The Economics of Chips and Beer

0 / 5. 0

The Economics of Chips and Beer

Category: Analytical Essay

Subcategory: Economics

Level: College

Pages: 6

Words: 1650

Economics of Chips and Beer
Student’s Name
Institution
Introduction
The Frito-lay company has been dealing with selling snacks for over 80 years. This company has its branches in over 200 countries worldwide. Frito-lay distributes several products, and it makes a lot of sales since it has been known to produce quality goods to its customers. Chips are Frito-Lay’s main product. On the other hand, Anheuser-Busch has been a leading producer of beer globally and it is the top five consumer goods company worldwide. In this excerpt, I will examine the economies of Chips and beer produced by these two companies.
Chips Description and Usage
Frito-lay produces several flavors of chips with an aim of satisfying the needs of their customers. They have more than 150 flavors of chips that are uniquely flavored to meet the different needs of their customers. One of their flavors is Doritos Dinamta that is Nacho Picoso Rolled Tortilla Chips. This is a rolled tortilla chip that is designed to add an extra kick to their customer’s snack time. Another flavor of chips is the Lay’s Pico de Gallo. This type is loaded with different flavors that are obtained from the Mexican recipe that include onion, tomato, and cilantro. Another flavor of chips that is produced by the Frito-lay company is the Ruffles that are loaded with Bacon and the Chedda potato skins (Attaran and Grijalva, 2001). Sunchips is another type of flavor that is produced by the Frito-lay company it is also called the Multigrain snacks, and it has a hint of summer salad that is mixed with a flavor of the sun-ripened tomato and it creates a fiesta of different flavors.
Factors that Determine Demand for Chips
There are some factors that affect the demand for the chips that are sold by Frito-Lay organization. One of the issues that affect the demand for chips is the price at which chips is sold. When the price of chips increases and all the other factors remains constant, the capacity of the chips that will be sold will reduce. As shown below.
Value per sack of
tortilla chips
capacity demanded of
sacks of tortilla chips
$3.00 180
$4.00 150
$5.00 100
Another aspect that determines the capacity of chips demanded is the value of the substitutes such as the popcorn when the price of the substitutes such as popcorn falls then the quantity of chips that will be demanded will fall. On the other hand, when the value of the substitutes such as popcorn raise the capacity of the chips that will be sold will increase, this is because the customers will buy more chips instead of buying the popcorns that are more expensive (Mankiw, 2014).
Another factor that will affect the quantity of the chips that will be bought is the value of the complement goods, for example, if the value of Guacamole and Picante falls the customers will be willing to buy several bags of the tortilla chips at each of the prices. Therefore, an increase in the charge of the complement has an opposite effect on the demand.
Another factor that affects the quantity of chips that will be demanded is the increase in the customer income. If the customer’s income increases, the customers will buy more. The customer preference is another factor that determines the quantity of tortilla chips that will be demanded (Mankiw, 2014). As more customers are introduced to the tortilla chips the more, they will like them and as a result, the demand for the chips will increase.
Determinants of Supply of Chips
Some of the factors that affect the quantity of chips supplied include; the price of the chips if the price of the chips increases the quantity of the chips that will be supplied to the market will increase. As shown in the table below.
Value per sack of
chips capacity sacks of chips supplied
$3.00 60
$4.00 110
$5.00 130
Another issue that affects some goods that will be supplied is technology. If there is an improvement in the technology such as the machines that are required in the production of chips the labor that will be required to produce, chips will decrease. As a result, the supply of chips to the market will increase (Attaran and Grijalva, 2001). Another factor that will determine the supply of chips is the number of firms that are in the market the more the number of firms the more the supply.
Elasticity of Demand for Chips in the Long Run and the Short Run Chips
The demand for chips, in the long run, will be more elastic; this is because consumers will have had more time to adjust to the changes in the price.
Whether Frito-Lay’s Production is Labor-Intensive or Capital-Intensive
Frito-lay Company is labor intensive since it depends mainly on labor for its production and since it incurs higher costs in its production than the capital costs that are incurred in production. Technology is important to Frito-lay since it is applied in its automated warehouse and packaging it relies on modern technology (Mankiw, 2014).
Long Term Prospects for the Product
The long term prospect for the firm is that the sales and production of chips are that the sales and production of chips will increase with time this is because more customers are being introduced to the product and Frito-lay has tried to expand its production. Also, Frito-lay will continue to invent more methods of increasing their production by using modern technology and advertise their products more with an aim of getting more customers for its products (Attaran and Grijalva, 2001). Frito-lay has also engaged in a program of educating its employees.
Beer Description and Usage
Budweiser is consumed in more than 80 countries worldwide. Originally Budweiser was manufactured only in the United States of America but it has spread to several parts of the world. The consumption of Budweiser in the outside countries grew by around 5.9% in the year 2014, and this provided for around 60% especially in the United Kingdom, China, and Brazil. The position of Budweiser was recognized in 2014 when it sponsored the 2014 world cup that was held in Brazil. Also, Budweiser managed to become the number one brand in Ambev portfolio in the 2014 (InBev, 2013).
Factors that Determine the Demand for Beer
There are several factors that determine the demand of the Budweiser. One of the factors that determine the demand for Budweiser is the price. When the price of chips rises and all the other factors remains constant, the quantity of Budweiser that will be demanded will fall. As shown in the table below.
Price per crate of
Budweiser
Quantity demanded of
Crates of Budweiser
$6.00 200
$10.00 150
$15.00 100
Another issue that will affect the amount of the Budweiser that will be demanded is the price of the complement goods, for example if the price of Marlboro cigarettes falls the customers will be willing to buy several Budweiser beers at each of the prices.
Another factor that determines the quantity of Budweiser that is demanded is the price of the substitutes such as the Brooklyn Pilsner when the price of the substitutes such as Brooklyn Pilsner falls then the quantity of Budweiser that will be demanded will fall. On the other hand, when the price of the substitutes such as Brooklyn Pilsner increases the quantity of the Budweiser beer that will be sold will increase, this is because the customers will buy more Budweiser instead of buying the Brooklyn Pilsner that is more expensive (Mankiw, 2014).
Another factor that determines the quantity of Budweiser beers that will be demanded is the increase in the customer income. If the customer’s income increases the customers will be willing to buy more Budweiser beers at each price. The customer preference is another factor that determines the quantity of Budweiser beers that will be demanded. As more customers are introduced to the Budweiser beers the more, they will like them and as a result, the demand for Budweiser will increase. Another factor that will determine the demand for Budweiser is customer loyalty the more loyal customers that Budweiser will have the more the demand (InBev, 2013).
Factors that Determine the Supply of Chips
Some of the factors that determine the supply of Budweiser include; the value of the Budweiser beers if the value of the Budweiser beers increases the quantity of the Budweiser that will be supplied to the market will rise (Mankiw, 2014). As shown below.
Price per crate of
Budweiser Quantity demanded of
Crates of Budweiser

$6.00 100
$10.00 150
$15.00 200
Another factor that determines the quantity of goods that will be supplied is technology. If there is an improvement in the technology such as the machines that are required in the production of Budweiser the labor that will be required in the production will decrease. As a result, the supply of Budweiser to the market will increase (InBev, 2013). Another factor that will determine the supply of Budweiser beer is the number of firms that are in the market the more the number of firms producing Budweiser the more the supply.
Elasticity of Demand for Budweiser beers in the Long Run and the Short Run
The demand for Budweiser beers, in the long run, will be more elastic; this is because consumers of Budweiser will have had more time to adjust to the changes in the price.
Whether Anheuser-Busch InBev Production is Labor-Intensive or Capital-Intensive
Anheuser-Busch InBev Company is labor intensive since it depends on labor for its production and since it incurs higher labor costs in its production than the capital costs that are incurred in production. Anheuser-Busch InBev Company applies technology in packaging and transporting the beers to their warehouse for storage (InBev, 2013).
Long Term Prospects for the Product
The demand for Budweiser beers is expected to rise since the Anheuser-Busch InBev Company has come up with new modern advertising techniques that are aimed at increasing the sales of the product.
Conclusion
There are several factors that determine the demand and supply of a commodity. Some of these factors that affect both the demand and the supply of a commodity include the price of the commodity and the consumers’ income.
References
Attaran, M., & Grijalva, S. M. (2001). Strategic management of technology at Frito-Lay’s Kern manufacturing facility. Industrial Management & Data Systems, 101(6), 264-272.
InBev, A. B. (2013). GSR Report 2012.
Mankiw, N. G. R. E. G. O. R. Y. (2014). Principles of macroeconomics. Cengage Learning.