Tis The Season Company is associated with happy occasions, and thus, it is great to be associated with the company. As a company that deals with importing holiday lightings and decorations, the company’s profits are dependent on the product demand. In all the formal goods, price and demand share a negative relationship (Kramar, 2019). It is also possible to judge the company’s profitability aspect using the demand elasticity of, which is the adjustment receptiveness of the quantity in demand upon changes in product price (Beers, 2018). Although the company’s supply curve is highly inelastic, it is fortunate that most of the products in the company have a price elasticity of demand of 0.19.
The percentage price change divided by the Percentage Quantity Change gives the Ped. If the figure obtained is less than one, the Ped is said to be inelastic. If the company’s price demand elasticity is 0.19 (Quantity demanded change/ 0.25), then the Change in Quantity Demanded is 0.19 x 0.25, which is 0.04. With twenty-five percent price changes, the Quantity Demanded change is four percent. The company’s price elasticity of demand is inelastic, implying that the consumers’ demand is fixed and, thus, will not change much upon a change in price. In this case, we can postulate that the consumers will incur more price increase imposed because of the taxation. Since the company has inelastic elasticity of supply, it will bear the highest portion of the price increase. However, it is fortunate that the company also has inelastic elasticity of demand, and thus, the consumers will also be sharing a good tax burden even though the tax burden will lie on the supplier.
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References
Kramar, L. (2019). How Does the Law of Supply and Demand Affect Prices?. Retrieved 18 October 2019, from https://www.investopedia.com/ask/answers/033115/how-does-law- supply-and-demand-affect-prices.asp
Beers, B. (2018). How price inelasticity and inelasticity of demand differ. Retrieved 18 October 2019, from https://www.investopedia.com/ask/answers/020215/what-difference-between- price-inelasticity-and-inelasticity-demand.asp
