Micro economics

project
About the
project:
We had to choose two companies, one from
luxury sector and one from necessary
sector. We compared the sales of two
companies before and during
demonetization.
Demonetization in India:
On 8 November 2016, the Government of India announced
the demonetization of all ₹500 and ₹1,000 banknotes of the 
Mahatma Gandhi Series. It also announced the issuance of
new ₹500 and ₹2,000 banknotes in exchange for the
demonetized banknotes. Prime Minister Narendra Modi
 claimed that the action would curtail the shadow economy,
increase cashless transactions and reduce the use of illicit and
counterfeit cash to fund illegal activity and terrorism. The
announcement of demonetization was followed by prolonged
cash shortages in the weeks that followed, which created
significant disruption throughout the economy. People 3
 What is a necessity good?
• In economics, a necessity good is a type of normal good.
Necessity goods are product and services that consumers
will buy regardless of the changes in their income levels,
therefore making these products less sensitive to income
change.
• Examples :haircuts, habits including tobacco, everyday
essentials such as electricity and water, and critical
medicine such as insulin.
• If income elasticity of demand is lower than unity, it is a
necessity good. This observation for food, known as
Engel's law, states that as income rises, the proportion of 4
What is a luxury good?
• A luxury item is not necessary to live, but it is deemed
highly desirable within a culture or society.
• Luxury items tend to be sensitive to a person's income
or wealth, meaning that as wealth rises, so do purchases
of luxury items.
• As a result, luxury items are considered to show
positive income elasticity of demand, which is a
measure of how responsive the demand is for a good to
a change in a person's income. Conversely, if there is a
decline in income, demand for luxury items will decline.
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Companies
chosen:
LUXURY GOOD(TREATMENT):
Company : Adidas India Marketing Pvt Ltd

NECESSITY GOOD(CONTROL):
Company : PepsiCo India Holdings Pvt Ltd

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Methodology:
TREATM CONTRO
ENT L
(LUXURY (NECESS
GOOD): ARY
GOOD):
BEFORE TB CB

DEMONITIZ
ATION:
DURING TD CD
7
DEMONITIZ
Sales:
TREATM CONTRO
ENT L
(LUXURY (NECESS
GOOD): ARY
GOOD):
BEFORE
DEMONIT
IZATION: 752.15 7,290.17
DURING
DEMONIT 8
IZATION:
9
 RESULT:
“
in economics, a luxury good is one in which demand grows
more and faster than an increase of the income of a potential
buyers. it stands in opposition to "necessity" goods, for
which demand grows much slower than income. luxury
goods are often the highest quality. luxury services and
goods are relative because it depends on many factors and
prospects. when a good or service is a luxury or a comfort
good, the demand is highly price-elastic when compared to a
necessary good. conversely, the demand for an essential
good, such as food, is generally price-inelastic because
consumers still buy food even if the price changes. when
price of goods increase people will cut consumption of
luxury goods and not of necessity goods because it is quite 10
PRESENTED
BY:
• JITYA SP
• BATHMAPRIYAN S
• BHALA VIGNESH L
• SRIPATHI SN

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THE END

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