Aldi Price Elasticity Of Demand Essay

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Aldi is a leading global discount supermarket chain with over 9,000 stores in over 18 countries, and an estimated turnover of more than €50bn. Aldi first started operating in Britain in 1990, and has been prevalent in the media recently as the company performs well against traditional British retailers including Tesco and Sainsbury’s following the recession. Demand is the quantity buyers wish to purchase at each possible price. Demand depends on price, price of substitutes and complements, income and spending of buyers and the tastes of buyers. The increased demand for discount retailers, like Aldi and Lidl, is a result of the recession. As real wages have been consistently falling since 2010 taking into account rising living costs, consumers…show more content…
The price elasticity of demand for supermarkets can vary, as demand is inelastic in the short run. This is because a fall in the price of inferior goods like salt and potatoes wouldn’t encourage consumers to buy more of it just because it is at a lower price, meaning a change in price has no real effect on demand. However, branded goods for example Heinz ketchup sold in many supermarkets is price elastic, as if the price rises consumers will switch to alternatives as there are many substitutes for example Sainsbury’s ketchup, or even go to different supermarkets to find the cheapest offer. This is the case for many goods sold especially at Aldi or Lidl as they offer close but not perfect substitutes to goods sold in Tesco or Sainsbury’s at a lower price. Consumers have more choice than they used to which gives them increased purchasing power as due to the increased competition there is more incentive for supermarkets to retain customers following the trend of ‘smart shopping’. Also, Supermarkets have started using matching loyalty schemes where they match each other on price or give customers money off if their shop was cheaper elsewhere. Competition is also good for consumers as supermarkets are competing on prices known as price wars, making them lower, therefore reducing the price of an average basket of…show more content…
Supply for supermarkets can be influenced by a variety of factors. One of the biggest factors is the weather as to grow successful crops a certain weather environment is needed. This is not an influence in manufactured goods. Price elasticity of supply measures the relationship between change in quantity supplied and a change in price. Supply is inelastic in the short run as to increase agricultural production you have to plant more seeds for crops to grow which can take a long period of time. However for manufactured goods it is easier to increase supply as firms can increase productivity or employ more workers. Supply is elastic when firms are operating below full capacity and can increase production without increased costs or time

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