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Sunbest Orange Juice Case Study
75
ORANGE JUICE
Sunbest Orange Juice is a product of California’s Orange County Growers’ Association. Both demand and supply of the product are highly sensitive to changes in the weather. During hot summer months, demand for Sunbest and other beverages grows rapidly. However, hot dry weather has an adverse effect on supply by reducing the sizes of the orange crops.
Executive Summary
In order to elevate the study of Sunbest demand and supp...
In order to elevate the study of Sunbest demand and supply, spreadsheet analysis was the preferable and appropriate tool in determining possible changes in exogenous and endogenous variables. Using spreadsheet analysis, it is possible to learn the demand and supply implications of an almost limitless range of operating scenarios.
Statement
of the
Problem
Statement of the Problem:
Prepare the spreadsheet analysis of Sunbest Orange Juice in order to identify and have better understanding on the effects of a wide range of demand and supply influences.
Data
Analysis
Purpose of Spreadsheet Analysis:
Studying the demand and supply effects of possible changes to:
->Endogenous variables e.g. product Pricing, advertising, product design and so on.
-> Exogenous Variables e.g. competitor pricing, competitor advertising, weather/temperature, general economic conditions and other related factors.
In the case of
Sunbest
In the case of Sunbest:
- Demand and supply are highly receptive to changes in weather
- During hot summer months, demand for Sunbest juice grows
- On the contrary, hot dry weather reduces supply of grown orange crops
Demand Function
Demand function:
Qd = 1,000,000 - 25,000,000P +10,000,000Ps + 1,600Y + 50,000T
where:
Qd = Quantity Demanded
P = Price of Sunbest
Ps = Price of Soda
Y = Income
T = Temperature
Supply Function
Supply function:
Qs = 8,000,000P - 100,000Pl -120,000Pk - 150,000T
where:
Qs = Quantity Supplied
P = Price of Sunbest
Pl = Price of labor
Pk = Cost of Capital
T = Temperature
Decision Criterion:
Decision
Criterion
Prepare a Spreadsheet Analysis
Pro: Results will allow adjustments to be made for demand and supply efficiencies
Con: Tedious to discover marginal effects of wide range of demand and supply
Economic Assumptions on Demand
Economic Assumptions on Demand
- All Factors Changing
- Change in Price Only
- Change in Temperature Only
- All Factors Changing
- Change in Price Only
- Change in Temperature Only
Economic Assumptions on Supply
Economic Assumptions on Supply
- All Factors Changing
- Change in Price Only
- Change in Temperature Only
- All Factors Changing
- Change in Price Only
- Change in Temperature Only
Economic Assumptions on Surplus or Shortage
Economic Assumptions on Surplus or Shortage
- Price on Supply and Demand
- Temperature on Supply and Demand
- Price on Surplus & Shortage
- Temperature on Surplus & Shortage
Conclusion
Conclusion
In the various spreadsheet analysis of Sunbest Orange Juice, whether there is a change in the price or a change in the temperature only or even if all other factors changed, market equilibrium occurs under operating Scenario #6.
Effects of changing Economic Assumptions
Effects of changing Economic Assumptions
Consequence of changing Economic Assumptions
Consequence of changing Economic Assumptions
Effects of changing Economic Assumptions on Surplus and Shortage
Effects of changing Economic Assumptions on Surplus and Shortage
References
• http://www.info.com/search?qcat=web&r_cop=search&qkw=sunbest+orange+juice
• https://www.chowist.com/search?s_pt=source2&s_it=aolsem&s_chn=4&s_gl=US&q=sunbest%20orange%20juice
• http://www.papercamp.com/essay/74163/C2-Sunbest-Orange-Juice