Extended essays in economics

Nonetheless, it was established that the market type, because of relatively high and countable number of firms, was somewhat neutral between monopoly and perfect competition and corresponded directly with the traits of a monopolistic market. Based on data revealing the number of customers that visited each footwear outlet in Connaught Place between p. The same is reflected the table and pie chart below. Table 1. Nonetheless, if one were to factor in the production capacity of these firms, the results would seem plausible and the percentages would seem to be equal with certain uncertainties.

Types of Products — Various kinds of shoes were sold in the market at Connaught place ranging from Loafers to sandals to formals leather shoes to sports shoes. Even at one glance, it can be concluded that the appearances of footwear are diverse in every aspect. This is a core criterion of monopolistic market forms and, hence, validates my hypothesis.

Diagram 2. In a Monopoly or a single firm dominated market there exist such high and impenetrable barriers to entry that it is virtually impossible for a firm s to enter it. These barriers can be in the forms of expensive licenses, legal barriers, insufficient resources, initial capital and aggressive tactics of dominating firms as well.

Similar, but slightly toned In a Perfect Competition and Monopolistic market, howsoever, entry into and exit out of the market are extremely fluid and easy. An interview with Mr. Kapoor3 revealed that a company, Asics, had recently set their base into the Connaught Place market.

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As that firm operated in the targeted region, it, too, was analyzed amongst all the firms. Agarwal shed light on how relatively easy it was for him to get into business in the Connaught Place market region. He mentioned that the entire process was not tedious, demotivating or accompanied by an endless chain of licensing and patenting. Agarwal said that after entering the market, the firm had to immediately start working on their brand image, the quality of their shoes, and on their service. The short term goal was to initiate the generation of brand loyalty. When questioned about prices, Mr.

He mentioned that Asics had to adopt relatively lower prices to catalyze the demand for its goods since the market already possessed profuse footwear manufacturers with customer bases. Conclusions drawn from the interview as follows: The footwear market demonstrates monopolistic features as there is free entry and exit along with very low barriers. And firms engage in both price and non-price competition. Price Competition — Price competition is simply a tactic firms use to keep their product in demand; firms lower the prices of the good and incentivize consumers.

In a Monopoly, for instance, the dominating firm is the price setter and does not have any need to compete. Himanshu Agarwal Economics EE Candidate SessionNumber Candidate Name:PalakBhargava 13 abundance of sellers and homogeneity in goods only leads to one deduction: sellers are price takers. The first technique, is however, only suitable for closed markets in which there are less substitutes for products.

The abundant availability of substitutes for footwear implied that, to make their product more attractive, firms will maintain fairly constant prices. This directly meant that a moderate degree of price competition would exist. And this, indeed, is a component of the Monopolistic market structure. The startup in this industry i.

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Asics has the lowest, but almost close to the average, price. Whereas, the giant firms, Puma and 5 Appendix G- Pricelevels for sports and leather shoes in targeted region of Connaught Place 0. Economics EE Candidate SessionNumber Candidate Name:PalakBhargava 14 Adidas, have the comparatively much higher prices; still their prices also belong to a specific range between and rupees.

Despite the partial consistency in the prices of Leather shoes, similar price trends indicate evidence regarding price competition in the footwear industry. This is another measure for monopolistic competition market. Graph 3. As for the large scale firms the price trends are analogous to that of the leather shoes; they are much steeper than the average. Still, it is evident via similar price level patterns that price competition is prevalent through the footwear market. Thus, firms would particularly compete on grounds of price levels.

Nonetheless, it is important to mention that these prices are just averages and outline the economic condition only for a specific duration. Strategies include discount offers, promises for fine quality, schemes, high service, trendy products etcetera. It was observed during multiple visits to Connaught place that the firms were fiercely attempting to augment their consumer base and revenues. When Kapoor International came up with ultra- shiny pure leather style, within a few days, in response FSports and Egoss manipulated their respective non-prices schemes.

Also some marketing and advertising stratagems were adopted by Puma, Asics, and Lee Cooper.

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Kapoor International, Lico, Hitz and Egoss, too, endorsed their product lines via pamphlets. Thus, the apt market form in this respect could be either monopolistic or oligopolistic.

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To gain more clarity for the same, I interviewed the owners of two well-established medium scaled footwear industries in Connaught Place: Kapoor International6 and FSports7. The Managing Directors, Mr. Sanjay Kapoor and Mr. Rakesh Chaturvedi, and I conversed about their firms, profits, revenues, rival firms, the competitiveness of the industry, and the various marketing strategies adopted to combat the pressure of increasing sales and prices.

Both the owners agreed that a majority of their customers were return customers. This demonstrated that consumers presented brand loyalty. Kapoor suggested that the cause for the same was quality consciousness while Mr. Chaturvedi said that it was premium service.

Through the interviews it became evident that via product differentiation, in the form of quality, packing, advertisement, and brand reputation, and 6 Appendix C- Interview with owner of Kapoor International:Mr. Rakesh Chaturvedi Apparently prices were not an important factor taken into account while making a purchase, Mr.

Kapoor and Mr. Chaturvedi claimed that consumers were price sensitive to a judicious extent. The interviewees did, however, admit the prices on the market were very similar and showed consistency in patterns. Thus, the immensity in product range made the demand for footwear relatively inelastic and reduced the need for the firms to compete on price. This behavior is a germane reflection of Monopolistic competition and is consistent with the free market idea.

Costs and Revenues — As it has been established that entry into and exit out of the footwear market is free and rather easy, the following assumption can be cohesively casted: footwear firms in Connaught Place will earn generate either abnormal or normal profits or losses in the short run and normal profits in the long run. Diagram 4. The demand curve for a good from the perfectly competitive industry is perfectly elastic while that of a good from the monopolist is highly inelastic. As footwear, sports and leather shoes, are normal goods and have A monopolistic competitor aims to create the demand for its good via differentiation to an extent that it magnifies market power by making the demand curve for that good inelastic.

The downward sloping demand curve bars PE from being equal to minimum ATC and MC thereby making the market inefficient on allocative and productive grounds.

To earn economics profits, a monopolistic competitor will produce the quantity, QE at which the marginal costs MC are equal to the marginal revenues MR and when MC is rising. The firms operating in monopolistic market will set their prices, PE, for quantity, QE, by charging as much as the Demand at QE will permit.

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The average total costs of production ATC will be below the price PE and the remainder would give the abnormal profits. However, the adjustment to long run normal profits would be the ultimate outcome of either case. If the firms are already generating profits then it would attract entrants into the industry. Consequently, the demand faced by each firm with shift to the left and, hence, decrease.

So, the marginal cost curve will interest the marginal revenue curve at a small quantity of output. The reduction in output and demand would result in a decrement in the profitability of the firms. Their short run economic or supernormal profits would be eliminated and replaced by normal profits.

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Thus, the entry of firms into the market will diminish short term abnormal profits by equalizing price with average total costs. But if the industry was experiencing loss then firms would exit the market and increase the individual demand for each firm and remove the condition of loss to reinstate normal profits. Since the footwear industry, too, made normal profits in long run and supernormal profits in short run, it embodies another characteristic of monopolistic market. The aim was to deduce the market knowledge of consumers, their preference, the Price Elasticity of Demand, etcetera.

fr.fetevapoqady.tk These results suggest that the consumers have good knowledge about the market and have the potential to make rational and informed decisions. Hence, the existence of close substitutes in the footwear industry is verified. Thus, it can be concluded that customers have a tendency to opt for firms with a better brand image as they have the notion that these firms adopt better quality measures.