23.03.2023 - 13:40

One of the jams and jellies producer’s most popular products has always been strawberry jam. Recently, however, the demand for the product has stagnated. The product manager for this product, Emily, h

Question:

One of the jams and jellies producer’s most popular products has always been strawberry jam. Recently, however, the demand for the product has stagnated. The product manager for this product, Emily, has been very outspoken about the fact that the product must be modified to reduce the sugar content or to replace sugar with a zero-calorie, natural sweetener called ‘stevia.’ Emily requested a study from the firm’s economics team of the quantity of demand at various price points for such a stevia-sweetened strawberry jam product. The following demand schedule transpired from the team’s work:

Hypothetical Prices for Stevia Strawberry Jam Quantity of Demand at Various Price Points
$2.00 1,000,000 Jars Per Month$2.50 900,000 Jars Per Month
$3.00 800,000 Jars Per Month$3.50 700,000 Jars Per Month
$4.00 600,000 Jars Per Month$4.50 500,000 Jars Per Month
$5.00 400,000 Jars Per Month In addition, she requested the finance team address profit/margin analysis at similar price points. The team indicated that$2.00 would be the rock-bottom price, as that is the break-even point for the product, i.e. the product’s cost would be $2.00 per jar. At that price, the team would expect substantial quantity of demand, and that said quantities would decline as prices increased up to$5.00 per jar, which they see as the absolute ceiling for the product. Beyond that, the quantity of demand would be so small that it would not provide the critical mass in the market to pursue it. However, at and above $2.00, the firm would be interested in supplying more and more of the product to the market because of increasing profitability as prices rise. The following is the supply scheduled defined by the finance team: Hypothetical Prices for Stevia Strawberry Jam Quantity of Supply at Various Price Points$2.00 1,000,000 Jars Per Month
$2.50 900,000 Jars Per Month$3.00 800,000 Jars Per Month
$3.50 700,000 Jars Per Month$4.00 600,000 Jars Per Month
$4.50 500,000 Jars Per Month$5.00 400,000 Jars Per Month

a. Graph the demand curve for the Stevia Strawberry Jam.

b. Graph the firm’s supply curve for the Stevia Strawberry Jam.

c. Label the projected Equilibrium point for the product on a graph that shows both the supply and demand curves.