Analysis Essay Example | Topics and Well Written Essays - 750 words - 17

Analysis - Essay Example The prices of groceries are determined by the interaction between demand and supply as with any other marketable product. Both the consumers and suppliers rely on quantity and prices as a signal to adjust respective demand and supply of groceries in the market. But as groceries are necessary items and widely available in any market due to competitive market, it has significant buyers purchase decisions. The supply curve plots the relationship between quantity and prices of US grocery industry s that are able to procure and sell products in open market. Assuming that the market structure is perfectly competitive, the basic law of supply states that with the increase in prices of groceries in the market, the suppliers will response positively by increasing supply with the objective to earn more profits. Conversely, as the supply of groceries become abundant the suppliers negatively react by lessening procurement and supply of groceries in the market in order to cut losses that gradually leads to the fall in prices of groceries. Now, in the given case, Albertsons parent Cerberus is buying Safeway for over $9 billion. Many analyst have noted that the move was an attempt to acquire top spot in the US groceries industries. In US, over 19 percent market share is owned by Kroger followed by Safeway which is at present the second largest chain following Kroger. The merger will impact the demand-supply equation because post-merger it is expected that Kroger would operate with 2,640 stores whereas Albertsons would operate with 2,400 stores. The chart depicted above reveals that the volatility in market regarding the supply of groceries modifies the basic supply curve by shifting position. The analysis of supply movements of groceries indicate that when the curve shifts from S1 to S2 (right-side), it is an indication that there is an increase in supply of groceries in market, assuming