Price elasticity of demand in CaBi shop.

We all have studied about how demand curve act to reflect the relationship between prices and quantity demanded. However, have we ever paid attention in the shape of the curve? Is it flat or steep?, and how does it affect to the alteration between price and quantity demanded?. If a swimsuit shop rises its price up to 7%, then what’s about quantity demanded? , It will base on how consumers respond. According to the responsiveness of the quantity demanded when there is a change in price, holding other factors constant, it is defined as a concept of price elasticity of demand ( PED).

The value of PED is greater than 1, it is known as elastic demand which causes a large fall in quantity demanded when price is up. However, if PED is smaller than 1, it will be inverse that causes only a little change in quantity demanded.

Now, I would like to mention about my family business, in specific, about my mother’s shop. She is a director of CaBi shop which produces and sells swimsuits and eurhythmics stuff in Vietnam. In each year, she has to separate into 2 period of time. First period is from May to September, and another is from October to April. In the first period, that is on summer holiday in Vietnam so that there are many families tend to buy swimsuits, and enjoying relaxing days on beaches or swimming pools together. According to first period, in 2008 , my mother rose up the price for swimsuits which was from 250,000 VND to 290,000 VND. After that, there was a fall in swimsuits demand from 87,000 to 77,500.Thus a 16% increasing in price caused a 11% fall in the quantity demanded, and inelastic demand appeard in this condition.

PED = %change in Qty Dd/ % change in P = 11%/16% = 0.7 ( PED <>

Next, from October to April, almost all consumers had to return to their works, and student started their semester 1 in school. Therefore, demand for swimsuits was really narrowed, and it turns into elastic demand. As the same price with previous period, yet there was a fall in demand from 87,000 to 70,000 which caused a 45% fall in quantity demanded.

PED = %change in Qty Dd/ % change in = 45%/16% = 2.8 ( PED > 1 )

In fact, around my house, there are a lot of shops from outstanding brands such as Nhu Lan, Anh Thu, Ly Ly and so on. Hence, to my mother, she has to face with many competitors, and to consumers, there are a large amount of substitutes. For example, a bikini in Nhu Lan shop is 150,000 VND with a good quality, and a bikini in CaBi shop which is my mother’s shop is 180,000 VND. Thus, when the price of my mother’s swimsuits is at that much, it is due to a big fall in quantity demanded.

Last but not least, I think that being aware of the alteration of demand curve through its slope, it will help my mom acknowledge more about desire of consumers. Moreover, this is also a chance for me to know more about my mother’s business, how has it been developing over time? as I never care about my parents business, and even I am not keen on business.