Subway Supply and Demand Subway Corporation: Supply

Subway Supply and Demand Subway Corporation: Supply and Demand Subway Corporation: Supply and Demand Supply and demand of a good or service in economics is the basis for economic analysis in its entirety. Supply and demand centers on the different quantities that a producer or producers will make available to the market at different prices over a given period of time. The law of supply and demand is twofold.

The law of supply functions that as price increases, producers are willing to produce and sell more, while if price decreases, producers are willing to produce and sell less. The law of demand is vastly similar. It functions in a manner that as price increases, the quantitiy people are willing to buy decreases, while as prices decrease, the quantity that people are willing to buy increases. The law of supply and demand illustrates a constant push-pull between the products that are being manufactured and the market that purchases them.

This law is present in any circumstance of purchase, including in a business chain like Subway. Production At Subway, the ability to turn a profit depends wholly on the company's ability to produce the menu items featured on its menu. Production and distribution to a steady client base may seem unalterable to a company who has achieved such high success as Subway. However, there are certain instances that can alter the standards of supply and demand that Subway has become accostomed to.

For instance the demand of a product has the capacity to change, which would therefore cause a massive shift in supply and demand within Subway internally. Take for example the following scenario: two sandwich restaurants operate within a small town -- one of which is Subway -- and business is generall split between the two. In this situation, both businesses are accostomed to a certain amount of demand each day, and have therefore achieved a manner in which to supply the items needed to each establishment's customers, respectively.

However, assume that Subway's competitor in this town unexpectedly closes, shifting all its customers into Subway's doors. In this circumstance, Subway must quickly and efficiently up its supply significantly in order to not only service its returning customers but these new customers as well. It is in situations such as this that a company has the opportunity to sink or swim depending upon how it is able to handle a shift in supply and demand.

Should Subway be unable to accommodate this new customer-base in its entirety, it risks losing many new customers as well as old. Subway may also see an opportunity to raise prices, even minimally in order to turn a bigger profit on a new consumer base. However, this may be the wrong tactic. Such a shift in customer demand further brings into play the subject of elasticity and quantity demanded within a company.

Note the example of pizza that Rittenberg and Tregarthen (2009) describe "Suppose 1,000 pizzes per week are demanded at $9 per pizza. Revenue equals $9,000. If an increase in price is made to $10, quantity demanded reduces to 900 pizzas per week and revenue will still be $9,000" (Rittenberg and Tregarthen, 2009, p. 115). It is in situations such as this, that tactics employed to turn a quick profit must be avoided in order to maintain prior sales. Supply Certain outside aspects can also affect supply, which in turn, affects the entire Subway operation.

Price increases or shortages in certain supplies that are needed by Subway in order to produce its food can hinder Subway's operation in its entirety. Take for example the milk shortage noted in the New York Times, which reads, "in parts of the United States, milk is more expensive than gasoline" (Arnold, 2007, p. 1). The same problem is mirrored in a Reuters article of the same topic which reads, "a year ago, raw milk from farmers cost processors $14-15 per hundred pounds. That cost is now $4-5 higher" (Dohery, 2007, p. 1).

In both situations, "milk" can stand for any food supply. In recent years, grain, fruits, vegetables, oil etc. have all seen a massive increase in prices, and increases like this can cause massive issues within a company that is at the mercy of food prices in order to operate. Effect of Minimum Wage Raise and Price Controls A raise in government-mandated minimum wage would have much the same affect on Subway as an increase in materials would affect supply.

With an increase in minimum wage comes the need for a company to dole out more money to its employees for doing the same task. Of course, employees should receive the payment deserved and mandated by the government for their work, but unless this revenue is made up in another form of profit, a company is essentially losing money for operating in the exact same manner as it had before. As Robert Schenk (2009) notes in his focus on Buyer and Seller Equilibrium, "sellers prefer higher prices to lower prices" (Schenk, 2009).

However, the question of how these prices should be controlled is also one that comes into play quite often. Like the aforementioned issue of the rising value of minimum wage, price controls such as this,.