Do you Know Macroeconomics?

Running Head: MACROECONOMICS 1

MACROECONOMICS 3

The company selected for this assignment is Yogurtland which is an American franchise chain that deals with the provision of frozen yogurt. The firm was established in 2006 by Phillip Chang and headquartered in Irvine, California in the United States. It offers self-serve frozen yogurt with various flavors as well as active cultures. Currently, the firm has established stores in more than twenty states in the U.S. and also in other nations such as Mexico, Japan, and Thailand among others. Yogurtland is famously known for its self-serve approach as well as its friendly and bright retail centers.

Besides, the demand for Yogurtland’s products tends to significantly impact the firm’s choices concerning how much it can sell as well as the price that it can set for the products. For instance, when the demand is high, the company increases its production level as well as the sales units to meet the high demand and make more profits. In essence, when the market demand is high, a company tends to produce more as well as offer more units of sales to both offset the high demand and make profits (Mankiw, 2014, Ch. 4). However, when the market is low, Yogurtland lowers its production level which leads to the sale of reduced product units to avoid making losses. When demand is , and a firm produces more products, it would likely to result in market surplus which would lower prices and consequently the profit. Nevertheless, when the demand for the firm’s products is high, Yogurtland sets its prices relatively high to offset the excess demand and make more profits. However, when the demand for the product is low, the company can decide to maintain its current prices or at times lowers it to increase sales.

Moreover, various factors can cause the demand for Yogurtland’s products to increase or decrease. One of the factors that cause the demand for frozen yogurt to increase include season. During festive seasons such as Christmas, the demand for yogurt rises because most consumers prefer consuming lifestyle foods such as yogurt during such times. Also, the demand for yogurt tends to increase during summer times compared to winter seasons because consumers prefer taking cold products during summer times. Another factor that can cause a demand increase includes the quality and uniqueness of the product. When the yogurt is of high quality and unique compared to rivals, it is likely to attract more customers. High demand can eventually increase the profitability of the organization (Videos, Ch. 4). Besides, when these events happen, the company should react by improving production to meet the high demand. However, an increase in market competition, as well as new entrants, can cause a reduction in the demand for Yogurtland’s products. Rivals and new entrants tend to lower the market share which can reduce demand. Also, lower product quality can even lower product demand because customers will opt for competitors. Low or reduced product demand would eventually lead to low profits for the firm (Mankiw, 2014, Ch. 4). Besides, during such times of lower demand, the firm should limit its production to avoid loses.

Lastly, Yogurtland can do various things to increase the demand for its products. Firstly, extensive marketing can play a vital role in maintaining as well as attracting both loyal and potential customers respectively. Enhancing the quality of yogurt can also attract more customers to buy the product. Lastly, consistent market research can enable the company to understand consumers’ needs then design their products according to such needs, thus influencing high demand. Yogurtland has continuously conducted market research to come up with diverse flavors that address the various needs of its clients.

References

Mankiw, N. G. (2018). Principles of macroeconomics. Cengage Learning.

Videos, Chapter 4