Managerial Economics Analysis of IKEA's Furniture Demand and Market Equilibrium

Managerial Economics 1

Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
Description of business................................................................................................................1
Identification of demand and market equilibrium.......................................................................3
Indicating that demand is more elastic or more inelastic............................................................7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
A branch of economics that deals in execution of microeconomic analysis for decision
making techniques associated to management along with businesses units is managerial
economics (Rajasulochana and Ganesh, 2019). It also assists management of company to predict
aspects of economic comprising cost, production, demand, price and so on. For understanding
about managerial economics, chosen business is IKEA which is popular conglomerate involved
in designing and selling ready to assemble offerings. It was established in 1943 to offer well
designed furnishing products at low prices that are affordable by many people.
The report describes business and its major products. Further, it identifies demand along
with market equilibrium. At last, it includes description about ways in which main organisational
product is affected and factor which indicate whether the demand is more inelastic or elastic.
MAIN BODY
Description of business
Overview of company
IKEA is a business that is specialised to design and sell various ready to assemble kitchen
appliances, furniture, house accessories and other commodities along with services. In 1943, the
organisation was established by Ingvar Kamprad (IKEA, 2021). It serves at global level and some
of its area served includes South Asia, North America, Europe, East Asia, Oceania, North Africa
and hence forth. The entity has passion for home furnishing and inspiring vision that is to create
a better everyday life for various people. It has around 456 stores worldwide. It offers iconic
products that has global popularity together with brightened up houses across the globe. The
company stands for great functionality, exceptional design as well as high quality services.
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Figure 1: Gross profit of IKEA worldwide from 2009 to 2020. 2021
(Source: Gross profit of IKEA worldwide from 2009 to 2020. 2021)
From the above graph, it is determined that in the year 2020, international gross profit of
IKEA amounted to 11.7 Billion Euros, down from 12.4 Billion recorded in earlier year. Products
offered by the entity are flat pack and ready to be assembled by clients and consumers (Gross
profit of IKEA worldwide from 2009 to 2020, 2021). Low prices are cornerstone of
organisational business idea and it executes practices in efficient as well as cost effective
manner. As of 2021, IKEA is one of the most valuable retailer brand in the world. The venture
sells range of products such as decoration, furniture, beds & mattresses, lighting, pots & plants,
textiles and many more.
Chosen product
Furniture is one of product of IKEA that attracts wider population for furnishing entire
home from top to bottom for comparatively modest amount. There are lot of furniture choices for
room decor in a house including beds, wardrobes, outdoor furniture, chairs, trolleys, cabinets &
cupboards, nursery furniture, room dividers and so on. Furniture offered by the company is
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