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Economics Assignment

1877 words - 8 pages

Lecturer: Kathy Peters
Subject: Principles of Economics
Student name: Chung Ngoc Anh Nhi
Individual Assignment

The Analysis For Perfume Market In
Vietnam

Table of Contents
1. Introduction 3
2. Perfume Characteristics 4
2.1 The elasticity of demand 4
2.2 The elasticity of supply 5
2.3 The market structure 6
2.4 Opportunity costs 7
2.5 Type of costs 7
3. Demand and Supply Analysis 8
3.1 Demand 150 8
3.2 Supply 150 9
4. References 10

1. Introduction
In recent years, the society and economy have been growing very fast. It has lead to human demand increase rapidly on many aspects such as food, clothe, transportation, etc. Besides ...view middle of the document...

To alternate it, many substitute goods have been released such as lotion, body cream, body mist, etc. It makes a big different level. The body cream or body mist can also maintain the scent. On the other hand, consumers can choose normal perfume brands such as Echanteur or Izzy cost under 100,000VND (Hanghaygiatot, 2012) instead of luxurious one.

These are some substitutes that consumers can choose to alternate perfume (Banned, 2010)

* Income: Vietnam is a country that has average income. Consequently, to normal people have the income over 5,000,000VND; buying a bottle of perfume is not difficult. On the contrast, those whose income is under 5,000,000VND; it’s another issue. Obviously, a 5ml bottle of luxurious perfume-the mini one costs around 300,000VND - 400,000VND (LinhPerfume, 2012). Therefore, increasing the price of perfume is a problem to every company and supplier.
* The time period: Although the price changes constantly, consumers can adapt it by time, but it just occurs in the short run. For example, the price increases from 400,000VND to 500,000VND between two and three months consumers still accept and willing to buy it. However, if the time takes longer and the price keeps going up, the demand will be more elastic.

3.2 The elasticity of supply
To the supply, it is more likely elastic. The supply will go up whenever the price and the demand in the market go up. On the contrast, if the price still goes up but the demand goes down, it means the supply will go down too because there is no consumption. It has lead to two determinants can affect the supply:
* The amounts that costs rise as output rises: the additional costs of producing additional perfume the firms will be encouraged to produce more for a given price rise, so the supply will more elastic.

* Immediately: Immediate is a problem that all firms sometimes have to deal with. Firms are unlikely to be able to increase supply in immediate. They need to take time to produce those bottles of perfume; thus, they cannot produce immediately if they have an order. However, they are still able to supply if they have available stocks. In short, supply is highly inelastic.
3.3 The market structure
For this product, the market structure is Monopolistic Competition. It can be understood as a situation where there are a lot of firms competing but where each firm does nevertheless have some degree of market power (Sloman & Garratt, 2009). There are bunch of competitors compete each other at the same time. However, to attract consumers, each firm must create the differentiated for their product. For example, Lancôme and Chanel have made the big differentiation in cosmetic industry. With their quality and their own value, they have maintained the consumers’ demand in previous decades and until now (All Top 10 List, 2012). On the other hand, firms have some control over price called non-price competition. With the quality and the reasonable price,...

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