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Finance And Accounting Essay

2370 words - 9 pages

Demand and Supply

Demand and Supply are two crucial elements of a business’ success. Demand is the amount of the product/service that is required to meet need. Supply, is the amount of a product/service that is available to fulfill that need (at a specified price).
As the service offered by the business is one of luxury, the amount demanded by customers will be highly influenced by the economic state. Therefore the main factor that will affect demand for it is price i.e. ticket, food and merchandise prices. This means that in times of recession and during periods of wide spread financial difficulty, the business is likely to see a decrease in demand for their service. As stated in (Mintel 2010) ‘Half of those who participate in leisure activities have cut back on at least one activity during the recession. Three out of ten have cut back on three or more activities.’’ However, fortunately for the business, more recent reports highlight that this may not be a worry ‘’The figures for the third quarter in 2013 show consumer spending activity increased by 0.8%, faster than any other quarter since 2010.’’ (Mintel 2013). Other factors that may also affect the demand of the business’ services include, the quality of the service, the taste of the consumers, the size of the population, advertising and the number of competitors in the market (Econport 2006) – which isn’t a concern due to the rarity of the service. (Appendix 1)
The amount of product/service that the business is willing to supply relies on how much customers are willing to pay. Producers will try to get the highest price possible whereas customers will try to get the lowest, meaning the price of a product eventually balances out at the ‘equilibrium’ price. In this case, the business needs to cover overhead such as fixed and variable costs in order to breakeven and/or start making profit. With this business, there is a set amount of supply (seats) available to sell, unlike a clothing manufacturer etc. who can make more or less, as required. This means that the business will have to abide by the equilibrium to ensure their supply being bought. (Appendix 2)
Price Elasticity

Price Elasticity of demand is the amount the demand for a product is affected by change in price. PED = (% Change in Quantity Demanded)/(% Change in Price) (Sloman and Wride, 2009: 57). If the demand for a product decreases massively due to a change in price, it is said to be elastic. Adversely, if the demand for a product changes only slightly, or not at all, the product is inelastic. In the case of this business, it would be how much would the price of tickets affect the amount of people that attend the games which is shown in appendix 1.
Price Elasticity of supply is the amount a supplier can react to a change in price. PES = (% Change in Quantity Supplied)/(% Change in Price) (Sloman and Wride, 2009: 66). For this business e.g. if the overall price of basketball tickets rose, how much would the business be able to...

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