On the documents I sent you I provided a business brief that someone wrote before.
Michelle_Michy
mba723.docx1. Choose a product/good/commodity/brand you are familiar with: one your company sells or one you personally consume. NOTE: Do not choose one of the goods discussed in the textbook’s Chapter 3 section Elasticities Estimates: Economics Literature and listed in Table 3.7.
2. Consider the possible determinants of your chosen good’s price elasticity of demand.
3. Review Business Brief Guidelines and Critical Thinking Process .
4. Write a 1- to 2-page business brief that includes the following sections. Include 1 to 2 sources in addition to your textbook.
· Opening: Discussion of the chosen product/good/commodity/brand and the reasons you chose it.
· Discussion on what you consider the major determinants of the chosen good’s price elasticity of demand.
· Recommendation: Choose its one or two most significant determinants and comment on the good’s relative price elasticity of demand as compared to sample products in the textbook’s Table 3.7
Price elasticity of demand is a measure used to reveal the change in the demand of the goods/products/when the price increases or decreases. (Tutor2u.net) Keeping a check on the responsiveness of the price elasticity of demand curve is very important in economics. This shows if the goods are moving or not, also helps businesses and economist to understand if there has been a shift in the wage gaps and buying interest. The subject this business brief is based on is Mazaya Oman LLC’s chartering services of private aircrafts to high profile clients. In Oman, it is a one of a kind product. So far the goods/products/services have no competition from any other firm and which makes the product unique and one of a kind. The amount of charters we receive per year dictates if the aircraft chartering business will boom or not. We do face competitive challenges regarding pricing from the European Markets who had started to charter private aircrafts in the middle east.
Few major determinants are; Nature of goods such as a chartering private aircrafts is highly luxurious, hence making it exceedingly elastic compared to normal flight tickets, which are necessities and priced very lowly. These products are highly flexible and can be used or postponed on demand if the client shift their departure date due urgency or weather factor. Also, the amount of price spent on such luxurious services is not negligible, the price not only dictates the mere transportation requirement for the client from point A to drops to point B, it also the experience of luxury, feel of importance, safety and security. The desire for expensive goods or services is elastic, only elite members of the society are able to afford it who have enough disposable income, these are definitely not common households goods which can be bought anywhere or make a habitual thing. Again chartering private aircrafts are always not feasible even for the most elite members of the society depending on the demands, routes, weather etc. (PreserveArticles.com)
As we have established services like charting private aircrafts to the rich and famous is unique. Hence making “nature of good” and “income level” as two very significant determinants for the price elasticity of demand as compared to the food products, water and electricity. To afford such goods/products/services a person needs to have high level of income and not only that they must enjoy the level of prestige that hiring a private aircraft brings. These goods/products/services don’t come cheap in itself, they have to be kept in top notch condition to serve the clients. A country’s economy also plays a big role in demand of these products, the better the oil price, the better the spending capacity, as this generally brings more income and therefore the ability to spend on such high levels of luxury items.
