Demand and Supply Analysis of Polo Mints in the UK: An Economic Report

Desklib provides past papers and solved assignments. This report analyzes the economic factors affecting the sales of Polo mints in the UK.

ECONOMICS FOR BUSINESS
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Table of Contents
Introduction................................................................................................................................3
LO1: Understand the language of economics.......................................................................4
LO2: Know the basic methodology and models used in this area and their application to real-
life situations..............................................................................................................................8
LO3: Demonstrate the ability to analyse hypothetical and / or real world situations that occur
in our economy.........................................................................................................................11
Conclusion................................................................................................................................14
Reference List..........................................................................................................................15
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Introduction
Economics is a very important thing that is used by the organisations that help them to
determine the demand, supply and the equilibrium in the market. These factors help the
organisations to determine the amount of products they need to produce for a particular
period. The sales of the organisation are determined according to the market condition of the
product in relation to the supply. These are very much important, as the demand and the
supply for the organisations are very much important for them to provide proper results. The
demand and the supply are the two main factors of the economical market that affects the
organisations the most. The report will consist of the analysis of the demand and supply and
the factors that determine the price of polo mints in the United Kingdom.
Company Overview
Polo Mints are the products of the company Nestle, UK. The headquarters of the company is
located in London, United Kingdom. The company was founded in the year of 1988. The
company that is present in UK is Nestle Waters UK Ltd, who is a subsidiary of Nestle. The
main headquarters of the parent company Nestle, which is located in Switzerland and is a
multinational company operating in every part of the world. Several numbers of products
manufactured and sold by the company out of which polo mint is one of them.
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LO1: Understand the language of economics
The term “Economics” is termed to be a social science that helps the people to understand
the market situation with the help of the production of the products of the organisation, the
distribution of the products that are being produced and the consumption of those distributed
services and goods.
There are a number of important factors that are necessary for the organisations to understand
the value of economics in their production and distribution of the products that are being
produced by the organisation. The production and distribution of the products are directly
dependent of the demand and supply of the product that is present in the market. These are
the determining factors of the production and distribution of the services and goods of the
organisation.
The term “Demand” is a term of economics that shows the demand and ability of the
customers in buying a certain product from the market. Demand of a product is dependent on
certain factors like the benefits, costs and many other items.
Figure 1: Demand Curve
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(Source: da Costa and Santos, 2016)
The term “Supply” is a term of economics where the organisations provides the products and
services that they produces and sends in the market for selling. The supply of the product is
dependent on the demand of the product in the market.
Figure 2: Supply Curve
(Source: Chen et al., 2017)
The term “Equilibrium” is a term that is used in economics to represent the situation where
the demand and the supply of the product or service are balanced, where there are no external
factors that influence the market. In this form, no external factors that affect the demand and
supply of the products and the market consists of the number of units that fulfils the demand
of the product in the market.
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Figure 3: Market Equilibrium
(Source: Valentinov, 2015)
A number of economic factors affect the market of a certain place. The economic factors are
as follows:
1. The purchasing powers of the people are reduced by the rates of inflation of the
economy. This is a very important thing that is needed for the organisations to
understand (Gonçalves, 2017). The reason behind this is that if the rate of inflation
increases then less money will be left in the hands of the people that will reduce the
purchasing power of the people.
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2. The shapes in the technology affect the behaviour of the buyer. Another important
thing is that affects the market condition of the organisation. Due to the technological
advances of the market, there are certain areas that are affected by the behaviour of
the buyer. This is very much important for the organisation to understand and they
should work according to the factors of the market condition.
3. The rate of interest affects the purchases that are done in credit. Another important
factor is that affects the purchasing power of the people. If there is an increase in the
interest rates then the credit purchase decreases and if the interest rate decreases then
an increase in the credit purchase of the people that affect the organisations that sells
their products in credit.
The term “Inflation” is used in economics to show the time when the buying power of the
people reduces and the prices of the products increases. This is a situation where the demand
in the market reduces to an extent. This is the main reason that affects the production and
distribution of the products in the organisations.
The term “Deflation” is used in economics to show the time during which the buying power
of the people increases as they have enough amount of money in hand and on the other side
the cost of the product also decreases making it easy for the organisations to produce more
and more products.
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S2
S1
D1
D2
P1
P2
Q2 Q1
LO2: Know the basic methodology and models used in this area and their application to
real-life situations
The demand and supply theory is the fundamental concept of the economics. The basic
understanding of the economics starts with the demand and supply theory. According to the
theory of demand and supply in economics if the supply is more than the demand in market
the amount of sales fall and the price of the product also falls (Cook, 2017). In UK the sales
of POLO has been decreased in significant rate. The prices of the mint have been fallen
because of the low demand and the huge supply of the product. There are several reasons of
decreasing the sales of decreasing the demand of the Polo Mints in UK. The people of the
country do not prefer the sour taste that is left after eating the mint. Polo is suffering from the
loss from a long time. At present, the demand and supply graph of the Polo mints will
described below:
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Figure 4: Demand and supply curve for Polo Mints

(Source: Created by learner)
The demand and supply curve of the product is denoting that the demand of Polo Mints has
been fallen and the supply has been increased. The Polo mints are facing from the falling of
sales from several times. The home of Polo mint is New York. It has been invented in 70
years ago. It has survived the second world war (Thisismoney.co.uk, 2018). Then the founder
of the company has resurrected the idea of Polo. The equilibrium of the demand and supply is
a concept that is the mostly applied theory in case of the demand and supply. The equilibrium
theory of the demand and supply denotes that the equilibrium is created at the time when the
supply is equal to the demand. In the situation of equilibrium, the country does not face any
unemployment. The equilibrium is the perfect situation that is desired by all the products and
the companies. In the case of Polo, the equilibrium is a far away. In this situation the prices of
the Polo Mint will fall.
The other model that is present in the real life situation is the equilibrium. This is a position
where there is a balance in the demand and the supply of the product. There is situation in the
organisation Nestle where the product Polo has a balance in the demand in the market and as
well as the supply in the market. There are no deficits and as well as extra products that are
found in the market (Pang et al., 2015). The main thing that can be seen in the market is that
the demand of Polo has decreased and the supply of the product has also been reduced. The
main thing is that the people do not like the taste of polo as the taste of the mouth of the
people in UK changes a lot. These are very much important for the company Nestle to look at
(Panagiotidis and Printzis, 2016). The situation that has evolved in the organisation will
affect in the profitability of the product. On the other hand the prices of mints have also
increased that is increasing the cost of production of the organisation.
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This is another important thing that is needed for the organisation to look at. The market
condition of polo has reduced to all time low and they need to improve market condition of
the product. These are very much important as because due to the increase in the cost of the
raw material that is mint the cost of production is also increasing. This is affecting the
problems in the workings of the organisation (Beck et al., 2015). These are the deciding
factors for the management of Nestle as because the determinants of the price are the cost of
the making of the products. These are very much important for the management of the
organisation to understand and work according to the market situation.
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LO3: Demonstrate the ability to analyse hypothetical and / or real world situations that
occur in our economy.
The supply and demand of the market is dependent on the government control. The
hypothetical market exists when the supply is equal to the demand of the market. The free
market concept is also related to the hypothetical market (Becker, 2017). The economic
decisions of the country are made by the spontaneous arrangements through the individuals.
In the free market, the competition that exists in the market is perfect. The perfect market of
competition is a hypothetical concept in which the buyers have the perfect competition of the
market. The numbers of buyers and sellers in this market is of same numbers. The
competition exists in the market is healthy and perfect.
The sellers decide the prices of the products and the prices of the market are affordable to the
customers. All the sellers in this market make profit and it helps the market to grow. In the
hypothetical economics, the free market concept is used. In the free market, in this market,
everyone has the freedom to choose the products and the purchasing is entirely dependent on
the choice of the consumers (Brim, 2017). The government intervention in this market is very
low and the market is completely in equilibrium. The demand and supply is equal and in the
hypothetical market, there is no loss and no profit all the people are employed in the perfect
market. The hypothetical market does not face any legal or economic problem and all the
factors are positive in the hypothetical market of the economy. All the factors of the
economic market run perfectly in the free economy. The buyers and sellers both are free to
choose anything in this market.
On the other hand the real market is dependent on different factors. The different factors of
the market fluctuate in the real market of the economy (Friedman, 2017). The real market
economy depends on the selers and the buyers but in the real market the supply is dependent
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on the demand of the market. The supply is never equal to the demand in the real market of
economy. The real market economy is way too different than the hypothetical. The
unemployment and inflation act as negative catalist in the market. The government
intervention in the hypothetical market is low but the intervention in the real market is very
high. The market runs in real by obeying the government rules and regulation. The legal
factors and the governmental decision are very much important in the real market of the
economy.
In the hypothetical market, there are no bad and no greed. The concept of greed is prominent
in the case of the real market economy. The real market economy is dependent on the
different real time factors. The real time factors differ from the hypothetical market. The
control in the hypothetical market is low but the control in the real market is very high.
Polo mint is the victim of the real market economy (Stevens and Johnson, 2016). The sales of
Polo mint have been fallen tremendously and there are several reasons. The tastes of Polo
have created some problem in the country. The mint leaves a sour taste in the tongue of the
people. It has created the problem in the sales of Polo mint. The price of the Polo mint is
dependent on the cost of goods sold, demand in the market, buying powers and the price of
the competitors. From all the factors the demand for Polo has been fallen. The consumers of
the country have cut down the intake of the sugar. It has reduced the sales of the product. The
dental hygiene of the country has been increased and Polo has been detected harmful for the
dental hygiene of the people and the sales of Polo have been reduced. The usage of mean
within the smokers has become less and all the mentioned factors in the report have affected
the sales of Polo adversely. The company is presently unable to come back to the previous
point of sales of the product.
Now the company can reduce the price of Polo Mint and come back with some different taste
and packaging to increase the sales. Falling in price is the most applicable therapy according
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