Factors Influencing Demand and Supply: A Polo Mint Economics Report

This report provides an economic analysis of Polo Mints, exploring the factors that influence its demand and supply. It begins with an introduction to the concepts of demand and supply, then delves into the factors that determine the price of goods and services, including production costs, utility, demand, government regulations, marketing methods, competition, and pricing objectives. The report then examines factors affecting changes in demand, such as consumer taste, income, substitute goods, consumer numbers, and future expectations, specifically relating these factors to the Polo Mint market. Furthermore, the report discusses the factors that lead to changes in supply, including the commodity's price, related goods' prices, technology, government policies, and firm objectives, again applying these factors to the Polo Mint scenario. The report also considers the impact of changes on the price of the product. The analysis includes the influence of substitute products like Orbit, and consumer income levels. This report provides a comprehensive overview of the economic forces shaping the Polo Mint market.

[ Economics for business]
Economics
2019
Polo Mint

Economics 1
Contents
Introduction......................................................................................................................................2
Factors that Determine the Price of Goods and Services................................................................3
Factors that leads to Change in demand..........................................................................................4
Factors that leads to Change in demand of polo mint.................................................................5
Factors that leads to Change in supply............................................................................................7
Factors that affect change in supply of Polo mint (UK)..............................................................9
Impact of change on price..............................................................................................................10
Conclusion.....................................................................................................................................12
References......................................................................................................................................13

Economics 2
Introduction
The purpose of this paper is to enlighten the reader about the demand and supply of a product in
the environment. The paper highlights details about the factors that lead to change in the demand
and supply of a product in the environment. The paper also discussed about the factors that leads
to changes in the price of a product in the target market. The paper discusses about the impact
that is made of price of the product with the changes in various external and internal factors and
not the impact of price on the demand and supply of product. Equilibrium is also explained in the
paper considering the company Polo Mints. Polo Mints is a brand of breath mint that was first
manufactured in the year 1948 in UK. The organization Polo Mints is a subsidiary organization
of the company Nestle (Nestle 2019). Further, evaluation of the demand and supply effect on the
company is discussed below:

Economics 3
Factors that Determine the Price of Goods and Services
The price of goods and services are determined based on various fluctuating factors present in
the environment. These factors help an organization to attain an optimum price for the product
that would be reasonable for the customers and will provide profitability to the company as well.
Further, these factors are mentioned below:
 Cost of Production: The most important factor that affects the price of a product is its
cost. Product cost refers to the cost that includes total of fixed cost, variable cost and semi
variable cost incurred during the process of production, distribution and selling of the
product. Fixed cost refers to the cost that remains same throughout different levels of
production or sales. Further, variable cost is the cost that is directly related to the level of
production or sale. This cost keeps on changing based on labour cost, raw material cost
etc. Thirdly, semi-variable cost refers to the cots that change with the level of activity but
not in the level of direct proportion. The price of a good is determined on the basis of
total cost (Becker 2017).
 Utility and Demand: It is known that a customer demands more units of product when
the price is low and vice versa. But in case demand is elastic, small change in the price
can lead to greater change in the quantity demanded. Whereas in case of inelastic demand
change in price does on affect the demand of the product so the company can charge high
profits also in case of inelastic demand.
 Government and Legal Regulations: companies having monopoly in the market usually
charge high prices for their products as they are the single seller present in the market. In

Economics 4
order to protect the interest of consumers, the government interferes and mediate the
prices of the product so that people of all income level can attain it (Friedman 2017).
 Marketing Methods Used: There are various methods of marketing that are used in
selling a product like advertising, customer service, distribution system, online selling
etc. These factors also affect the price of the product. Like, in case if a company is using
high level of advertising plan for the business then it will ultimately charge high prices
from the customers.
 Level of Competition in the Market: The level of competition present in the market
also affects the price of product and the degree of competition present in the market as
well. An organization can effectively fix the price for the products in case the level of
competition in less in the industry. Further, in case the level of competition is high then
the price of the product is determined based on price of competitor’s products, quality,
their feature etc. For instance, Starbucks cannot fix the coffee without looking at the price
offered by Costa (Johnson 2017).
 Pricing Objective: There are various pricing objectives initiated in the environment by
the organization. These objectives include profit maximization, obtaining market share
leadership, surviving competitive market and attaining product quality leadership in the
target market.
Thus, above mentioned are the detailed factors that affect the pricing decision of an organization.
Factors that leads to Change in demand
 Taste and Preference of Customers: the taste and preference of the consumer determine
the demand of the good in the external market. As organizations only want to sell the

Economics 5
products that are demanded by the customers in the market so it can be said that it is one
of the factors that lead to change in demand of product.
 Income of Consumer: The demand of goods is affected by the income level of people.
Higher the level of incomes, higher the chances of increase in demand of goods and vice
versa. Increase the level of income of people also increases the demand of products in the
environment due to increasing purchasing power (Ball 2017).
 Change in Price of Substitute Goods: When the price of a substitute good increases in
the environment then the consumer generally gives up the consumption of that good in
the market due to which demand of own commodity subsequently increases. The price of
substitute goods has a direct relationship with the demand of the goods.
 Number of Consumers: when number of consumers increases then there are more
people to purchase products in the market due to which the demand subsequently
increases and vice versa.
 Future Expectation of Consumer: when consumers present in the market expect higher
price of the product in future then the buy more goods so as to avoid purchasing them at
higher prices. Thus, this results in increase in current demand of commodity.
 Change in Price of Complementary Goods: With the change in price of complementary
good, the price of commodity subsequently changes. When the price of complementary
good decreases then the consumer generally start purchasing the product more due to
which the demand of own commodity also increases. Like in case of coffee and sugar,
decrease in price of coffee increases its consumption due to which the demand and
consumption of sugar subsequently increase (Singh 2019).

Economics 6
Factors that leads to Change in demand of polo mint
The above mentioned are the factors that lead to change in the demand curve of the company.
Relating these factors to the demand of the products of the company Polo Mints, it should be
noted that change in the price of the substitute goods subsequently affect the demand of Polo
Mints in the market. Orbit is one of the biggest competitors of Polo Mints present in the UK
industry. Slight change in the price of Orbit highly affects the demand of Polo Mints in the
market. As the company Orbit increased the price of its product due to which the demand of Polo
Mints subsequently increased as given in the below mentioned graph. Through this analysis, it
should be noted that there a direct relationship between price of substitute good and demand of
own commodity (Stevens 2018).
Price of Orbit = Demand of Polo Mints
Further, relating the case of Polo Mints to another factor that influences demand, it should be
noted that the income of the consumer also highly affects the demand of the product as discussed
above. Increase in the income of consumers of UK subsequently increases their purchasing
power in the environment. Increased purchasing power further provides them opportunity to
purchase more products in the environment (Heider 2017). Thus, increasing income of people
present in UK increases the demand of Polo Mints as shown in the below mentioned graph.
Orbit Polo Mints

Economics 7
In this case the leftward movement of demand curve shows that decrease in demand due to
decreasing income level (I1). While I2 explain increase in demand due to increase in income level
of the consumer present in UK market.
Factors that leads to Change in supply
In the study of economics, supply of a commodity refers to as the quantity of a product that is
present in the market for sale at a particular price at a set point of time. Supply of a product is
considered as a multi-valued function as it relies on different number of variables (Salvatore,
2015). In case when there is change in supply, the price of the product is kept at the constant and
other non-price determinants keep changing. Thus, it has been found that there are different
important factors that contribute in determining the supply of a commodity. The change in any of
Income of Consumer
I1 I I2

Economics 8
the factors will directly result in the change in supply of the product (Cowell, 2018). These
factors are discussed below -
Price of the commodity: -The major factor that determines the supply of the commodity is price
associated with the product. In the general rule, the price of any product is directly linked with
the supply of product. Thus, this simply means that with the rise in price there will be rise in the
quantity supplied by company for that particular product or vice-versa. It helps the firm to offer
more products in the market that enhance the chances of making higher profit (Kreps, 2019).
Price of related goods: - The supply of commodity is depended on the change in the price of the
related goods. The rise in the price of the other goods makes commodity more profitable while
comparing it with the allocated commodity. Thus, this is the reason that the firm brings the shift
in its inadequate resources from the manufacturing of the given commodity to production of
other commodity.
State of technology: - The change in the technology that is used for the production directly
influences the supply of product. The up-gradation or improvement in the technology of
production need sophisticated machinery as well as the complex division human resources and
their specialisation in order to increase the supply of goods (Bade and Parkin, 2015).
Government policy: - The government policy majorly include the taxation policy which include
rise in taxes which enhance the cost of production and negatively affects the supply because of
decrease in margin of profit. Apart from it, the tax concessions as well as subsidiaries bring the
improvement in supply that makes it more profitable for organisations (Fine, 2016).
Objective of firm: - The objective of firm affects the supply of commodity as supply of
commodity increases only at higher prices that meets the objective of increasing profit.

Economics 9
Although, some firms are willing to supply more even at particular prices that means it do not
maximise their profits. These firms work with different sort of objectives which include
capturing the market as well as increase brand awareness.
Factors that affect change in supply of Polo mint (UK)
In case of polo mints, there are different factors such as objective of company and price of goods
that create the impact on the change in supply of polo. The objective of the company for their
product polo mint is to offer product at specific price and to cover the entire market by creating a
good brand value in UK. Thus, the supply of the polo mint increases in the market at that price
only. If in case the price of polo mint increases then the supply will reduce in UK market.
Further, the price of the product also influences the supply of product as this has been found
there is relation between the both. The law of supply states that there is direct relationship
between supply of commodity and price of product (S=P). Thus, the rise in price of polo mint in
UK will lead to increase in supply of polo.
The above image shows that supply of polo mint is increasing with the increase in the price of
polo mint in the UK market or vice versa. The price shift is clear from P1 to P2 with the upsurge

Economics 10
in the supply of the product. Thus, this shows that there is direct relationship between the price
and supply of the product. The increase in price will improve the supply of product and similarly
with the decrease in price there will be decrease in supply of polo mint in UK.
Impact of change on price
In the terms of microeconomics, the supply and demand is considered as an economic model that
helps in determining the price of product in a market. It has been found that there is situation in
the market when the price is such that the quantity is asked by the consumer that is accurately
balanced with the help of quantity that the company is willing to supply (Karl, Case, Oster and
Sharon, 2019). The point when both the demand and supply of commodity meet at a price is
point of equilibrium.
(Source: Seth, 2019)
In the economics, the supply and demand of the commodity are inter-related, which affects the
price. It is a fundamental principle that when the supply exceed the demand of the product then
the price falls and vice-versa (Seth, 2019). Similarly, in the case of polo mint in UK market,

Economics 11
when the demand of polo mint exceeds the supply of mint then the price generally increases. In
other case, when the supply of polo mint is more than the demand of mint then the price
generally falls. This allows the customers to take the advantage of the same in the market by
purchasing the products at effective prices. The below given is the detailed explanation: -
If there is excess of supply, which means the price increases due to direct relationship between
supply of commodity and price of commodity, keeping the remaining factors constant. However,
the price has indirect relationship with demand that means demand of product falls with increase
in price.
In the case of polo mint in UK market, the S2 shows that there is increase in supply that leads to
rise in the price of polo mint in UK that is presented with P2. This is because there is direct
relationship between the supply and price while other things are constant. However, the price of
the polo mint P2 has indirect relationship with demand of polo mint. Thus, the demand of polo
mint decrease in UK market that is indicated with D2 in the above graph.
S2D2

Economics 12
Conclusion
Thus, in the limelight of above-mentioned events, the fact should be noted that the above-
mentioned paper represented the impact of demand and supply of Polo Mints on the prices of the
product in the environment. Price determination factors were explained in the paper, these
factors evaluates the reasons due to which companies change the prices of the product in the
environment. Moreover, the paper represents the factors leading to change in the demand and
supply of products in the environment along with its application on Polo Mints. The latter part of
the report expressed the impact of these changes in price of the Polo Mint product in the
environment. Initially price variation lays impact on the demand of product but changes in
demand and supply of the product due to various factors many times influence the prices of
product in the environment.

Economics 13
References
Bade, R., and Parkin, M. (2015) Foundations Of Microeconomics. New York: Pearson.
Ball, R.J. (2017) Inflation and the Theory of Money. UK: Routledge.
Becker, G.S. (2017) Economic theory. UK: Routledge.
Cowell, F. (2018) Microeconomics: principles and analysis. Oxford University Press.
Fine, B. (2016) Microeconomics. Chicago: University Of Chicago Press Economics Books.
Friedman, M. (2017) Price theory. UK: Routledge.
Heider, K.G. (2017) The economic organization.UK: Routledge.
Johnson, H.G. (2017) Macroeconomics and monetary theory. UK: Routledge.
Karl, E., Case, F., Oster, R., and Sharon, E. (2019). Principles Of Microeconomics. New York:
Pearson.
Kreps, D.M. (2019) Microeconomics for managers. Princeton University Press.
Nestle., (2019) Polo [online]. Available from < https://www.nestle.com.mt/brands/polo>
[Accessed on 11 April 2019].
Salvatore, D. (2015) Managerial economics in a global economy. OUP Catalogue.
Seth, T. (2019) How Does the Law of Supply and Demand Affect Prices? [Online]. Available
from: http://www.economicsdiscussion.net/supply/7-factors-which-affect-the-changes-of-
supply/1645 [Accessed on 11th April 2019]

Economics 14
Shaikh, S. (2019) Equilibrium of Demand and Supply (With Diagram)| Perfect Competition
[Online]. Available from: http://www.economicsdiscussion.net/perfect-competition/equilibrium-
of-demand-and-supply-with-diagram-perfect-competition/13780 [Accessed on 11th April 2019]
Singh., J. (2019) 6 Important Factors That Influence the Demand of Goods [online]. Available
from < http://www.economicsdiscussion.net/essays/economics/6-important-factors-that-
influence-the-demand-of-goods/926> [Accessed on 11 April 2019].
Stevens, J.B. (2018) The economics of collective choice. UK: Routledge.