economic project report
TRANSCRIPT
IIPMCHANDIGARH
PROJECT REPORT ON:
INTERVIEWING CONSUMER AND DETERMINING DEMAND CURVE
OF ONE NECESSARY AND ONE LUXURY ITEM.CALCUTE PRICE
ELASTICITY OF THESE ITEMS AND INTERPRET THE RESULT
Submitted By:
Vikrant Baghi
Rohit Aggarwal
Yogeshwar Dhaliwal
Ravinder Kumar Garg
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Declaration
We hereby declare that the project title "Interviewing consumer and determining demand curve
of one necessary and one luxury item" is a work of our own and all reference sources have been
accurately reported and acknowledged. We would also mention that our information gathered,
analyzed and documented for this project is entirely in our possession which is authentic and
genuine. We will mention that the work done is not purchased or acquired by any unfair means
or any external sources. The data and the information presented in the report are accurate and
updated to the best of our knowledge. However, for the purpose of the project, information
already compiled in many sources has been utilized.
Place: Signature:
Date:
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Acknowledgement
We are grateful to thank our Dean Mr. Amit Baruah and Assistant Mrs. Samuya Baruah for
giving us this great opportunity to do this project.
We also extend our thankfulness to our beloved parents and friends for their continuous
encouragement at every moment.
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TOPIC
Determining Demand Curve
When the cost of a commodity changes, demand for that commodity will also change. The term
"demand" refers to the total amount of the commodity that is consumed. Usually, when cost goes
up, demand goes down. For example, when the cost of beef goes up, total beef sales will go
down. It is also true that when the price of a commodity goes down, consumption usually goes
up.
Demand curves plot the relationship between price and demand (consumption). The horizontal
axis (X axis) shows the unit price of the commodity, and the vertical axis (y axis) shows the total
amount of that commodity consumed at each of the prices.
Because less of a commodity is consumed when the price goes up, the demand curve drops.
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What is a Necessary Item?
In economics a necessity good is a type of normal good. Like any other normal good, when
income rises, demand increases. But the increase for a necessity good is less than proportional to
the rise in income, so the proportion of expenditure on these goods falls as income rises. This
observation for food is known as Engel's law. The income elasticity of a necessity good is thus
between zero and one.
Necessity goods are goods that we can't live without and won't likely cut back on even when
times are tough, for example food, power, water and gas.
The more necessary a good is, the lower the price elasticity of demand, as people will attempt to
buy it no matter the price.
What is a Luxury Item?
In economics, a luxury good is a good for which demand increases more than proportionally as income
rises, in contrast to a "necessity good", for which demand increases less than proportionally as income
rises.
Luxury goods are said to have high income elasticity of demand: as people become wealthier,
they will buy more and more of the luxury good. This also means, however, that should there be
a decline in income its demand will drop. Income elasticity of demand is not constant with
respect to income, and may change sign at different levels of income. That is to say, a luxury
good may become a normal good or even an inferior good at different income levels, e.g. a
wealthy person stops buying increasing numbers of luxury cars for his automobile collection to
start collecting airplanes (at such an income level, the luxury car would become an inferior
good).
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Socioeconomic significance
Certain manufactured products attain the status of "luxury goods" due to their design, quality,
durability or performance that are remarkably superior to the comparable substitutes. Thus,
virtually every category of goods available on the market today includes a subset of similar
products whose "luxury" is marked by better-quality components and materials, solid
construction, stylish appearance, increased durability, better performance, advanced features, and
so on. As such, these luxury goods may retain or improve the basic functionality for which all
items of a given category are originally designed.
There are also goods that are perceived as luxurious by the public simply because they play a
role of status symbols as such goods tend to signify the purchasing power of those who acquire
them. These items, while not necessarily being better (in quality, performance, or appearance)
than their less expensive substitutes, are purchased with the main purpose of displaying wealth or
income of their owners. These kinds of goods are the objects of a socio-economic phenomenon
called conspicuous consumption and commonly include luxury vehicles, expensive watches and
jewelry, designer clothing, yachts, and large residences, urban mansions and country houses.
Market characteristics
Some luxury products have been claimed to be examples of Veblen goods, with a positive price
elasticity of demand: for example, making a perfume more expensive can increase its perceived
value as a luxury good to such an extent that sales can go up, rather than down
A luxury brand or prestige brand is a brand for which a majority of its products are luxury goods.
It may also include certain brands whose names are associated with luxury, high price, or high
quality, though few, if any, of their goods are currently considered luxury goods.
.
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COMPANIES
COLGATE COMPANY
Organizer: Colgate Company is headed by Mr. Ian Cook, Chairman, President and CEO.
Company’s Profile: The small soap and candle business that William Colgate began in New
York City early in the 19th century is now, more than 200 years later, a truly global company
serving hundreds of millions of consumers worldwide.
Our 200-year history reflects the strength and innovation that Colgate people have used to
constantly transform our Company and identify new opportunities. With global brands sold in
over 200 countries; Colgate, Mennen, Palmolive, Ajax, Soft-soap, and Hill’s Pet Nutrition are
among the world's most recognizable household names, trusted and relied upon by consumers
everywhere.
Colgate People, working around the world, share a commitment to our three core corporate
values: Caring, Global Teamwork and Continuous Improvement. These values are reflected not
only in the quality of our products and the reputation of our Company, but also in our dedication
to serving the communities where we do business.
Products: Colgate manufactures a wide range of products with different brands as follows:
Oral Care: Toothpastes, Toothbrush, Toothpowder, Whitening Products.
Personal Care: Body Wash, Liquid Hand Wash, Shave Preps, Skin Care, Hair Care.
Household Care: Surface Care
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Objective of study: To determine the demand curve of Colgate Toothpaste as necessary item.
Toothpaste Face Wash Cream Skin Care
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HONDA CARS IN INDIA
Organizer: Honda Company is headed by Mr. Soichiro Honda, Founder, Honda Motor Co.
Company’s Profile: Honda Siel Cars India Ltd., (HSCI) was incorporated in December 1995 as
a joint venture between Honda Motor Co. Ltd., Japan and Siel Limited, a Siddharth Shriram
Group company, with a commitment to providing Honda’s latest passenger car models and
technologies, to the Indian customers.
The Honda City, its first offering introduced in 1997, revolutionized the Indian passenger car
market and has ever since been recognized as an engineering marvel in the Indian automobile
industry. The success of City as well as all its other models has led HSCI to become the leading
premium car manufacturer in India. The total investment made by the company in India till date
is Rs. 1620 crores, further investment of RS. 1000 crore is planned and being currently invested
for the coming second plant in Rajasthan. The company has a capacity of manufacturing 100,000
cars.
Sales and Distribution Network:
Honda Siel Cars India has a strong sales and distribution network spread across the country. The
network includes 106 facilities in 63 cities. HSCI dealerships are based on the “3S Facility”
(Sales, Service, Spares) format, offering complete range of services to its customers.
The City is manufactured with 74% indigenization level.
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Honda Products: It is one of the largest cars manufacturers in India.
Honda Jazz Honda Accord Honda Civic
Honda City Honda Civic Hybrid Honda CR-V
Objective of Study: To determine the demand curve of Honda City as Luxury Item.
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Research Methodology:
Questionnaire
Luxury Item
1. What do luxury brands mean to you?
Upper class
Premium price
Creative design trends
Extravagance
Prestige
Good marketing strategies
2. What following qualities do exclusive brands need to have?
High price
Well known fashionable designing
Brand Equity
A special retail location
3. Is Honda City Car one of them according to your opinion?
Yes
No
4. What evocation does the Honda City represent for you? Choose one answer
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Luxury brand
Big industry
Exclusivity
Accessories
5. Have you ever bought a Honda City?
Yes
No
If your answer is 'No', jump to question 12.
6. Are you attracted to it?
Yes
No
7. What amount did you spend?
Less than 100000
Between 100000 to 300000
More than 300000
8. Who bought it?
Family
Friends
Yourself
Boyfriend/Girlfriend
9. How do you feel after buying this car item?
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I feeling good
It means a lot if it given to me as a gift
Its dependent on the type of item
Nothing special
10. How many times a year do you sell and buy Car?
Never
1-2 times
3-4 times
Over than 5 times
11. Do you prefer to buy luxury car from foreign brands?
Yes
No
12. Do you think that luxury goods are more accessible nowadays?
Yes
No
13. What do you do for a living?
Full Time student
Full time student with a part time job
Part time student
Full time worker
14. What is your Monthly Income?
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Between 10000 to 15000
Between 15000 to 20000
Between 20000 to 25000
Necessary Item
1. What do you mean by necessary item?
Easily accessible by every consumer
Only accessible by few consumers
Should be differentiated in two categories elite and lower
2. Is Toothpaste a necessary item?
Yes
No
3. Are necessary items costly or cheap at present?
Yes, It is costly
No, It is cheap
No idea
4. Let us take the example of Colgate. Suppose the price of Colgate at present is Rs. 25 per
50 gm which is comparatively less. Would you buy it.
Yes
No
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5. How much would you buy?
More
Less
6. If the price of Colgate goes down to Rs. 20 per 50 gm then how much would you prefer to
buy?
More than earlier one
Less than earlier one
7. If the price of Colgate goes up to Rs. 35 per 50 gm then how much would you prefer to
buy?
More
Less
Would prefer to buy its substitute
8. As per you what is very important item for living?
Necessary, required by every person
Luxury, ability of only few rich persons to buy it
9. What is your Educational Qualification?
High Schools
Under Graduate
Graduate
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Post Graduate
Professional
10. What do you do for living? Are you satisfied with it?
I do job and I am satisfied
I do job but I am not satisfied
I do business and I am satisfied
I do business but I am not satisfied
11. What is your monthly income?
Between 5000 to 10000
Between 10000 to 15000
Between 15000 to 20000
Sources of Data:
The data is basically primary in nature.
It was obtained from the customers.
Data Collection Method:
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Our communication approach was basically structured questioning, that is personal interview
with the aid of printed questionnaires.
Data Analysis:
Appropriate statistical analysis will be adopted. The data will be tabulated and analyzed.
Limitations of the Study:
The study is limited to the Colgate (necessary item) and Honda City (Luxury Item).
Since the time is less the researcher has taken a sample of 20 people and it will not reveal
the whole population of a country.
Data Analysis
And Interpretation
Data Analysis and Interpretation:
The following information contains the data interpretation of the questionnaires. The
respondent’s responses for the questions have been interpreted and a finding has been made
based on the respondents responses.
Frequency Table for the Demographic Details of the Colgate Respondent’s
Table: 1
Category of the Respondents
Frequency Percentage
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High Class 5 25%
Medium Class 10 50 %
Lower Class 5 25 %
Total 20 100
Interpretation:
From the above table 25% respondents are belonging to the age category of High Class. And %
respondents are belonging to the category of Mid Class and 25% respondents are belonging to
the category of Lower Class.
Table: 2
Gender of the Respondents
Frequency Percentage
Female 8 40 %
Male 12 60 %
Total 20 100
Interpretation:
From the above table 40% respondents are belonging to the category of female. And the
remaining 60% respondents are belonging to the category of male.
Table: 3
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Educational Qualification of the Respondents
Frequency Percentage
School 2 10 %
UG 10 50 %
PG 6 30 %
Professional Course 2 10 %
Total 20 100
Interpretation:
From the above table 10% of respondents are belonging to the category of school and
professional course each. And 50% of respondents are belonging to the category of UG. And
30% of respondents are belonging to the category of PG.
Table:4
Occupation of the Respondent
Frequency Percentage
Salaried Person 10 50 %
Professionals 3 15 %
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Businessman/Housewife 7 35 %
Total 20 100
Interpretation:
From the above table 50% of respondents are falling under the category of salaried person. And
15% of respondents are falling under the category of professionals and 35% of respondents are
belonging to the category of business/housewife.
Table: 5
Income level of the Respondents
Frequency Percentage
Rs.5,000-Rs.15,000 7 35 %
Rs.15,001-Rs.25,000 5 25 %
Rs.25,001-Rs.35,000 3 15 %
Above Rs.45,000 5 25 %
Total 20 100
Interpretation:
From the above table 35% of respondents are falling under the income range between Rs.5, 000-
Rs.15, 000. And 25% are falling under the income range between Rs.15, 001-Rs.25, 000. And
15% of respondents are falling under the income range between Rs.25, 001-Rs.35, 000. And
25% of respondents are falling under the income range between Above Rs.45, 000.
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Calculation of Price Elasticity and interpreting the result:
After interviewing the consumers about Colgate toothpaste the following result has been
interpreted:
When price of Colgate Toothpaste is low, demand is high but when its price is increased the
demand falls and consumers go for its substitute toothpaste because its price is less as compared
to Colgate and is also under their budget level.
For e.g. say Price of Colgate is Rs. 25 per 50 gm and more than 60% of the toothpaste consumers
are buying it but when its price is increased to Rs. 35 per 50 gm then those 60% consumers may
go down to 30% (whereas few consumers will not move because either they are high class
people for whom price does not matter or those people who are brand conscious). Hence demand
will fall and these consumers will go for other toothpaste say X which is not costly is under their
budget.
Frequency Table for the Demographic Details of the Honda City (Luxury Item)
Respondent’s
Table: 6
Age of the Respondents
Frequency Percentage
20-40 yrs 15 75 %
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Above 40 yrs 5 25 %
Total 20 100
Interpretation:
From the above table 75% of respondents are falling under the age group of 20yrs-40yrs. And
25% of respondents are falling under the group of above 40 yrs.
Table: 7
Gender of the Respondents
Frequency Percentage
Female 3 15 %
Male 17 85 %
Total 20 100
Interpretation:
From the above table 15% of respondents are belonging to the female category and 85% of
respondents are belonging to the male category.
Table: 8
Education Level of Respondents
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Frequency Percentage
UG 2 10 %
PG 14 70 %
Professional 4 20 %
Total 20 100
Interpretation:
From the above table 10% of respondents are belonging to the category of UG. And 70% of
respondents are belonging to the category of PG. And 20% of respondents are belonging to the
category of professionals.
Table 9.
Occupation of the Respondents
Frequency Percentage
Salaried Person 7 35 %
Businessman 4 20 %
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Professionals 4 20 %
Managerial 5 25 %
Total 20 100
Interpretation:
From the above table 35% of respondents belong to the category of salaried person. And 20% of
respondents are belonging to the category of businessman and professionals. And 25% of
respondents are belonging to the category of managerial.
Table: 10
Income Level of the Respondents
Frequency Percentage
Rs.5,000-Rs.15,000 5 25 %
Rs.15,001-Rs.25,000 2 10 %
Rs.25,001-Rs.35,000 5 25 %
Rs.35,001-Rs.45,000 4 20 %
Above Rs.45,000 4 20 %
Total 20 100
Interpretation:
From the above table 25% of respondents are falling under the income level of Rs.5, 000-Rs.15,
000 and Rs.25, 001-Rs.35, 000. And 10% of respondents are falling under the income level of
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Rs.15, 001-Rs.25, 000. 20% of respondents are falling under the income level of Rs.35, 001-
Rs.45, 000 and above Rs.45, 000.
Calculation of Price Elasticity and interpreting the result:
After interviewing the consumers about Colgate toothpaste the following result has been
interpreted:
There are few consumers who like to buy Honda city cars even though price is high because it is
a sign of their status for them in the society or few people like to but it as it is their capability to
buy. Whereas there are few consumers who don’t have that much capability to buy the car as
compared to others.
Conclusions:
Since both the items are not comparable with each other because there is a huge
difference in them as Colgate is a necessity whereas Honda City is luxury item.
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But Honda City is little bit below the line in customer capability when compared to
Colgate because there are few consumers who can buy the Honda City as of High Class
whereas middle class or lower class people cannot buy due to average income.
Profit for the Honda City is high as compared to Colgate because its cost is very high.
But Demand for the Colgate is high then Honda City.
When price of Colgate increases consumers may shift to other substitutes
When price of Honda City increases very less people shift to other substitutes because
few consumers are brand conscious.
Suggestions and Recommendations:
Prices should be such that most of the consumers should be able buying it.
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There should be customer feedback system so that while revising the price of the
products their advices shall be considered.
The Honda City should launch cars that are easily accessible by the middle class as did
by TATA Motors.
The Honda City can concentrate on their elite consumers more but should not ignore
others.
BIBILOGRAPHY:
Research Methodology
Statistical Analysis – S.P. Gupta
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Websites:
www.colgate.com
www.honda. com
www.wikipedia.com
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