ECOM4000 T1 2021 Week 6 Activity 1.Group Case Study (5%)

Consider the article on Peloton exercise bikes reported at the end of this document.Using this information, answer the following four (4) questions.All questions are worth a total of 10 marks.

1.The article states that there is an increase in demand for exercise bikes because of Covid-19.Explain the effect this has on the demand curve for bikes, and on their market price and quantity. (3 marks)

2.The article also states that customers are saying on social media that they are not happy with having to wait for their bikes to arrive.Explain what effect this might have on the demand curve for bikes, and on their market price and quantity.(3 marks)

3.Given the two demand determinants identified in Questions 1 and 2, which do you think is greater, and what do you think the ultimate effect on demand, price and quantity will be?(2 marks)

4.Taking into account all of your previous answers, do you think the price elasticity of demand for Peloton exercise bikes will be higher or lower in the long run?Explain why.(2 marks)

Peloton's Predicament:What To Do When Demand Outstrips Supply

By Jon Picoult, Forbes Contributor (January 25, 2021)

Many Peloton customers are exhausted - not by their workouts on the company's exercise bikes, but by the seemingly endless wait for the fitness equipment they've purchased.

Peloton's pricey bikes and treadmills have been in high demand since the pandemic closed down gyms and fitness centers, leaving consumers to look for home-based exercise alternatives.

With Covid-19 lockdowns substantially increasing demand for its products, Peloton has struggled to keep up with orders.

According to The New York Times, Peloton customers are being given delivery timeframes up to ten weeks out from their purchase dates. And, as delivery day approaches (or even arrives), some customers get messages from Peloton indicating that their equipment won't arrive when promised.

Peloton's predicament might seem a lot more appealing than the converse problem - having a lot of product supply but no customer demand. In truth, however, an inability to reliably deliver on customer orders creates serious reputational risk for a business. It's a risk with which Peloton has become all too familiar, as customers take to social media to express their dissatisfaction and, in some cases, even cancel their orders and defect to competitors.

(Source:https://www.forbes.com/sites/jonpicoult/2021/01/25/pelotons-predicament--what-to-do-when-demand-outstrips-supply/?sh=5402746662d1)