Objective: Engage with a real-world scenario in this interactive case study, designed to deepen understanding of supply, demand, and elasticity concepts. Over five years, students will analyse Green Groccers’ responses to market changes, calculate PED and PES, and apply economic theories to practical business decisions.
Case study: Green Groccers, owned by the Grocc family, is a small, independently owned shop in a bustling town. It primarily sells fresh produce, dairy, and packaged goods. Over a five-year period, Green Groccers faced various market challenges and opportunities, compelling them to adapt their supply and demand strategies.
Year 1: Market Entry and Initial Challenges
- Demand Factor: High consumer interest in organic products.
- Supply Factor: Limited supply of organic produce due to fewer partnerships with organic farmers.
Questions:
- Explain how consumer interest in organic products affects the demand curve for Green Groccers.
- Draw a supply and demand diagram showing the effect of increased interest in organic products.
- Calculate and comment on the Price Elasticity of Demand (PED) if the quantity demanded of organic apples increased by 10% when their price decreased by 5%.
Year 2: Weather Impact and Supply Constraints
- Demand Factor: A health trend boosts demand for fresh juices.
- Supply Factor: Unfavorable weather conditions reduce the supply of key fruits.
Questions:
- Discuss the impact of weather conditions on the supply curve for fresh fruits.
- Illustrate the supply curve shift due to weather conditions on a diagram.
Year 3: Economic Changes and Pricing Strategies
- Demand Factor: Economic downturn leads to decreased consumer spending.
- Supply Factor: Reduced operational costs due to technological advancements in storage.
Questions:
- Explain the effect of an economic downturn on the demand for Green Groccers’ products.
- Draw a supply and demand diagram reflecting the economic downturn and reduced operational costs.
- Calculate and comment on the PED for dairy products if the quantity demanded decreased by 7% after a 3% increase in price.
Year 4: Competitive Market and Strategic Responses
- Demand Factor: A new supermarket chain opens nearby, offering similar products.
- Supply Factor: Green Groccers secures a deal with local farmers for exclusive supply of certain vegetables.
Questions:
- Explain the likely impact of new competition on Green Groccers’ demand curve.
- Draw a demand and supply diagram showing the effect of exclusive supply deals.
- Calculate and comment on the PES for the exclusive vegetables when their quantity supplied increased by 12% following a 5% increase in the price they can sell them for.
Year 5: Market Stabilization and Growth Opportunities
- Demand Factor: Increasing local population leads to higher overall demand.
- Supply Factor: Green Groccers expands its storage capacity, enabling larger stock quantities.
Questions:
- Discuss how a growing local population influences demand for grocery items.
- Draw a diagram illustrating the combined effect of increased population and expanded storage on supply and demand.
- Calculate and comment on the PED for packaged goods if the quantity demanded rises by 9% due to a 4% reduction in their prices.