Mooncakes – Demand and Supply
4S
Gigi Leung (25)
Florence Li (27)
Konny Tang (33)
Cherry Yeung (39)
Content
1. Introduction – What Are Mooncakes?
2. Demand – Mooncakes before/during MidAutumn Festival
3. Comparison of Different Mooncakes –
Traditional Mooncakes VS. Jelly Mooncakes
4. Case Study – Mooncakes Sellers’ Profit/Loss
(Law of Demand & Elasticity of Demand)
UFO Mooncake
Introduction
Mooncakes
• Traditional food eaten during the Mid-Autumn
Festival
• The most important item in the Festival
Mooncakes during normal days
P($)
S1
D1
P1
0
Q/t
Q1
Mooncakes during normal days
P($)
D1
Before Mid-Autumn
Festival, there isS1no change in both
the demand and supply for mooncakes. As shown in the
diagram, the supply S and demand D remain constant.
The equilibrium price is P1 and quantity transacted is
Q1. P1
0
Q/t
Q1
Mooncakes during Mid-Autumn Festival
P($)
D2
S1
D1
S2
P2
P1
0
Q/t
Q1
Q2
Mooncakes during Mid-Autumn Festival
During P($)
Mid-Autumn Festival, people will buy
mooncakes for bothDself-consumption
and gifts, leading
2
to an increaseD in demand for mooncakes,
the demand
S
S
1
1
2
curve shifts rightwards from D1 to D2. Mooncake
suppliers will also increase their supply of mooncakes,
P2 to an increase in supply of mooncakes, the
leading
supply curve shifts rightwards from S1 to S2. Since the
P1 in demand is greater than the increase in
increase
supply, the price of mooncakes rise from P1 to P2. The
quantity transacted increases from Q1 to Q2.
0
Q/t
Q1
Q2
Mooncakes during Mid-Autumn Festival
During Mid-Autumn Festival, people will buy
mooncakes for bothDself-consumption
and gifts, leading
2
to an increaseD in demand for mooncakes,
the demand
S
S
1D
2
1 increase
21 D2.
curve shifts rightwards
from to
D1Dto
Mooncake
S1 increase
increase
to supply
S2 of mooncakes,
suppliers will also
their
P2 to an increase in supply of mooncakes, the
leading
P1 increase to P2
supply curve shifts rightwards from S1 to S2. Since the
Q1 increase
Q2 the increase in
P1 in demand
increase
is greatertothan
supply, the price of mooncakes rise from P1 to P2. The
quantity transacted increases from Q1 to Q2.
0
Q/t
Q1
Q2
Traditional Mooncakes vs. Jelly Mooncakes
•
•
•
•
Jelly (冰皮) mooncakes are becoming more popular
due to the change in trend, e.g. advertisement/ fashion
Its demand has greatly increased in the previous years
We are going to look into the relationship between
traditional mooncakes and modern jelly mooncakes
Number of Mooncake Products Provided by the
Major Producers*1 in the Market
*1 Wing Wah, Maxim's, Tai Pan
HAHA, jelly
mooncakes are more
popular now. I am
selling more
mooncakes than you,
so I am gaining more
profit than you!
Not necessarily…
Cherry
A seller of jelly
mooncakes
Henry
A seller of traditional
mooncakes,
also an expert in Economics
Jelly Mooncakes
P($)
D2
S1
D1
P2
P1
0
Q1
Q2
Q/t
Jelly Mooncakes
P($)
D2
S1
D1
The demand for jelly mooncakes increases. As shown in
the diagram, the demand curve for jelly mooncakes
P2
shifts rightwards from D1 to D2. The equilibrium price
for
traditional mooncakes increases from P1 to P2, and
P1
the quantity transacted increases from Q1 to Q2.
0
Q1
Q2
Q/t
Jelly Mooncakes
P($)
D2
S1
D1
The demand
jelly mooncakes
D1 for
increase
to D2 increases. As shown in
the diagram, the demand curve for jelly mooncakes
Supply remains unchanged
P2
shifts rightwards from D1 to D2. The equilibrium price
P1 increase
toincreases
P2
for
traditional
mooncakes
from P1 to P2, and
P1
the quantity
Q1transacted
increaseincreases
to Q2 from Q1 to Q2.
0
Q1
Q2
Q/t
Traditional Mooncakes
P($)
D1
S1
D2
P1
P2
0
Q2
Q1
Q/t
Traditional Mooncakes
P($)
D1
Since jelly mooncakes are substitutes
for traditional
S1
mooncakes,
people now buy fewer traditional
D2
mooncakes. There is a decrease in demand for
P1
traditional
mooncakes. As shown in the diagram, the
demand curve for traditional mooncakes shifts leftwards
P2 D1 to D2. The equilibrium price for traditional
from
mooncakes drops from P1 to P2, and the quantity
transacted decreases from Q1 to Q2.
0
Q2
Q1
Q/t
Traditional Mooncakes
P($)
D1
Since jelly mooncakes are substitutes
for traditional
S1
mooncakes,
people now buy fewer traditional
D2
D1 decrease
D2
mooncakes.
There is atodecrease
in demand for
Supply
remains
unchanged
P1
traditional
mooncakes.
As shown
in the diagram, the
demand curve
for traditional
mooncakes shifts leftwards
P
decrease
to
P
1
2
P
2
from D1 to D2. The equilibrium price for traditional
Q1drops
decrease
to Q
mooncakes
from P1
to2 P2, and the quantity
transacted decreases from Q1 to Q2.
0
Q2
Q1
Q/t
See? Both of price and
quantity transacted of
jelly mooncakes
increases while those
of traditional
mooncakes decrease,
and that means I earn
more than you!
However, I can lower
the price of the
mooncakes to attract
more buyers, so the
quantity demanded
will increase
according to the law
of demand.
Cherry
A seller of jelly
mooncakes
Henry
A seller of traditional
mooncakes,
also an expert in Economics
Quantity Demanded
The amount of good or service
consumers are willing to buy at
a given price over a period of
time, other things being
constant.
Law of Demand
A decrease in the price of a
good will result in an increase
in its quantity demanded over a
period of time and other things
being constant, or vice versa.
However, I can lower
the price of the
mooncakes to attract
more buyers, so the
quantity demanded
will increase
according to the law
of demand.
Henry
A seller of traditional
mooncakes,
also an expert in Economics
Traditional Mooncakes
P($)
D
P1
Loss
P2
Gain
0
Qd1
Qd2
Q/t
Traditional Mooncakes
P($)
Traditional mooncakes have an elastic demand. As the
price goes down
from P1 to P2, the quantity demanded
D
for
traditional mooncakes will increase from Qd1 to Qd2.
P1
The percentage increase in quantity demanded is
Loss the percentage decrease in price. The gain
greater than
in the increase in quantity demanded is greater than
P2
the loss in decrease in price. Therefore, the total
revenue of traditional mooncakes increase.
Gain
0
Qd1
Qd2
Q/t
Traditional Mooncakes
P($)
Traditional mooncakes have an elastic demand. As the
P1 down
decrease
price goes
from P1totoPP2,
D
2 the quantity demanded
for
traditional
mooncakesto
will
increase from Qd1 to Qd2.
Qd1 increase
Qd
P1
2
The percentage increase in quantity demanded is
in Qd > Decrease in P
Loss the percentage decrease in price. The gain
greaterIncrease
than
in
>
Loss
in
P
in the Gain
increase
inQd
quantity
demanded
is greater than
P2
the loss
in decrease
price. Therefore, the total
Total
revenueinincreases
revenue of traditional mooncakes increase.
Gain
0
Qd1
Qd2
Q/t
So in this case, my total
revenue increases
because I lowered the
prices of my products.
And since we are in
competitive demand,
the demand for jelly
mooncakes will fall.
So how does it affect
my total revenue?
Henry
A seller of traditional
mooncakes,
also an expert in Economics
Cherry
A seller of jelly
mooncakes
Jelly Mooncakes
P($)
D1
S1
D2
P1
Loss
P2
0
Q2
Q1
Q/t
P($)
Jelly Mooncakes
D1
S1
Since theDtwo
products are in competitive demand, the
2
increase in the quantity demanded of traditional
P1
mooncakes
will lead to a decrease in the demand for
jelly mooncakes. There will be a leftward shift in the
P2
demand
curve from D1 to D2. Thus, there will be a
decrease in the sales revenue of jelly mooncakes.
0
Q2
Q1
Q/t
Jelly Mooncakes
P($)
D1
Substitutes for eachSother
Since theDtwo products are in competition, the increase
D1 decrease
2
in the quantity
demandedto
of D
traditional
mooncakes will
unchanged
P to a Supply
lead
decrease remains
in the demand
for jelly mooncakes.
There willPbedecrease
a leftward shift
in the demand curve from
to
P
1
2
P
D1 to D2. Thus, there will be a decrease in the sales
to Q2
1 decrease
revenue ofQjelly
mooncakes.
Total revenue decreases
1
2
1
2
0
Q2
Q1
Q/t
Oh my! This is so
confusing! So who is
earning more?
Cherry
A seller of jelly
mooncakes
No worries, let
me summarise
all the ideas.
Henry
A seller of traditional
mooncakes,
also an expert in Economics
Conclusion
Since jelly mooncakes are becoming popular,
demand for traditional mooncakes will
decrease while the demand for jelly
mooncakes increases. The price and quantity
transacted of traditional mooncakes will
decrease. Conversely, the price and quantity
transacted of jelly mooncakes increases.
Henry
A seller of traditional
mooncakes,
also an expert in Economics
However, the traditional mooncakes
suppliers may lower their to attract
more customers to increase their
sales revenue. Then the demand for
jelly mooncakes will decrease, so is
the sales revenue of jelly mooncakes.
The total revenue of both kinds of
mooncakes are constantly affecting
each other. There are also many
other factors influencing the
revenues. Therefore, it is hard to tell
who is gaining more profit.
I finally get it! Thanks
Henry!
Cherry
Henry
A seller of traditional
mooncakes,
also an expert in Economics
A seller of jelly
mooncakes
References
• http://www.jetsoguide.com/mooncake/
• SPCS economics notes