Transcript The Park` N Shop

Economics Project
The sharp Reduction on the
price of the fresh pork in the
supermarkets
Presented by
Munsang College
Flora Tsang Yin Fong
Eva Lo Cheuk Yee
Sara Choi Ka Yan
(End the presentation)
Event Introductory
03/05/02
The supermarkets (Park’ N Shop and Wellcome)
reduced the price of the fresh pork sharply,
04/05/02
The supermarket asked people to advertise in
the wet market.
05/05/02
The wet market sellers asked the pork supplier,
Ng Fung Hong (五豐行) to reduce the wholesales
price to them but not succeed.
06/05/02
There were no fresh pork supplied in both the
wet market and supermarkets.
The Triangular Relationship
The supermarket
The Buyer
Please CLICK on either button!
The wet market
(Home)
The Supermarkets
(The Park’ N Shop)
超市以低於每斤二十二元至二十四元零售價
出售豬肉，可能是因減省處理鮮豬程序而令
成本下降。一般買手由五豐行購得豬肉後，
需要再經兩個程序才到達市民手上，而超市
卻可減省有關程序，直接向市民出售豬肉，
在成功控制成本的優勢下，才能以較低價格
出售。
百佳發言人說他們藉減價為消費者提供便宜
鮮肉，他們以減低營運成本及提高生產力，
務求達到薄利多銷的效果。
(The above is quoted from the SingTao Daily)
The Supermarkets
(The Park’ N Shop)
1. Why could the Park’ N Shop
reduce the price of the fresh pork
so sharply?
2.Why long queues are
seen in the supermarkets?
Please CLICK on either bubble!
(Back to Triangular
Relationship)
The Supermarkets
(The Park’ N Shop) Referring to Question 1
S
S’
P
P’
D
Q Q’
Loss in Revenue
S
S’
P
P’
D
Q
Q’
Gain in Revenue
The Park’ N Shop successfully
reduces the cost of production
which could then increase the
supply. This causes a decrease in
the market price and an increase
in the quantity transacted. So the
total revenue of the supermarket
will either increase or decrease,
depending on the elasticity of
demand.
The Supermarkets
(The Park’ N Shop) Referring to Question 1
What’s the elasticity of Demand for fresh pork?
As the fresh pork in the wet market and those in the
supermarket are close substitutes. Buyer could easily
turn to buy the pork from another market when either
market is setting a higher price for the pork. So the
demand for the fresh pork is elastic.
Conclusion:
Since the demand of the pork is elastic, by increasing
the supply of the pork in the supermarket, the
percentage decreases in price is less than the
percentage increases in the quantity transacted. The
total revenue increases.
(Back to bubbles)
The Supermarkets
(The Park’ N Shop) Referring to Question 2
S
Pe
mkt.
price
(Excess
Demand)
D
As the price of the fresh
pork in the supermarket
is set below the
equilibrium price,
quantity supplied is less
than quantity demanded,
excess demand occurs.
Long queues are found
in the supermarkets.
Qs Qe
(Qt)
(Back to bubbles)
The Wet Market Sellers
1. Why the wet market sellers asked
Ng Fung Hong (五豐行) to reduce
the wholesaling price to them?
2. Why the wet market sellers request
the supermarket not to reduce the price
of the pork so sharply?
Please CLICK on either bubble!
(Back to triangular relationship)
The Wet Market Sellers
Referring to Question 1
S
S’
P
P’
D
Q
Q’
The sellers of the wet
market asked Ng Fung
Hong to reduce the
wholesaling price of the
pork to reduce their cost
directly. By reducing the
cost, supply will increase.
Then price will decrease
and quantity transacted
will increase. This would
help the sellers of the wet
market to compete with
the supermarket.
(Back to Bubbles)
The Wet Market Sellers
Referring to Question 2
S
P
P’
D
D’
Q’
The pork in the wet market and the
pork in the supermarkets are close
substitutes. When the supermarket
set the price of the pork at $19, the
quantity demanded of the pork in the
supermarket will increase which leads
to a decrease in the demand of the
pork in the wet market. This will
decrease the total revenue of the seller
in the wet market.
Q
(Back to Bubbles)
The Choice of the Buyer
The H.K. government doesn’t take any
action to affect the free trade of pork
within H.K. Therefore the buyer would
prefer to buy the cheaper & higher
quality one. Because of this, Wellcome
& Park’n shop set a price lower than the
wet market to attract more business. As
a result the buyers tend to buy pork
from the two supermarkets.
As it is cheaper, I’ll
buy more!
P
P’
D
Q
Q’
The Choice of the Buyer
Since the pork sold in the
butchers and the one
sold in the two super
markets are substitutes.
When the price of pork
sold in the super market
decreases, the demand
for the pork sold in
butcher decreases.
I’ll choose to buy the pork in the
Supermarket as it is much cheaper!
S
D
D’
Back to triangular
Relationship)