Assignment-1
PGPM 26 - Section 2, Group 4- EconSelfie
SECTION 2 - GROUP 4 Participants
FT262009 - Pothuri Venkata Durga Sai Eswar
FT262024 - M Harini
FT262032 - Aakash Sunil Tripathi
FT262053 - Balkaran Tiwary
FT262055 - Abin John
FT262074 - Vemula Sai Manvitha
FT265004 - Akash Kumar Sahu
Rising Cake Prices During Christmas - Inelasticity
During the Christmas season, bakeries around the city experience a surge in demand for cakes,
especially fruitcakes and plum cakes. This demand spike typically causes prices to increase,
compared to non-seasonal months like October or February.
For example, a 500g plum cake that costs ₹350 in October may be priced at ₹500 in December.
Demand Shift: The festive season increases the demand for cakes, shifting the demand curve
rightward (D1 to D2).
Elasticity: Cakes during Christmas become price inelastic, since they’re considered essential for
Demand and supply curve to depict Inelasticity
During the Christmas season, the demand curve shifts rightward (outward) due to increased desire for cakes.
This causes both the equilibrium price and quantity to rise:
Price increases from ₹628 → ₹800
Quantity increases from 142 → 200 cakes
This demonstrates how higher seasonal demand leads to higher prices and more sale
References:
You have to shell out more for cakes, chocolates & more this Christmas - The Economic Times
Kolkata’s dear Christmas bakes set to be dearer on soaring flour & edible oil prices | Kolkata News
2. Packaged drinking water - Effect of MRP
During summers, we usually see an uptick in the demand for packaged drinking water. It can be in the form of 1L bottles - 20L jars. In a free market this would cause competitors to jack up prices of regular water bottles as customers would be willing to pay more for the same bottle.
Key concepts:
Incentives : No incentives for smaller players to enter markets as the Rs 20 price-point is
Demand and Supply : There is an increased demand in the market, so we see a shift in the
Equilibrium : The equilibrium point only sees a horizontal shift and no shift along the Y axis
Supply and shortages: Even though the increase in demands helps manufacturers sell
Here we can see that the supply and demand curves both see a shift but the equilibrium point only
shifts rightwards due to MRP.
Sources:
https://timesofindia.indiatimes.com/city/kolkata/packaged-water-demand-surges-5-fold-this-summer/
articleshow/111150092.cms
3. An Analysis of MAC Lipstick as a Veblen Good
What is a Veblen Good?
A commodity for which demand increases as their price increases, largely due to their exclusive nature
and their role as status symbols. Consumers derive utility not just from the product itself,
but from the prestige and perceived social status associated with owning and displaying a luxury item.
Are MAC lipsticks worth the price?
To better understand the demand, let us go through is a comparison of major lipstick brands available
in India:
This comparison gives evidence that a lipstick can be desirable when charged at a premium price.
Conclusion:
Our exploration into the economics of MAC lipstick has revealed a compelling scenario. While the
traditional law of demand dictates an inverse relationship between price and quantity demanded, Veblen
goods defy this principle, experiencing an increase in demand as their price rises. This paradoxical
behavior is driven by the desire for conspicuous consumption, where the product's high price itself becomes a key component of its value, signaling status,
exclusivity, and prestige to the consumer and their peers.
4. Admissions into PGPM Great Lakes Institute of Management
The Great Lakes, Chennai campus admits approximately 300 PGPM students on an average for an
academic year. It is a very sought after program in the whole country, there is a huge competition
to get into the program. Despite a noticeable increase in demand from employers of different industries
and organisations , there has been little to no increase in the supply of potential graduates from the cohort.
After factoring in the above scenario and shifting the demand curve we can clearly see the
new equilibrium point which is relatively moved upwards from where it was initially.
5. Air Conditioner “Price” and “Demand” increases during summer Season
During summer, demand for ACs increases, leading to price fluctuations. Manufacturers adjust supply, retailers offer incentives, and consumers
make purchasing decisions based on budget and necessity.
Key Economic Concepts: Demand & Supply, Elasticity, Opportunity Cost & Trade-offs
Incentives, Surplus/Shortage, Price Controls
Demand & Supply Curve During Summer (Price Increase Due to High Demand)
This graph shows how the demand curve shifts right during summer, leading to higher equilibrium prices.
6. Laundry Services - Inelasticity
Demand Factors:
· As household income increases, people start to value time more due to their busy lifestyle
and will start outsourcing laundry services for convenience.
· During rainy season when people find it difficult to dry clothes at home.
Supply Factors:
· Any increase in cost of washers, dryers, water, electricity , and detergents will affect the ability of
businesses to give services at current rates.
7. C-Type cable - Opportunity cost
Situation: Bought a C-C type cable that costed me Rs. 500 in the nearest market with no option to make any
choices however the same was available online with several options and cheaper prices.
Actual Price in a fair market:
Concepts involved:
Supply & Demand, Opportunity Cost, opportunity cost of not buying online was Rs 350 (the difference in price).
I traded off lower cost for immediate availability.
Trade-off Decision:
If I had waited for an online delivery, I would have saved money but risked inconvenience.
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