Microeconomics Project: Product Market Analysis, ECO2101 CA1

This microeconomics project analyzes five different product markets: electric cars, Apple iPhones, durian, Starbucks coffee, and fashion brands. The analysis applies five key microeconomic concepts: production possibility frontiers (PPF), market equilibrium, price elasticity of demand, utility theory, and demand determinants. The project examines how technological advancements impact the electric car market using PPF, the effects of competition on Apple iPhone sales, and the impact of increased demand on durian prices and market equilibrium. It also explores the inelastic demand for Starbucks coffee and how brand preferences influence consumer choices in the fashion industry. The project utilizes articles from reputable sources to support its analysis, providing a comprehensive overview of how microeconomic principles apply to real-world market dynamics.

Running head: MICROECONOMICS
Microeconomics
Name of the Student
Name of the University
Author note

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EXECUTIVE SUMMARY
This paper intends to analyse different product markets on the basis of microeconomic theories.
This paper taken into consideration five different products from five different industries and
assesses those product markets depending on five different economic theories such as production
possibility frontiers, market equilibrium, price elasticity of demand, utility theory and demand
determinants.

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Table of Contents
Introduction......................................................................................................................................3
Analysis...........................................................................................................................................3
Analysis 2.1 (PPF).......................................................................................................................4
Source......................................................................................................................................4
Summary..................................................................................................................................4
Analysis...................................................................................................................................4
Analysis 2.2 (Demand and Supply).............................................................................................5
Source......................................................................................................................................5
Summary..................................................................................................................................5
Analysis...................................................................................................................................5
Diagrams..................................................................................................................................5
Analysis 2.3 (Market Equilibrium)..............................................................................................6
Source......................................................................................................................................6
Summary..................................................................................................................................6
Analysis...................................................................................................................................6
Diagrams..................................................................................................................................6
Analysis 2.4 (Price elasticity of demand)....................................................................................7
Source......................................................................................................................................7
Summary..................................................................................................................................7
Analysis...................................................................................................................................7
Diagrams..................................................................................................................................7
Analysis 2.5 (Utility)...................................................................................................................8
Source......................................................................................................................................8
Summary..................................................................................................................................8
Analysis...................................................................................................................................8
Diagrams..................................................................................................................................8
Conclusion.......................................................................................................................................9
References......................................................................................................................................10

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Introduction
This paper includes five articles based on five different product markets. Moreover, it
analyses these articles on the basis of five different microeconomic concepts. This paper taken
into consideration five different products from industries such as smartphone, fashion, fruit,
coffee and automobile. It analyses how the market of electric car influence due to PPF. The
market for Starbucks coffee is examined on the basis of price elasticity of demand. The market
for fashion brands are analyzed in terms of utility theory. Moreover, the market for durian is
analyzed depending on market equilibrium. The market for Apple iPhone is assessed on the basis
of demand determinants.
Analysis

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Analysis 2.1 (PPF)
Source
https://edition.cnn.com/2019/07/18/cars/electric-car-market-sales/index.html
Summary
First article is based on revolution in electric car industry. The improvements in
manufacturing would help to control the battery prices. There is also improvements in the energy
efficiency. As a result, it would drive up the sale of the electric car. There are several areas in
which improvements have made to boost the market of the electric cars (Edition.cnn.com 2020).
It is estimated that gasoline powered cars would be outsold by the electric cars by 2040. To
smoothly run an electric car it is also important to build a network of fast chargers. The plan for
fast chargers are already formulated. Eventually, there would be more options to choose from in
case of electric cars.
Analysis
The point is represented by the production possibility frontier (PPF), where the resources
are allocated efficiently and the production of goods and services are maximum. Therefore, at
this point the production is optimally efficient. However, any changes in technology keeping all
other factors constant would push the PPF curve outwards (Pindyck and Rubinfeld 2015). It
would also increase the output. Here, technological improvements would bring better results for
the electric cars. Thus, it would outperform another product gasoline powered cars.

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Analysis 2.2 (Demand and Supply)
Source
https://www.theguardian.com/technology/2019/jan/03/iphone-slump-the-rivals-taking-a-
bite-out-of-apple.
Summary
Second article is related to Apple, which faced slow sales growth due to increased
competition. Though, the company blamed economic slowdown in china due to tumble in share
of Apple. One of the main reason includes growing fierce competition in the smartphone market.
Analysis
There are several competitors of Apple in smartphone market, which changes the demand
for iPhone. As a result, the sales growth of Apple fall significantly (Gibbs 2019). Major
competitors of Apple includes Samsung and Huawei, which captured a share of Apple’s market.
Figure 1 shows the drop in quantity demanded for Apple iPhone due to reduced demand. It also
forced Apple to lower the prices. Moreover, the company also launched lower cost iPhone such
as iPhone XR.
Diagrams
Figure 1: Decrease in demand changes the quantity demanded and supplied
Source: As created by the author

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Analysis 2.3 (Market Equilibrium)
Source
https://theaseanpost.com/article/durian-new-gold
Summary
Third article is based on a tropical fruit durian. Increased demand of durian in Asian
market such as Singapore, China and Hong Kong created a pressure on producers such as
Malaysia, Indonesia and Thailand. However, the main producer of the durian is Thailand and
China being the largest importer of the durian.
Analysis
The role of durian is significant in the national income of Malaysia and Thailand
(Theaseanpost.com 2020). However, increased demand of durian in Chinese market led to
depletion of natural resources. In addition, high demand also pushed the prices of durian up.
Therefore, excess demand creates a gap between quantity demand and quantity supplied. It
shifted the market equilibrium point due to change in demand. Hence, there exists a new market
equilibrium based on new price and quantity of durian. Figure 2 represents shifts in market
equilibrium due to increase in market demand of durian. Thus, the equilibrium shifts rightward
from E0 to E1.
Diagrams
Figure 2: Increase in demand Changes market equilibrium
Source: (Cowell 2018)

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Analysis 2.4 (Price elasticity of demand)
Source
https://www.usatoday.com/story/money/2018/06/07/starbucks-raises-coffee-prices-10-
20-cents/680313002/
Summary
Fourth article is related to sales growth of Starbucks, which remained steady despite the
price hike in US market (Usatoday.com 2020). Starbucks also planned for business expansion in
China as the US market is saturated. The company believed that it would attract new customers
even after price hike. However, there was a possibility that it would lose some existing
customers as well.
Analysis
The company took various measures in order to increase the sales growth of Starbucks. It
planned to expand business in China and raised the price of coffee to get better access of the
saturated market of US. Despite these initiatives sales growth would not be affected as much.
The company offered higher prices for its products than the local coffee chains. As the change in
price of the coffee did not affect the demand much. Therefore, the demand for Starbucks coffee
is inelastic. Figure 3 shows the inelastic demand for coffee.
Diagrams
Figure 3: Inelastic Demand
Source: (Browning and Zupan 2020)

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Analysis 2.5 (Utility)
Source
https://www.forbes.com/sites/scottdavis/2019/10/02/not-forever-21-why-zara-hm-
dominate-fast-fashion-relevance-war/#62cc7566206e
Summary
Fifth article is based on apparel brands. The first fashion relevance war is dominated by
H&M and Zara, not Forever 21. Though, there exists fierce competition in fashion industry.
H&M and Zara continued with their better performance in terms of product quality, product
selection and overall brand relevance. On the other hand, Forever 21 failed to grab attention of
the customers due to poor brand loyalty.
Analysis
Here, brand preference of customers plays an important role in fashion industry. Though,
Forever 21 also offers same kind of products to its customers and the level of satisfaction also be
same in this case in comparison with any other brand. The poor brand loyalty compelled the
company to lose is customers over H&M and Zara (Forbes.com 2020). Figure 4 illustrates set of
preferences of customers. According to the utility theory, on a same indifference curve two
products would provide same amount of satisfaction. However, the brand preference will make
customers switch from one brand to another.
Diagrams
Figure 4: Set of preferences of a customer
Source: (Cowell 2018)

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Conclusion
The five articles analyses the market of different products on the basis of different micro
economic theories. It examines how these economic theories influence the market of these
products. Demands for these products changes depending on the market conditions.

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References
Browning, E.K. and Zupan, M.A., 2020. Microeconomics: Theory and applications. John Wiley
& Sons.
Cowell, F., 2018. Microeconomics: principles and analysis. Oxford University Press.
Edition.cnn.com 2020. CNN. The electric car revolution is coming. This is what has to happen
first. [online] Available at: https://edition.cnn.com/2019/07/18/cars/electric-car-market-sales/
index.html.
Forbes.com 2020. Not Forever 21...Why Zara And H&M Still Dominate In The Fast Fashion
Relevance War. [online] Available at: https://www.forbes.com/sites/scottdavis/2019/10/02/not-
forever-21-why-zara-hm-dominate-fast-fashion-relevance-war/#62cc7566206e.
Gibbs, S. 2019. iPhone slump: the rivals taking a bite out of Apple. [online] the Guardian.
Available at: https://www.theguardian.com/technology/2019/jan/03/iphone-slump-the-rivals-
taking-a-bite-out-of-apple.
Pindyck, R.S. and Rubinfeld, D.L., 2015. Microeconomics. Boston: Pearson,.
Theaseanpost.com 2020 The ASEAN Post. Durian: The new gold. [online] Available at:
https://theaseanpost.com/article/durian-new-gold.
Usatoday.com 2020. [online] Available at:
https://www.usatoday.com/story/money/2018/06/07/starbucks-raises-coffee-prices-10-20-cents/
680313002/.