Economics Project Phase - Free Essay Example

ECONOMICS PROJECT PHASE – I DEMAND ANALYSIS HIMALAYA NEEM FACE WASH Submitted to: Ms. Geeta Jaglan Submitted By: Kapil Chadha Kriti Puri Section: E 1ST SEM. AIBS AMITY UNIVERSITY CONTENTS 1. Basic Introduction†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. 3 2. Price Elasticity of the Product†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. 8 3. Analysis of the Product†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. 10 4. Conclusion†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. 11 BASIC INTRODUCTION DEMAND The amount of a particular economic goods or service that a consumer or group of consumers will want to purchase at a given price. In simple words, it refers to how much (quantity) of a product or service is desired by buyers (Consumers) Example: A person wants an LAPTOP and he has $700 to spend on it. He is ready to spare $700 and so he has created a demand for that product which the market should supply. SUPPLY The total amount of goods or service available for purchase depending on the demand is called supply. In other words, it represents how much a market can offer for the product demanded. The quantity supplied refers to the amount of a certain good producers are willing to supply when receiving a certain price. DEMAND CURVE The demand curve shows the amount that consumers are willing to buy given a particular market price. It is the graphical representation of a demand schedule. For example: A Demand sch edule of a Particular product is as follows: PRICE54321 QTY. DEMANDED1017265375 The Demand Curve will be The demand curve is usually downward sloping, since consumers will want to buy more as price decreases. Demand for a good or service is determined by many different factors other than price, such as the price of substitute goods and complementary goods. In extreme cases, demand may be completely unrelated to price, or nearly infinite at a given price. Along with supply, demand is one of the two key determinants of the market price. FACTORS DETERMINING THE DEMAND of the PRODUCT Some factors that determine the demand for a product: ?Price of Product and its substitutes ?Consumer’s income ?Consumer’s taste and preferences ?Consumer’s Future expectations ?Population of a country and its credit facility ELASTICITY of DEMAND The Degree of responsiveness of demand to the change in its determinants is called Elasticity of Demand In simple, elasticity is the ratio of the percent change in one variable to the percent change in another variable. This concept plays an important role in business-decisions regarding manoeuvring of prices with a view to making larger profits. PRICE ELASTICITY of DEMAND Generally it is defined as the responsiveness or sensitiveness of demand for a commodity to the changes in its price. More precisely, elasticity of demand is the percentage change in demand as a result of one percent change in the price of commodity. Price elasticity (ep) is given by Mathematically, definition of elasticity is given by Where Qd = Original Quantity demanded P = Original price ?Q = Change in quantity demanded ?P = Change in price. PRICE ELASTICITY AND TOTAL REVENUE Price and total revenue are related as follows: Total Revenue = Price ? Quantity There may be 3 kinds of price elasticity a). Less than unit elastic (ep1) In this situation, change in quantity demanded is greater than the proportionate change in price. Therefore total revenue increases as price falls and vice versa. An increase in price would result in an increase in revenue, and a decrease in price would result in a decrease in revenue. In the extreme case of elasticity near 0, the demand curve would be nearly vertical, and the quantity demanded would be almost independent of price. The case of zero elasticity is described as being perfectly inelastic. PRICE ELASTICITY of the PRODUCT PRODUCT TAKEN Himalaya Purifying Neem Face Wash 100ml. One of the most prominent product of The Himalaya Drug Company, the demand of this product is growing day by day irrespective of the increase in the price of the product. Its total revenue is increasing which is discussed below: PRICE ELASTICITY Himalaya Neem Face Wash (100ml) sales statistics Sales VolumePrice in Rs. Dec’08-Sep’09Oct’09-Jul’10% ChangeDec’08-Sep’09Oct’09-Jul’10% Change 22,19,65833,13,97949. 30%65707. 69% Substituting in the formulae o f price elasticity, we have ep = (49. 30/7. 69) = 6. 41 which is greater than 1 ep1which means elastic demand. Here we see an increase in the total revenue (TR) as a result of the marginal increase in the prices. ANALYSIS OF THE PRODUCT FACTORS RESPONSIBLE FOR ELASTIC DEMAND ?During the last 2 years many new products have been launched by the competitors like Everyouth face wash, Ponds, Garnier etc with nominal price range but because of the herbal nature and optimum quality of the product, it is still winning the hearts of the consumer. The product contains less of chemicals as it is herbal in nature. Consumers these days are shifting more towards buying herbal products to minimize the harmful effects of chemicals. ?The price increase is marginal in nature and is not affecting the buying capacity of the consumers. ?The marketing strategy of the company so as to reach to the common man is much more effective than its competitors. ?In recent years, consumers taste and preferences has taken a shift towards natural products as they are not harmful to their body. CONCLUSION After analyzing the price elasticity of the product, we found that the demand sales of Himalaya Neem Face Wash has been increasing steadily over the years and currently the company is enjoying the peak position in face wash categories in India. Even an increase in the price of the product didn’t have any effect on its demand. With monthly sales of more than 5, 00,000 units, Himalaya is the leader in face wash segment in India with a market share of around 70%. The study of this phase of the project has helped us to understand the concept of â€Å"Demand Analysis and Price Elasticity† and how this concept is useful in analyzing the demand of the product and its applications.