Case Studies on Demand Analysis

1. The Times of India reported that the toll on the Mumbai- Pune Express was raised from Rs 100/- to Rs 150/-.The authorities concerned justified the increase on a host of factors including rising labour and maintenance cost. Following the toll increase, traffic fell by 5 %.The chairman of bridges finance auditing committee, warned that the toll increase could affect toll revenue. a. b. c. d. Critics and The Maharashtra Car Owners Association contend that the decision to increase the toll would be result in long term revenue loss to the authorities. Comment. Calculate the effect on volume of traffic if the increase in toll would be to the extent of 25%. By what percentage would revenue change as a result of the increase in toll prices? If the toll is reduced by 10%, will it result in increased revenue?

2. Shalimar Foods sells Vegetarian Corn Samosa plates for INR 30 each, and serves an average of 625 customers per week. During a recent promotion on the eve of Indias Independence Day, Shalimar cut its price to INR 25 each and observed an increase in sales to 750 plates per week. a. b. c. d. Calculate Shalimars price elasticity of Demand Shalimar is considering permanently lowering its price to INR 28 to increase revenue. Explain How many plates should Shalimar expect to sell at the new price? Does the move make sense in the light of Shalimars intent to increase revenue?

3. The price of crude oil continued to rise. As a result, the petrol and diesel prices also took an upward move. The oil refining companies studied the trend of the price rise in the last two years and reckoned that, though reluctantly, customers submitted to the price rise. However, after an unaffordable petrol price rise, a small class of people shifted from using their personal vehicles to public transport. Moreover, for travelling to short distances, they dropped using petrol run vehicles, and adopted bicycles that became the need of the hour. The oil refining companies studied the price elasticity of demand for petrol in short run and long run. And they reckoned that the short run elasticity for petrol is 0.2. Whereas, the long run elasticity is 0.4. The petrol authority decided to increase the price by 10%. a. b. c. d. What will be the change in demand when the price of petrol increases by 15%? In the long run, will there be a national agenda to find alternatives to petrol/diesel run vehicles if the price increases steadily? Explain What percentage of the oil companies revenue changes owing to the change in the price rise by 15%? Explain the nature of Elasticity of Demand between Car and Bicycle.

4. You run a small business and would like to predict what will happen to the quantity demanded for your product if you raise your price. While you do not know the exact demand curve for your product. You do know that in the first year you charged rupees 45 and sold 200 units. And that in the second year, you charged rupees 30 and sold 1800 units. a. b. c. d. If you plan to raise the price by 10% what would be a reasonable estimate of what will happen to quantity demanded in percentage term? If you raise your price by 10%, will revenue increase or decrease? Your decision of increasing the price is justifiable? Explain To increase the demand of your product, should you decrease the price? Explain

5. The worlds renowned networking website ABC, after an overwhelming response of account holders, observed that as the months passed by, the opening of new accounts continued to decrease. To be in the market and hold the account holder from going to a newly opened rival networking giant DEF, ABC decided to add some more exciting features and then conducted an online survey. The online survey report was used by the experts to conclude that the addition of new features on an intermittent basis would not only retain the old account holders, but also would attract potential users to open fresh accounts. They also realized that promotions and advertisements would play an important role to keep the website live among masses. a. b. c. Which are the methods of demand forecasting has been used? Write a few factors that determine the demand of the social networking website? Explain the type of elasticity of demand that is mentioned in the above case study?