HarbourBite Ltd sells meal boxes through supermarkets. A poor vegetable harvest raises input costs just as a popular fitness campaign increases demand for healthy meals. Table 1 shows a proposed price change.
| Measure | Current price | Trial at proposed price |
|---|---|---|
| Price per box | £18 | £21 |
| Weekly quantity sold | 1,200 | 1,032 |
| Vegetable cost per box | £6.20 | £8.10 |
| Price elasticity of demand | -0.84 |
[ITEM A] The poor harvest may last for another year. HarbourBite's research suggests customers value convenience and the firm's healthy brand. Managers argue that the trial shows revenue can be protected by charging £21.
[ITEM B] Two supermarket rivals plan cheaper healthy-meal ranges. Some customers in the trial said they would cook at home if prices rose again, and supermarket buyers warn that slower sales may lead to less shelf space.
Define the term 'equilibrium price'.
Using Table 1, calculate the change in HarbourBite Ltd's weekly revenue if it raises the price to £21.
Explain two factors that may make demand for HarbourBite's meal boxes price inelastic.
Using Table 1, analyse the likely effects of the harvest and fitness campaign on the meal-box market.
Do you think HarbourBite Ltd should raise the price of its meal boxes from £18 to £21? Use Items A and B and your own economic knowledge to justify your view.
236 exam-style questions on AQA GCSE Economics 1.3 How prices are determined, covering 1.3.1a Demand and the factors that influence it, 1.3.1b The demand curve, 1.3.2a Supply and the factors that influence it, 1.3.2b The supply curve, 1.3.3a Determining equilibrium price, 1.3.3b Applying diagrams and showing revenue, 1.3.4a Complements and substitutes, 1.3.4b Effects of changes on related markets, 1.3.5a Price elasticity of demand, 1.3.5b Factors affecting price elasticity of demand, 1.3.5c Measuring PED and its implications, 1.3.6a Price elasticity of supply, 1.3.6b Factors affecting price elasticity of supply, and 1.3.6c Measuring PES and its implications. Each one has a worked solution and a mark scheme showing where the marks go.