Managerial Economics

Name-Hemaabh Khurana Enrollment no.-112162614

Poor: 40-49%.Merit. N/A .not applicable Distinction: 70-80%. D . layout & Organization (10) Test for Plagiarism (10) Feedback Marks/Grade Key Areas of Strengths Key Areas for Improvement Marks Second Marking (if Applicable) Moderated Marking (if Applicable) Sign of Faculty: Sign of Faculty: Sign of Moderator: Final Marks Date . except for any clearly marked up quotation. Fail: 0-39% Write in Block Letters Name: Signature: Course Name: This assignment is all my own work and has not been copied in part or in whole from any other source. Merit: 60-69%. It complies with the Institute’s regulations on Plagiarism which I have read and understood.Poor.Average. B . E .Fail. C .Distinction. Average: 50-59%. (Section Below to be filled by the evaluating Faculty) Criteria Relevance to topic (10) Background research: application of theory to the topic (20) Analysis & interpretation of material (10) Appropriate use of diagrams (10) Quality of conclusions & recommendations (20) Use of reference materials and bibliography (10) Presentation.CENTUM U Course Work Assessment (Assignment) Feedback Form Enrollment ID: Module Title: Number of words: Submission Date: If Late (please tick): A .

1(a).  Weightage will be given to critical evaluation or reflection on the problem/issue being analyzed. Elaborate on the economic concepts based on your observation and learning.1(b). Explain the difference between price and non-price competition and elasticity and the contexts which give rise to it.Visit a local super market or departmental store. pricing. etc. (50 marks) . different brands under the same company.MANAGERIAL ECONOMICS INSTRUCTIONS  Students would carry a Plagiarism Check of the submitted document on “VIPER” and submit the report along with the assignment. brands. Focus on the section where floor cleaning detergents are displayed for sale. He/she would also sign the Plagiarism check statement on the cover page. (50 marks) Q. Observe and analyze the space allocated. Q.

product. Firm try to differentiate and build customer loyalty to maximize sales. Price is a major factor that a consumer considers while purchasing a product. packaging. This situation is beneficial for the consumers because he/she can get the good at a cheaper price. In non-price competition a firm must spread awareness of its product through advertising and other promotional activities to differentiate itself from other firms. non-price competition is a situation where the seller tries to distinguish its good or service from rest of the competitors on the basis of color. In a price competition a firm must react to the change in price strategy of the other firms quickly. And even though the firms incur more costs but it is still better not to sell the good or service at a cheaper price. Firm tries to lower the cost of the product to maximize sales. However. Whereas. advertising. apart from price there are various other factors that a consumer considers before making a decision. . The other 3P’s i.It is the sum or amount at which a good or service is valued or a value which a seller gets for his goods or services in the market. Price and Non-price competition Price competition is a situation where the seller cuts the retail price of the homogeneous good or service to gain competitive edge over its competitors. place and promotion also play a pivotal role. size. other than price to gain a competitive edge. Change in price of the good or service leads to fluctuation in demand of that good or service. quality etc.Part-I Price. Heterogeneous products are sold.e.

other factors are held constant. When price is at P1. Supply Supply for a good or service is defined as the amount of a product that a seller is willing to sell in a market at a particular price and at a particular period of time. {Source:http://www.blogspot. When price increases.Quantity demanded of a product changes with the change in its price. “Demand” is known as any desire of a good to a person when he or she is having purchasing power and willingness to pay for the good.google.png& } Figure no.the quantity demanded changes from Q1 to Q2. Let us first consider the market according to the consumer point of view.the quantity demanded at that price is Q1 and when price increases from P1 to P2.Contexts which give rise to it Economics talks about both consumer and producer point of view. the price and quantity demanded are two variables on Y and X axis respectively. Demand Demand for a good or service is defined as quantities of a good or services that people are ready to buy at various prices within some given time period. quantity demanded decreases and vice versa.com/_5EvqK386BWg/S0d aDhPMaYI/AAAAAAAAAIM/qTEurLwVEO0/s400/DemandCurveMovementExample2.in/imgres?imgurl=http://4.bp. .co. .1 Figure Analysis In the above figure.

Price elasticity of demand 2. he/she is less elastic. Cross elasticity 4. When a consumer is giving response to the price change. ES=0-When there is no change in the quantity supplied of a good or service. ES<1-ES is said to be less elastic when percentage change in supply is less than percentage change in its price. ED<1-ED is said to be less elastic when percentage change in demand is less than percentage change in its price. Measurement 1. Measurement 1. ES=infinity-When the quantity supplied of a good or service can increase or decrease to any extent. Price elasticity of supply 3. with or without any change in its price. Price elasticity of supply It is the degree of responsiveness for a commodity’s change in quantity supplied to a change in its price. ES=1-ES is said to be unitary elastic when percentage change in supply is equal to percentage change in price. 2. . 4. he /she is more elastic whereas if a consumer is not giving response to the price change. When a consumer is giving response to the price change. with or without any change in its price. 5. ES>1-ES is said to be more elastic when percentage change in demand is greater than percentage change in its price.Elasticity It is the degree of responsiveness of percentage change in one variable with respect to change in another variable. ED=infinity-When the quantity demanded of a good or service can increase or decrease to any extent. Different types of elasticity 1. 2. ED=1-ED is said to be unitary elastic when percentage change in demand is equal to percentage change in price. ED=0-When there is no change in the quantity demanded of a good or service. Cross elasticity The sensitivity of demand of a commodity to the price change in its respective substitute/compliments is called cross elasticity of demand. with or without any change in its price. he /she is more elastic whereas if a consumer is not giving response to the price change. Income elasticity Price elasticity of demand It is the degree of responsiveness for a commodity’s change in quantity demanded to a change in its price. 3. 3. ED>1-ED is said to be more elastic when percentage change in demand is greater than percentage change in its price. 5. he/she is less elastic. 4. with or without any change in its price.

concept of demand and supply. When income of a consumer changes. There is a decrease in the quantity demanded. Perfect competition      Large no. Different market forms are as follows: Market Structure Perfect Competition Monopoly Imperfect competition Monopolistic Oligopoly A market is just not a geographical area or expression but any place could be called a market where buyers and sellers are in regular contact. there is a change in the quantity demanded.Ecp=% change in demand of a commodity / % change in price of its substitute or compliment Income elasticity It is the sensitivity of change in the demand of a good or service with the change in income of the consumer. when there is an increase in income. business transactions are continuous in nature and they have perfect knowledge of price. of buyers and sellers exist. Homogeneous goods are sold at uniform price. when there is a decrease in the income of the consumer. when income of the consumer decreases. . Each market structure has its own features.  Normal goods-There is an increase in the quantity demanded. when income of the consumer increases. Because of price uniformity P=AR=MR. There is a decrease in quantity demanded.  Inferior goods-There is an increase in the quantity demanded. Price and non-price competition along with the concept of elasticity play an important role in determining various forms of market structure. Price is determined by the industry. different demand curves etc. There is an inverse relationship. Firms are free to enter and exit. There is a positive relationship.

Demand curve is downward sloping but less elastic. . There is non-price competition but most of the firms don’t indulge in it because cost of promotional activities is too high and the margin per unit is very low. No close substitute available. MR < AR Revenue MR AR Output Figure no.3 ANALYSIS In monopoly demand curve is downward sloping but demand curve is less elastic due to single seller. . – 2 ANALYSIS FIRM Q In perfect competition demand curve is perfectly elastic. There is non-price competition but it is not necessary as price fluctuates. Large no of buyers. In short run the monopoly firm may hike the prices to gain maximum revenue but the monopoly firm may reduce the price in the long run to avoid new entrants in their own interest. If a firm increases its price then all the other firms also increase their prices to keep uniformity. Price has no role because of homogeneous goods. Monopoly      Single seller exists.P S D P P=AR=MR Q INDUSTRY Figure no. Price is uniform but not constant.

 Heterogeneous products are sold.-4 ANALYSIS The demand curve in a monopolistic market is downward sloping and is flatter i.Monopolistic competition  Very large no.  Large volume of goods and service freely move in the market.e.  Firms are free to enter and exit. is more elastic. For e. of buyers and sellers exist  Elements of both monopoly and competition co-exist together. .  MR<AR. This type of market situation is sometimes called perfect example of non-price competition. bitter rivalry between sprite and mountain dew through promotional extensible activities. Revenue AR MR Output Figure no.  Demand curve is downward sloping and is more elastic.g.

5 ANALYSIS There is both priced and non-price competition elements present according to the form of oligopoly market. . other firms would decrease the price. There is price competition. The demand curve facing an oligopoly market is kinked. of buyers. other firms may not increase the price. More than 2 and less than equal to 10 sellers. in such a case ED>1. There is bitter rivalry between the firms. And if a firm decrease the price. Both collusive and non-collusive forms of oligopoly market exist. The demand of other firms is determined by the price variation of any of the existing firms. Homogeneous and heterogeneous products are available. Revenue ED>1 ED<1 Output Figure no. . Firms hide their price and output policy. There is no price war. in such a case ED<1. There is non-price competition Non-collusive oligopoly. Collusive oligopoly-The firms in collusive oligopoly acts like a cartel and determines the price and output policy and behaves like a monopoly. The demand curve of an oligopoly market is very difficult to derive. If a firm increases the price of its good.    Oligopoly Few sellers and large no.A type of oligopoly market that exists in reality.

00 50.1 showing different brands. COMPANY FLOOR VARIANT QUANTITY CLEANERS RECKITT LIZOL PINE 975ML BENCKISER FRAGRANCE PINE 500ML FRAGRANCE PINK 500ML FRAGRANCE CITRUS 500ML FRAGRANCE BEACHPOWDER 500ML (LIQUID) HINDUSTAN CIF 500ML UNILEVER 250 ML 120ML HINDUSTAN DOMEX WHITE 500ML UNILEVER AMOUNT Rupees 99.00 53.Part-II The store I visited was reliance fresh at Dwarka mod. Muscle Table no.00 54.00 27. Different floor cleaning agents were displayed as followed: 1st rack.00 78.00 54.Cif. variants and prices of floor cleaners. near Uttam nagar.00 .Dowsil perfumed floor cleaner (phenyl) 2nd rack-Lizol and Domex 3rd rack. Easy of bang and Mr.00 54.00 52.

Easy entry of new entrants is possible. In the floor cleaning segment too it depends on other firms i. The demand curve can be both more elastic and less elastic depending upon the rival’s reaction.e. also because consumer has no knowledge about the ingredients of the product. face non-price competition. If income of a consumer is increasing.e. The market share of a firm or a particular brand depends on how well the brand is differentiated from others. There is oligopoly market situation as there are few sellers with a large no of buyers. Cif has launched a special cleaning agent for wooden floors. According to me. of sellers are more than 2 and less than or equal to 10. Also the price margin is high on the in-house manufactured product. After talking to the store manager I got to know that the in-house brand of reliance fresh i. to the highest. the brands catering to the high income consumer like Cif.HINDUSTAN UNILEVER SC JOHNSON RECKITT BENCKISER RELIANCE CHEMICALS DOMEX 2IN 1 MR. dowsil (phenyl) was allocated the top shelf and a greater area so as to catch the eye of the consumer and promote its brand respectively.e. other firms may not increase price i. Analyzing the table we see there is price and non-price completion both present between the competing firms. packaging of the product. Easy of bang etc. Hence. size etc. In the floor cleaning market the brands under the same company name have such strong brand image that the brand is a product itself. Tactics are used to differentiate ones brand from other competing brands through advertising. the consumer will not shift even if the price is increasing. here the decision of the firm depends largely on the competitors. The no. and the in-house brand dowsil. Demand is less elastic here.00 65. Cost being one of the major factors for a firm depends on certain factors. . Lizol. But as the firms come into play it changes its price to “penetration mode” i.e. ED<1(less elastic). Instead firms catering to this segment only try to price themselves as cheaply as possible to attract the maximum number of consumers. There is also non-price competition between the brands like domex and lizol. other firms would decrease the price i. we do not see much non price competition in this segment.e. WHEREAS brands catering to the low income consumer like dowsil floor cleaner face price competition. As long as no other brand comes with a product in the same category it will keep its cost to “skimming” i. If a firm increases the price. There is a price war between respective brands like domex.e. to keep itself either lower or equal to the next player. lizol etc. ED>1(more elastic) but if a firm decreases price.00 50. MUSCLE (floor cleaner) EASY OF BANG DOWSIL PERFUMED WHITE BLACK 1 LTR 500ML 500ML 400ML 1LTR 108.00 66 2LTR 149 3LTR 250 Different economic concepts prevailing in the floor cleaning market. Since here consumer is more price sensitive and is probably not affected by the advertisements or product development undertaken by the firm.00 50.

New Delhi: OXFORD: 2008. . Managerial Economics: Principles and Worldwide Applications. Managerial Economics: Economic tools for today’s decision makers. et al. Petersen Craig. Noida: Pearson: 2009. Salvatore Dominick. 3. Managerial Economics.Bibliography 1. 2. et al. Keat Paul G.. Noida: PEARSON: 2006.

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