Hovis not flawless

Hovis chose to raise their bread price “to more than £1 for the first time last September.” This raise in price caused their sales to drop. In this drop, we can see that the demand of Hovis bread is elastic. We can assume this, because the second they raised their prices, the amount of people that bought their bread dropped. The reason the demand on Hovis bread is elastic is because it is responsive and sensitive to changes to price. Also, because Hovis is a brand, it is bound to have elastic demand since there are many substitutes to bread. As seen in the graph, it shows how a small change in price causes a big change in quantity demanded. In this case, Hovis raised their price and relied on their costumer loyalty. However, the small change caused a very large change in the quantity demanded.

JAL

Japan airlines needs to definitely cut down on prices to maximize their profit. Possible cuts can be in their staff and the foods they serve. They could also change their marketing scheme and possible do something similar to Ryanair.

Why Ryanair Flies High

The article we have read suggests that British Airways believes that the demand is inelastic in the upper segment of the market. This way raising prices causes very little changes in the quantity demanded while also avoiding a decrease in the revenue. Ryanair’s believes that the demand is highly elastic in the lower segment of the market. They than have a very low price and attract a large amount of consumers. Changes in prices however significantly affect the revenue.

Ryanair has cut down as much as possible on their costs and they have also increased their routes. 

They sell their first seats at a regular higher price. Once they have covered their costs, they calculate the cheapest price for their next seats while still having a reasonable profit. They range these prices and they lower them as more and more people buy tickets. This way, they maximize their profits.