Part 1
Summary
The article chosen is about Domino’s Pizza Malaysia has been allocated with RM100 Mil so that Domino’s Pizza Malaysia and Singapore executive chairman Datuk George Ting want to expand Domino’s Pizza to Sabah and Sarawak by next year which target to be the Malaysia’s leading outlet in 2020. Firms. While the remaining of the assigned gross will plan to use it for technology improvement and the company also planned to open other 38 new stores in 2017. Datuk George Ting thinks that Malaysia holds majority of the potential so that he will be continue to expand more firms in Malaysia. This is because Domino’s Pizza growth rapidly in the past few years which are favoured and credited by customers. Besides, according to Datuk George Ting, the company has growth steadily by 60% on the online sales which from RM 39mil in 2015 increase to RM 63mil in 2016. This induce him to indicate that the digital and online segment will keep growing and make a greater contribution to the overall sales. This article is related to the topic of supply which Domino pizza had increase in the number of firms in Malaysia. As we can see, there are more firms enter into market so that they will produce more goods to satisfy customers’ needs. In other words, when increase in the number of firms will bring up the quantity of products that supply in the market while the decrease in the number of firm will lead to a decrease in supply. For example, when more firms of Domino pizza enter the market, there will be more seller exist in the market thus the supply increase.
Part 2
Demand and supply
Domino pizza is a well-known fast food as it has a lot of different favours which gain popularity from customers successfully. Demand helps the growth of economic, the so that business want to increase the demand to gain more profit. According to the law of demand, the lower the price, the higher the quantity demanded. The demand of pizza has a few of determinants which consists of income, consumer preferences, price of other goods. (Sloman, Wride and Garratt 2012, p.34). Different people will have different preference and this might affect the demand of pizza from Domino’s pizza. For example, some people like to eat domino pizza compared to Pizzahut, therefore the demand for Domino’s pizza will increase. Besides, pizzas are considered as normal good, when people’s incomes increase, the demand of Domino’s pizzas will also increase, this is because people will have the ability to spend more so that they will treat themselves to eat pizza. The price of other goods have a big impact to the demand of pizza from Domino’s pizza, people will choose to eat Domino’s pizza if their competitor charges a higher price compared to Domino’s pizza. Therefore, the demand decrease. According to the law of supply, the higher the price, the higher the quantity supplied which shows a direct relationship between the price and quantity supplied. There are few determinant of supply which includes the price of input, technology and prices of factors of production. (Sloman, Wride and Garratt 2012, p.40). If the prices of pizzas’ inputs decrease, the cost of production will also decrease. This will lead to an increase of the profit, so that they will produce more, therefore the supply of pizza will be increase. On the other hand, the technological improvements allow the producer to produce more as it help to decrease the production cost and increase the profit, therefore the supply increase as well.
Price elasticity
Price elasticity of demand measure the elasticity of the quantity demanded of a commodity to a change in price. For the given percentage change in price, elastic demand hold a large percentage in change in quantity demanded. Likewise, inelastic demand hold a small percentage change in quantity demanded. A good or service is considered inelastic if slight change in price does not affect much in the quantity demanded or supplied. There are many factors that will affect the demand of elasticity which such as availability of close substitutes, the degree of necessity, habit of customers and so on. If the substitutes available in a large number, the elasticity of demand will be higher. This is because people can always have many other choices of substitutes to replace it which means that small change in price will cause the big impact to the demand. For example, if the price of Domino pizza increase, they might refuse to choose to eat Domino’s pizza, because consumers still have other choices such as Pizzahut, Cottage pizza and so on. Therefore, pizza can be considered as an elastic good as a small change in price will lead to a large change of demand. On the other hand, some people will have their own eating habits and these people will be less sensitive to the price change. This is because if they are pizza lovers, they will still buy it with a higher price instead of change their preference to eat other foods, so that this will be considered as inelastic demand in this situation. In a nut shell, to make the pizza more inelastic, Domino’s Pizza can come up with new ideas to make it more unique compared to their competitor, such as create a healthy favour of pizza but not just keep it as a fast food. This is because when Domino’s Pizza has different and unique type of pizza, people cannot find other substitute easily to replace it which will make it more inelastic.
Market equilibrium
When that is equal between quantity demanded and quantity supplied which means that the supply and demand curves intersect, the market is equilibrium. If a market reach the point of equilibrium, that will be no reason to change the point. However, if a market is not at the point of equilibrium, then economic should make it move toward to the equilibrium price and equilibrium quantity. Besides, when the quantity supplied is higher than quantity demanded, there will be access supply which creating surplus. Once surplus occurs, the market price will decrease. For example, if the price is higher than the equilibrium price, producer will tend to produce more. But if consumers do not buy much, it will be a lot of unsold surplus of goods, therefore, producer should cut off the price to get rid of the problem of surplus to stay competitive. When the price is lower, quantity demanded for the product will increase until it reach the equilibrium. However, when the quantity demanded is higher than the quantity supplied, there will be exist the excess demand which creating shortage. Once the shortage occurs, the market price will increase. For example, when there is not enough goods to satisfy customer’s need, producers will increase the price and improve the quantity of the products. Once the price is increase, it might be too expensive for some customers and they will decrease the demand for the products. Meanwhile the available quantity of product will meet the other customers, therefore, the market equilibrium will be reached. In conclusion, if a surplus exists, the price should decrease in order to encourage the additional quantity demanded and drop the quantity supplied until the problem of surplus is eliminated. Likewise, if a shortage exists, price must increase in order to encourage excess supply and decrease the quantity demanded until the problem of shortage is eliminated.
Part 3
Diagram 1.1 Diagram 1.2
The quantity of a product demanded is based on the price and many other factors. Demand curve is the combination of the price and quantity that plotted on a curve which quantity represented on the horizontal axis and price represented on the vertical axis. Normally, a demand curve is downward-sloping and it reflects the degree of willingness from customers to consume more of the products at a lower price. Any change other from price factors will shift in the demand curve, however the changes in the price of the products will be can movement along the demand curve. For example, from the diagram 1.1, when the the demand for the Domino’s pizza increase, the demand curve shifts to the right. Equilibrium price increase from P1 to P2 and the equilibrium quantity increase from Q1 to Q2.
The quantity of a product supplied is based on the price and many other factors. Supply curve is the combination of the price and quantity which plotted on a curve. The price represented on the vertical axis and quantity represented on the horizontal axis. Normally, a supply curve is upward-sloping that reflects the degree of willingness of producers to sell more of the products with a higher price in the market. If there is a change with non-price factors will make a shift on the supply curve, however thw changes in the price of the products will be moving along the supply curve. For example, from the diagram 1.2, when the supply for the Domino’s pizza increase, the supply will curve shifts to the right. Equilibrium price decrease from P1 to P2 and the equilibrium quantity increase from Q1 to Q2.