concludes by highlighting the relationship between demand elasticity and revenue, and how Samuel Adams can leverage its low prices and inelastic demand to maintain profitability. The paper also includes references to relevant academic research.

Running head: SAMUEL ADAMS BUSINESS ANALYSIS
SAMUEL ADAMS BUSINESS ANALYSIS
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SAMUEL ADAMS BUSINESS ANALYSIS
Supply and demand conditions
The success of an organization is denoted by the change in consumer demand overtime.
According to the law of demand, price and demand has inverse relation such as a rise in price
causes a fall in demand for normal goods and vice-versa (Acuff & Murphy, 2017). Goods that
has a good brand value in the market can charge a higher price that is effective for the
organizational development. Market demand is the summation of individual demand for a
particular good with respect to cost effective techniques and outcomes. Samuel Adams has
several customers in United States who consume the good in bulk amounts. The company
supplies beer in United States due to its potential customers. The company has effectively
increased in supply in places like England and New Zealand that supplies goods in bulk amounts.
Hops for beer are grown in Cimcoe, Citra Centinnial, Chinnok, Mosaic and Amarillo that is good
for the creation for quality goods that is effective for the business development (Bonsu & Kuofie,
2019).
Market demand is denoted by several factors apart from consumer demand such as
income, taste, price of related goods, expected future price, population and demographics.
Income plays a huge role in the sale of the good because Samuel Adams has been a well-
established firm in US that has a brand value. An increase in income will cause people to buy
more of beer. Thus income and beer are positively related. Price of related goods is another
impact parameter that can affect marker demand (Malone & Lusk, 2018). Higher availability of
substitute product will cause consumers to shift their demand for other goods that has low price.
Taste and preference varies among consumers such that can change the overall market demand.
Samuel Adams keeps a price that is lower than the competitive price level which attracts people
to consume their beer. If customers expects that price of goods will go up in future then they will

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buy more now that will increase the consumer demand and marker demand. Population and
demographics denote market demand because Samuel Adams produce high quality beer has a
high value that is consumed in the advanced economies (O'Connor et al. 2017).
Table 1: Net income derived from annual revenue of the firm
Source: (Goergen, 2017)
From Table1, it is evident that net income shows a fluctuating trend. The net income
went up for two consecutive years, 2014 and 2015 respectively which eventually declined in
2016. The net income of Samuel Adams increased in the end of 2017 by huge proportion. This
can be related with input costs, technological improvement, price substituites, number of firms in

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SAMUEL ADAMS BUSINESS ANALYSIS
market and expected future price. Samuel Adams uses world class techniques to prepare its
products which is cost efficient. This lower input cost enables Samuel Adams to prepare beer at
low cost and sell them at low prices that gives them a comparative advantage in production. The
major competitors of Samuel Adams are Yuengling, Anheuser-Busch, Coors Brewing Company,
South African Brewers and Pabst Brewing Company respectively (Malone, 2017). Prices
provided by Samuel Adams are comparatively lower than that provided by its competitors. Prices
are expected to go up in the future and the company is preparing to come up with new products
in several forms. If consumers expect that price will go up in the future, then current
consumption goes up. Therefore, there is an uncertainty whether revenues will go up or down in
the future.
Price elasticity of demand
The price elasticity of demand is defined as the degree of responsiveness of demand with
respect to change in price. Beers have inelastic demand because it is an item of addiction such. A
change in price will lead not change the demand by excessive amounts. This enables Samuel
Adams to raise the price and still extract similar level of sales. Inelastic demand means the fall in
demand is lower than rise in price level.
Elasticity is dependent on several factors like
 availability of substitutes
 passage of time
 necessity or luxury
 Share of overall budget.

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SAMUEL ADAMS BUSINESS ANALYSIS
Availability of substitutes will enable people to consume more of the other good if they have
the same value to the customer. Boston Beer has several substitute beers and provide range of
substitute drinks that can be used in place of Samuel Adams (Lindvall, 2019). Time serves as one
of the most important parameters because in short-run consumer preferences cannot change
making the price elasticity of demand to remain inelastic. Whereas, in the long run demand for
beer can be changed such that consumers might have wider options or change their preference
considerably, which will lead to a reduction in consumer demand.
The nature of the good denotes the elasticity of demand because necessary goods are
required daily and a price change does not affect the quantity demanded leading to inelastic
demand. Luxury goods has elastic demand because a small increase in price or income will cause
a greater fall in demand (Casavant, 2017). Beer is considered as a normal or necessary good
depending on the person who is consuming it. If the person is addicted to beer, it will be a
necessary good and vice-versa. The price elasticity of demand remains high for goods that has a
large share of the budget with respect to frequent usage and high cost. An increase in the price of
products will cause consumers to switch to other incentives.
Demand elasticity and revenue has an inverse relation between each other. When demand
is inelastic, the rate of price change is larger than rate of change in quantity demanded. As a
result, revenue will not fall by equal amounts that will not change the amount of quantity
demanded. Moreover, Samuel Adams sells products at low price that refrains customers from
switching to other substitutes (Goergen, 2017). Thus, Samuel Adams can raise price and still
extract huge revenues due to inelastic demand and provision of goods at low prices. However,
Samuel Adams provides the most expensive beer of the world at $199 per bottle, although
expensive beer has been banned by government due to its high alcohol content.

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Reference List
Acuff, S. F., & Murphy, J. G. (2017). Further examination of the temporal stability of alcohol
demand. Behavioural processes, 141, 33-41.
Bonsu, S., & Kuofie, M. (2019). Small Business Survival. Journal of Marketing &
Management, 10(1).
Casavant, B. (2017). Three Essays on Craft Beer and Craft Breweries.
Goergen, E. (2017). American Beer: Community, Tradition and Culture (Doctoral dissertation,
Goucher College, Baltimore, MD).
Lindvall, J. (2019). A Strategic Audit of Boston Beer.
Malone, D. J. (2017). Incorporating Behavioral Principles in Primary Data Collection and
Analysis with Application to Beer Demand (Doctoral dissertation).
Malone, T., & Lusk, J. L. (2018). If you brew it, who will come? Market segments in the US
beer market. Agribusiness, 34(2), 204-221.
O'Connor, J. P., Aboagye, E. O., Adams, J. E., Aerts, H. J., Barrington, S. F., Beer, A. J., ... &
Buckley, D. L. (2017). Imaging biomarker roadmap for cancer studies. Nature reviews
Clinical oncology, 14(3), 169-186.