Question On Post BB

You need to come up with question and respond on the following post:”The product chosen is cake.  The determinants of demand for cake are the price of cake, the price of any related products such as pie, cookies, ice cream as well as the income level of the potential customers.  Providing cakes in a variety of flavors, ingredients, colors, shapes in varying price ranges will increase demand.  Also having an assortment of cakes created from organic ingredients will attract health conscious customers.  These will all have a direct impact on demand.  Additionally, funding advertising expenditures, managing customer expectations, and understanding the tastes and preferences of the customers will participate as determining factors.

The substitutes for cake include pastries, jello, pudding, pie, brownies, fudge, donuts, and Belgian waffle a la mode.  These have a positive cross elasticity to cake.  The complements to cake include ice cream, coffee, tea, raspberry/strawberry wine.  These have a negative cross elasticity to chocolate cake.  The price elasticity of demand of chocolate cake is elastic.  As the price of cake increases, the total revenue decreases.  As the price of cake decreases, total revenue increases.  Determinants of the price elasticity of demand for cake are good substitutes (e.g., pies, donuts), competition i.e., competing bakeries and food stores, consumption of cake for ceremonies, holidays, and special occasions and throughout the year, and brand loyalty.  I would characterize the income elasticity of demand for cake as small income elasticity that is stable over economic cycles.

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