Mooncakes – Demand and Supply4S

Gigi Leung (25)Florence Li (27)Konny Tang (33)

Cherry Yeung (39)

Content1. Introduction – What Are Mooncakes?2. Demand – Mooncakes before/during Mid-

Autumn Festival3. Comparison of Different Mooncakes –

Traditional Mooncakes VS. Jelly Mooncakes4. Case Study – Mooncakes Sellers’ Profit/Loss

(Law of Demand & Elasticity of Demand)

Introduction

Mooncakes• Traditional food eaten during the Mid-Autumn

Festival• The most important item in the Festival

Mooncakes during normal days

S1D1

P1

Q1

P($)

Q/t0

Mooncakes during normal days

S1D1

P1

Q1

Before Mid-Autumn Festival, there is no 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.

Before Mid-Autumn Festival, there is no 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.

Q/t0

P($)

Mooncakes during Mid-Autumn Festival

S1D1

P1

Q1

D2

S2

P2

Q2

P($)

Q/t0

P($)

Mooncakes during Mid-Autumn Festival

S1D1

P1

Q1

D2

S2

P2

Q2

During Mid-Autumn Festival, people will buy mooncakes for both self-consumption and gifts, leading to an increase in demand for mooncakes, the demand curve shifts rightwards from D1 to D2. Mooncake suppliers will also increase their supply of mooncakes, leading to an increase in supply of mooncakes, the supply curve shifts rightwards from S1 to S2. Since the increase in demand is greater than the increase in supply, the price of mooncakes rise from P1 to P2. The quantity transacted increases from Q1 to Q2.

During Mid-Autumn Festival, people will buy mooncakes for both self-consumption and gifts, leading to an increase in demand for mooncakes, the demand curve shifts rightwards from D1 to D2. Mooncake suppliers will also increase their supply of mooncakes, leading to an increase in supply of mooncakes, the supply curve shifts rightwards from S1 to S2. Since the increase in demand is greater than the increase in supply, the price of mooncakes rise from P1 to P2. The quantity transacted increases from Q1 to Q2.

Q/t0

Mooncakes during Mid-Autumn Festival

S1D1

P1

Q1

D2

S2

P2

Q2

During Mid-Autumn Festival, people will buy mooncakes for both self-consumption and gifts, leading to an increase in demand for mooncakes, the demand curve shifts rightwards from D1 to D2. Mooncake suppliers will also increase their supply of mooncakes, leading to an increase in supply of mooncakes, the supply curve shifts rightwards from S1 to S2. Since the increase in demand is greater than the increase in supply, the price of mooncakes rise from P1 to P2. The quantity transacted increases from Q1 to Q2.

During Mid-Autumn Festival, people will buy mooncakes for both self-consumption and gifts, leading to an increase in demand for mooncakes, the demand curve shifts rightwards from D1 to D2. Mooncake suppliers will also increase their supply of mooncakes, leading to an increase in supply of mooncakes, the supply curve shifts rightwards from S1 to S2. Since the increase in demand is greater than the increase in supply, the price of mooncakes rise from P1 to P2. The quantity transacted increases from Q1 to Q2.

D1 increase to D2

S1 increase to S2

P1 increase to P2

Q1 increase to Q2

Q/t0

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

DERIVED DEMAND

DERIVED DEMANDSUBSTITUESSUBSTITUES

Number of Mooncake Products Provided by the Major Producers*1 in the Market

*1 Wing Wah, Maxim's, Tai Pan

HenryA seller of traditional

mooncakes,also an expert in Economics

CherryA seller of jelly

mooncakes

HAHA, jelly mooncakes are more popular now.

I am selling more mooncakes than you, so I am gaining more

profit than you!

Not necessarily…

Jelly Mooncakes

S1D1

P1

Q1

D2

P2

Q2

P($)

Q/t0

Jelly Mooncakes

S1D1

P1

Q1

D2

P2

Q2

The demand for jelly mooncakes increases. As shown in the diagram, the demand curve for jelly mooncakes shifts rightwards from D1 to D2. The equilibrium price for traditional mooncakes increases from P1 to P2, and the quantity transacted increases from Q1 to Q2.

The demand for jelly mooncakes increases. As shown in the diagram, the demand curve for jelly mooncakes shifts rightwards from D1 to D2. The equilibrium price for traditional mooncakes increases from P1 to P2, and the quantity transacted increases from Q1 to Q2.

P($)

Q/t0

Jelly Mooncakes

S1D1

P1

Q1

D2

P2

Q2

The demand for jelly mooncakes increases. As shown in the diagram, the demand curve for jelly mooncakes shifts rightwards from D1 to D2. The equilibrium price for traditional mooncakes increases from P1 to P2, and the quantity transacted increases from Q1 to Q2.

The demand for jelly mooncakes increases. As shown in the diagram, the demand curve for jelly mooncakes shifts rightwards from D1 to D2. The equilibrium price for traditional mooncakes increases from P1 to P2, and the quantity transacted increases from Q1 to Q2.

D1 increase to D2

Supply remains unchangedP1 increase to P2

Q1 increase to Q2

P($)

Q/t0

Traditional Mooncakes

S1

D2

P1

Q1

D1

Q2

P2

P($)

Q/t0

Traditional Mooncakes

S1

D2

P1

Q1

D1

Q2

P2

Since jelly mooncakes are substitutes for traditional mooncakes, people now buy fewer traditional mooncakes. There is a decrease in demand for traditional mooncakes. As shown in the diagram, the demand curve for traditional mooncakes shifts leftwards from D1 to D2. The equilibrium price for traditional mooncakes drops from P1 to P2, and the quantity transacted decreases from Q1 to Q2.

Since jelly mooncakes are substitutes for traditional mooncakes, people now buy fewer traditional mooncakes. There is a decrease in demand for traditional mooncakes. As shown in the diagram, the demand curve for traditional mooncakes shifts leftwards from D1 to D2. The equilibrium price for traditional mooncakes drops from P1 to P2, and the quantity transacted decreases from Q1 to Q2.

P($)

Q/t0

S1

D2

P1

Q1

D1

Q2

P2

Since jelly mooncakes are substitutes for traditional mooncakes, people now buy fewer traditional mooncakes. There is a decrease in demand for traditional mooncakes. As shown in the diagram, the demand curve for traditional mooncakes shifts leftwards from D1 to D2. The equilibrium price for traditional mooncakes drops from P1 to P2, and the quantity transacted decreases from Q1 to Q2.

Since jelly mooncakes are substitutes for traditional mooncakes, people now buy fewer traditional mooncakes. There is a decrease in demand for traditional mooncakes. As shown in the diagram, the demand curve for traditional mooncakes shifts leftwards from D1 to D2. The equilibrium price for traditional mooncakes drops from P1 to P2, and the quantity transacted decreases from Q1 to Q2.

D1 decrease to D2

Supply remains unchangedP1 decrease to P2

Q1 decrease to Q2

P($)

Q/t0

Traditional Mooncakes

HenryA seller of traditional

mooncakes,also an expert in Economics

CherryA seller of jelly

mooncakes

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.

HenryA seller of traditional

mooncakes,also an expert in Economics

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.

Quantity DemandedThe 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 DemandA 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.

Traditional Mooncakes

P1

Qd1

D

P2

Qd2

Loss

Gain

P($)

Q/t0

Traditional Mooncakes

P1

Qd1

D

P2

Qd2

Loss

Gain

Traditional mooncakes have an elastic demand. As the price goes down from P1 to P2, the quantity demanded for traditional mooncakes will increase from Qd1 to Qd2. The percentage increase in quantity demanded is greater than the percentage decrease in price. The gain in the increase in quantity demanded is greater than the loss in decrease in price. Therefore, the total revenue of traditional mooncakes increase.

Traditional mooncakes have an elastic demand. As the price goes down from P1 to P2, the quantity demanded for traditional mooncakes will increase from Qd1 to Qd2. The percentage increase in quantity demanded is greater than the percentage decrease in price. The gain in the increase in quantity demanded is greater than the loss in decrease in price. Therefore, the total revenue of traditional mooncakes increase.

P($)

Q/t0

Traditional Mooncakes

P1

Qd1

D

P2

Qd2

Loss

Gain

Traditional mooncakes have an elastic demand. As the price goes down from P1 to P2, the quantity demanded for traditional mooncakes will increase from Qd1 to Qd2. The percentage increase in quantity demanded is greater than the percentage decrease in price. The gain in the increase in quantity demanded is greater than the loss in decrease in price. Therefore, the total revenue of traditional mooncakes increase.

Traditional mooncakes have an elastic demand. As the price goes down from P1 to P2, the quantity demanded for traditional mooncakes will increase from Qd1 to Qd2. The percentage increase in quantity demanded is greater than the percentage decrease in price. The gain in the increase in quantity demanded is greater than the loss in decrease in price. Therefore, the total revenue of traditional mooncakes increase.

P1 decrease to P2

Qd1 increase to Qd2

Increase in Qd > Decrease in PGain in Qd > Loss in PTotal revenue increases

P($)

Q/t0

HenryA seller of traditional

mooncakes,also an expert in Economics

CherryA seller of jelly

mooncakes

So how does it affect my total revenue?

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.

Jelly Mooncakes

S1

D2

P1

Q1

D1

Q2

P2

Loss

P($)

Q/t0

Jelly Mooncakes

S1

D2

P1

Q1

D1

Q2

P2

Since the two products are in competitive demand, the increase in the quantity demanded of traditional mooncakes will lead to a decrease in the demand for jelly mooncakes. There will be a leftward shift in the demand curve from D1 to D2. Thus, there will be a decrease in the sales revenue of jelly mooncakes.

Since the two products are in competitive demand, the increase in the quantity demanded of traditional mooncakes will lead to a decrease in the demand for jelly mooncakes. There will be a leftward shift in the demand curve from D1 to D2. Thus, there will be a decrease in the sales revenue of jelly mooncakes.

P($)

Q/t0

Jelly Mooncakes

S1

D2

P1

Q1

D1

Q2

P2

Since the two products are in competition, the increase in the quantity demanded of traditional mooncakes will lead to a decrease in the demand for jelly mooncakes. There will be a leftward shift in the demand curve from D1 to D2. Thus, there will be a decrease in the sales revenue of jelly mooncakes.

Since the two products are in competition, the increase in the quantity demanded of traditional mooncakes will lead to a decrease in the demand for jelly mooncakes. There will be a leftward shift in the demand curve from D1 to D2. Thus, there will be a decrease in the sales revenue of jelly mooncakes.

Substitutes for each otherD1 decrease to D2

Supply remains unchangedP1 decrease to P2

Q1 decrease to Q2

Total revenue decreases

P($)

Q/t0

HenryA seller of traditional

mooncakes,also an expert in Economics

CherryA seller of jelly

mooncakes

Oh my! This is so confusing! So who is

earning more?

No worries, let me summarise all the ideas.

HenryA seller of traditional

mooncakes,also an expert in Economics

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.

Conclusion

HenryA seller of traditional

mooncakes,also an expert in Economics

CherryA seller of jelly

mooncakes

I finally get it! Thanks Henry!

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.

References

• http://www.jetsoguide.com/mooncake/• SPCS economics notes