Extended essays in economics
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.
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.
IB Extended Essay Layout
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.
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.
This could be due to similar prices and presence of close substitutes in the market and firms offering similar services to customers. Chart 5. This is a large percentage and, hence, implies that the demand for leather and sports shoes is elastic and there are a myriad options for the consumers to choose from. If the prices of the goods of a particular firm rise, they can easily switch to another firm.
This response clearly confirms that footwear firms in Connaught Place engage in non- price competition to promote their goods. The hypothesis stated that the market form of the footwear industry in Connaught Place, New Delhi was Monopolistic in nature. Throughout the analytical portion of the essay, attempts were made to cross-verify the features of a Monopolistic market to the actual footwear arcade in targeted area of Connaught Place.
There were 8 firms that sold footwear in the defined region and a total of stores in the whole of Connaught Place. Counting method checked the criterion demanding large number of firms in the market. Moreover, deduction for the market share showed that, with few exceptions, most of the firms bore approximately equal share of the market. The same proven was via photographs, consumer survey, and interviews with the owners of three firms Kapoor International, FSports, and Asics.
So another condition for being a Monopolistic market was fulfilled. The recent entry of a firm, Asics, into the market was proof that there were very low barriers to entry and exit. Conversations with Mr. Agarwal, Mr. Chaturvedi, and Mr. Kapoor concretized the belief that competition among firms was based on price and non-price factors. The survey designed for customers also yielded the similar outcomes regarding elasticity of demand and price sensitivity.
Thus, the hypothesis was proven to be correct as most of the features of the actual footwear market in Connaught Place resemble the traits of a Monopolistic market. However, the apparent domination of large firms hinted towards oligopolistic features. Further study could have been conducted in this domain without the time crunch. In that case, it would become possible to make proper price, cost and revenue analysis to acquire the actual abnormal profits and deeply study the market. Limitations: 1.
1) Doubt Your Sources
The data which was analyzed throughout the extended essay was limited and as was the area. So the conclusions were not entirely effective and true for the whole market of New Delhi. Only two products were studied in context of the footwear market whereas the product range is much vaster. I neglected street side shoe sellers and that lead to disregard for indirect competition.
There was a lack of secondary data for authentication purposes. The consumers went through the survey with certain pre-conceived notions and biases and so the data was not thoroughly credible. The time constraints on my research posed as a barricade for surveying more consumers in the Connaught place market and collecting more data. The products were proven to be differentiate, however, the absence of patent rights on designs of shoes insinuated whether designs were originally differentiable or not.
Economics On Toast: Initial Guidance for Extended Essay in Economics
AmosWEB, n. Dolton: Glanville, Economics- in Terms of the Good the Bad and the Economist. Which type of footwear do you buy the most? Which type of footwear do you use the most? How often do you visit Connaught Place, New Delhi to purchase footwear? Rarely Weekly Fortnightly Monthly Never Are you aware of the highest and lowest prices of footwear in Connaught Place, New Delhi? How many stores or outlets do you visit in Connaught Place before buying some sports or leather footwear?
According to you, which of the following criterion is most crucial for the purchase of sports footwear?
How many diagrams is it best to use in an extended essay?
According to you, which of the following criterion is most crucial for the purchase of leather footwear? Do advertisements and media influence your purchase of shoes? Which medium of communication do you find most attractive? How responsive do you think you are to changes in the prices of sports shoes in the footwear market?
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How responsive do you think you are to changes in the prices of leather shoes in the footwear market? Which of the following firms do you buy sports shoes from most frequently? Which of the following firms do you buy leather shoes from most frequently? How would you rate your experience shopping in Connaught Place, New Delhi? As an informed consumer, how do you believe the footwear market can improve? What are the primary products manufactured? Kapoor International was established in and has, since then, been producing quality footwear.
Splendid Ideas for Extended Essay Topics
Though I may sound biased, I believe that Kapoor International has its own trademark which is accredited to its consumer-need awareness, trendy product line, and successful association s with leading foreign companies. Actually, we pay utmost regard to customer convenience and quality; it is probably what sets up apart from the rest. As a result of which the existing firms have also pulled their socks up.
So competition is getting severe by the day. With new firms entering the market so easily, it is safe to say that competition is stiff. Kapoor International is an extremely quality conscious organization. It pays highest regard to its specialized quality mechanism beginning from the first stages of procurement to the last ones of dispatch to stores.