ANSWER

1. Demand Elasticity about Price: Demand elasticity evaluates how responsive a product’s quantity sought is to a change in price. The formula is used to compute it:

Price Elasticity of Demand = % Change in Demanded QuantityPrice Change as a PercentagePrice Elasticity of Demand = Price Change as a PercentageChange in Demanded Quantity by Percentage​

The following factors affect the price elasticity of demand:

    Substitutability: Consumers are more likely to move to alternatives when a product’s price increases if there are near substitutes available, making demand more elastic.

    Luxury vs. Necessity: Demand for necessities is typically inelastic because people need them regardless of price changes. As customers may readily reduce their consumption as costs rise, luxuries typically have more elastic demand.

    Proportion of Income: A product’s price adjustment will significantly impact demand if it accounts for a considerable portion of a consumer’s income, making it more elastic.

    Demand elasticity can alter over time or time horizon. Consumers needed more time to change their behavior in the short term, which would result in a more inelastic demand. Long-term adjustments they can make will result in more elastic demand.

Effect on a company’s strategy:

    A company must exercise caution when considering price increases for products with elastic demand since they may result in a sizable decline in sales. Conversely, price reductions may enhance revenue due to higher sales volume.

    When demand is inelastic, businesses can raise prices without experiencing a significant drop in sales. They should still exercise caution to stay below the point where demand becomes elastic.

    Accurately forecasting revenue changes, setting the best pricing strategies, and preparing for market swings are all made possible by understanding price elasticity.

2. Comparative Advantage: According to the economic theory of comparative advantage, people, regions, and nations should focus on producing the commodities and services for which they have the lowest opportunity costs. This encourages international trade and results in more effective deployment of resources.

Real-world illustration Think about nations A and B. Both wheat and textiles can be produced in Country A. However, it can produce more wheat per unit of resources than textiles. Country B can also produce both items, although it has a more robust edge in textiles. In this case, Country A should concentrate on producing wheat, while Country B should focus on textile production. By exchanging these items, both nations can get more of each product at a lower opportunity cost.

3. Porter’s Five Forces Theory: Porter’s Five Forces is a framework for examining the industry’s competitive landscape. It takes into account five leading factors that affect a company’s competitive position:

    The threat of New Entrants: The simplicity with which new businesses can enter the market. A more favorable climate for competition results from higher entrance barriers.

    Suppliers’ capacity to influence terms of negotiation, including pricing. For businesses, having few suppliers is advantageous.

    Buyers’ Bargaining Power: The capacity of buyers to bargain for conditions and pricing. Strong buyer bargaining power is advantageous to a business.

    The threat of Substitute Goods or Services: The presence of substitute goods or services that meet the exact requirement. An industry loses appeal as there are more alternatives.

    Competitive rivalry’s level of ferocity among already-established businesses. Profitability is under strain from increased competition.

4. Value Creation Theory: Value creation theory describes how a business creates value for its stakeholders and customers. It entails delivering goods and services that satisfy customers’ wants and needs while frequently exceeding their expectations. Customer loyalty, competitive advantage, and long-term success are all influenced by value creation.

5. Entry Barriers: Entry barriers make it difficult for new businesses to enter a market and successfully compete. They come in a variety of shapes:

    Economies of scale make it difficult for new competitors to compete on pricing because larger companies can produce at lower costs.

    Brand Loyalty: Long-standing brands have the trust of their customers, making it difficult for new brands to take off.

    Capital Needs: Some sectors demand sizable up-front investments, discouraging new competitors.

    Regulatory Barriers: Complying with legal and regulatory obligations can be difficult and expensive.

    Industries that rely on network effects, in which a product’s value rises with the number of users, include social media. This makes it difficult for new competitors to draw users.

    Access to Distribution Channels: Established businesses may have close ties to distributors, which would restrict access for newcomers.

Comparing Essays on Dunkin’ Donuts and Amazon: While both essays highlight competitive advantage, they do so in the context of different businesses. Dunking Donuts and Amazon use different business models and marketing approaches. Although both articles examine competitive advantage, they most likely focus on distinct elements because of the differences in the companies.

    Amazon: The paper on Amazon may highlight how its technological innovation, broad product selection, effective supply chain management, and customer-centric attitude contribute to its competitive advantage. Focus points could include Amazon’s use of data analytics, Prime membership program, and e-commerce supremacy.

    Dunking Donuts: The essay on Dunkin’ Donuts may highlight how its franchise strategy, diversified menu, and emphasis on convenience provide it a competitive advantage. It is possible to draw attention to the business’s local presence, coffee selections, and loyalty programs.

Both businesses may concentrate on factors including differentiation, customer experience, and market positioning to acquire a competitive edge. Each paper will likely discuss their tactics to add value for clients and differentiate themselves in their respective businesses. The comparison might demonstrate how various market dynamics and consumer preferences necessitate distinct methods for competitive advantage depending on the industry.

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