Econ dis
Please read the article: http://www.priceintelligently.com/blog/bid/184451/How-Starbucks-Uses-Pricing-Strategy-for-Profit-Maximization
1) What is a purely competitive market?
2) Why type of market would Starbucks belong to?
3) Why do you think Starbucks increased its prices by 1%, and do you believe that this action is risky, or a safe bet?
First, Answer this discussion as 250 words.
Second, And choose two of classmates’ discussion to respond as 100 words each
Monday11月 13 at 11:14上午
1) What is a purely competitive market?
Because sellers must take the current market price a purely competitive market is also called a "price takers" market. The firm can sell as much as it can produce at the existing market price, so demand is not a constraint for the firm. Revenue will be simply the market price multiplied by quantity produced.
2) Why type of market would Starbucks belong to?
Starbucks should belong to the perfect competition market. Perfect competition is a market system characterized by many different buyers and sellers. In the classic theoretical definition of perfect competition, there are an infinite number of buyers and sellers. With so many market players, it is impossible for any one participant to alter the prevailing price in the market. If they attempt to do so, buyers and sellers have infinite alternatives to pursue.
3) Why do you think Starbucks increased its prices by 1%, and do you believe that this action is risky, or a safe bet?
I think Starbucks raised their prices not only to keep their business but to make more profit. I think that due to social media, Starbucks is competing not only with CoffeeBean but other little coffee shops. I am a die-hard Starbucks drinker so I think the price increase is a safe bet. They may not have crazy flavors but I think they do have quality coffee. I remember paying only $3.25 for my drink and now it's almost $5 but I don't stop because I like the taste.
Monday11月 13 at 2:35下午
1.What is a purely competitive market?
A) A purely competitive market exist when there are so many buyers and sellers and are selling the same product and as result can’t have any control over the price set by the market. This makes them known as a price taker since they have to sell the product at whatever the rate of the market exist. Another characteristics of purely competitive market is that competitors can easily enter and no barriers to entry.
2) Why type of market would Starbucks belong to?
A) Starbucks would fall into a purely competitive market since there are other businesses that are fully capable of selling coffee. There are not many barriers to other companies to prevent them from getting into the market. Starbucks can decide to charge more but they are not capable of selling it a price that is not close to resembling the market price. As well there are a lot of people that purchase coffee and they are not relegated to only buy from Starbucks and have many options like donut stores, McDonald, and multitude of other businesses.
3) Why do you think Starbucks increased its prices by 1%, and do you believe that this action is risky, or a safe bet?
A) According to their studies this seems like a safe bet for sure. Typically a price hike would be a bad decision for profit and only done as a last resort however thanks to the homework Starbucks have done the articles explains ,” Since their loyal following isn’t especially price sensitive, Starbucks coffee maintains a fairly inelastic demand curve.” So since the buyers of Starbucks love their coffee so much that a small price hike won’t prevent them from still buying and since it is inelastic the demand will not decrease at all. So Starbucks has found a way to significantly increase their profit without turning off its loyal customers.
Monday11月 13 at 5:41下午
1) What is a purely competitive market? A purely competitive market or price taker market has multiple sellers that sell the same product. The items sold must be sold at the market price. Selling lower then the market price would result in loss. Selling higher then the market price could cause buyers to buy else where. None of these businesses can cause a shift in the market price. Other sellers can freely enter and exit the market.
2) Why type of market would Starbucks belong to? Starbucks belongs to the purely competitive market. It's product, coffee, is sold by other competitors such as a Peet's Coffee, Coffee Bean, and Dunkin Donuts. All of these companies prices for their drinks are very close. Though Starbucks is a huge world wide chain, they must stay within the market price. If they increase their prices way above the market price, consumers would buy elsewhere. Especially when there are so many places selling coffee.
3) Why do you think Starbucks increased its prices by 1%, and do you believe that this action is risky, or a safe bet? Starbucks increased their prices by 1% to increase profits. 1% wouldn't be so drastic of a change in price for customers. It possibly may go unnoticed by some. Maybe they want to do the price increases in small increments instead of slamming people with a huge price increase. Doing so wouldn't cause a huge backlash from customers. It was a safe bet to do so. Starbucks is a huge global chain with a lot of loyal customers. 1% change wouldn't hurt those who love the product deeply. Starbucks is also very convenient with multiple locations and drive-thru. Especially now with Starbucks' huge social media platform, Starbucks seems to be the hip and cool place for a coffee fix. It is also possible that they increased 1/3 first and the other 2/3 later for a slow overall price increase of the whole menu.
Tuesday11月 14 at 1:49下午
1) What is a purely competitive market?
A purely competitive market is a market with many buyers and sellers operating the same products, referring to buyers and sellers as price takers. It has no barriers to entry and no firm has market power.
2) Why type of market would Starbucks belong to?
Starbucks belongs to purely competitive market due to there being more buyer and sellers that provide coffee. These coffee places and their prices are relatively the same offering consumers the option to choose to purchase their beverage at Starbucks. If the prices were rise buyers have alternatives, therefore sellers like Starbucks stay within the market price.
3) Why do you think Starbucks increased its prices by 1%, and do you believe that this action is risky, or a safe bet?
I think Starbucks increased its prices by 1% to enhance their profits more. Starbucks gradually increases the prices that it could go unnoticed by the consumer. Starbucks has a large number of loyal consumers and I believe that this action is a safe bet. This is due to consumers still continuing to purchase their coffee there and not minding the small price raise.