Analysis of Supply and Demand: A Case Study of Polo Mints UK

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Economics for Business
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Table of Contents
Introduction................................................................................................................................4
Discussions.................................................................................................................................5
Conclusion................................................................................................................................13
Reference List..........................................................................................................................14
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Introduction
In the following study, the main focus will be given on the relationship of supply and demand
which will be explained with the help of a diagram of demand curve. Equilibrium is of
demand and supply will also be explained and the factors that affect and changes the demand
and supply curve. The study will also consist of the effects that these changes have on the
fluctuation of the prices which widely affects the market as well. An elaborative picture will
also be highlighted to show the various ways that fluctuates the supply and demand of a
commodity in the market. The factors that mainly build the whole concept of demand and
supply are the main focus of the study. The study will help in understanding and evaluating
the knowledge that makes the whole concept of inflation and deflation that mainly occurs due
to the fluctuation in the supply and demand. Proper illustrations explaining the idea of supply
and demand along with their diagraphs will be presented in the study.
In context to Polo Mints UK Company the whole demand and supply will be explained in
detail words to understand their demand and supply of the products and their revenue
generation that they have gained in the past years. The management they have been
implementing in their business and on the demand and the supply of their products have been
beneficial or a downfall to the company (nestle.co.uk. 2019).
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Discussions
Business economics is the area which is mainly applied in the understanding the theories of
the economics and the qualitative procedures to study the productivity or the economy of the
company. This is a part of the traditional methods of economics; this mainly encircles the
problems or struggles that occur in the economy of the business organisations or enterprises.
Demand in economics is used to understand the need or the desire of the customers that is
increasing with the progressive days. This is also called the desire in the customers for buying
the products to satisfy their needs and requirements. Supply is known as the flow of
commodities in the market from the companies end to make their customers satisfy and to
maintain the customer loyalty towards their company. Price is the main component out of all
the factors in economy this is the determinant that ensures both supply and demand. During
the time of inflation and deflation the demand and supply tends to fluctuate.
In context to Polo mints their demand was very high during the time of early 90s and 80s as
well as their supply was also very stable. This year the company completed its 70 years yet
the study of the previous year’s states that the business has faced a downfall it the demand for
Polo mints. The market has become so competitive that they are gradually losing the position
from the markets and the new entrants are capturing the market.
Figure 1: Supply and demand Curve
(Source: Yang et al., 2017)
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This is the law of the demand curve. This clearly states the relation between the supply and
demand which occurs mainly due to price fluctuation. The law of demand diagram clearly
states that the lower is the demand of the commodity the higher will be the price of the
commodity. This is the time when the customers are not keen in buying the products that are
overpriced for no reason. The customers have the tendency to avoid the products that are
overpriced and look for substitutes and their purpose will also be solved. Hence this is the
crucial stage for the companies as they face a great downfall in their profit margins. So, the
demand slope is has a downfall. On the other hand, the law of supply states that the higher the
price of the commodity goes the higher will be the probabilities of the supply. This shows a
slope that is moving towards upwards and the companies are yielding good profit within this
timeframe.
In context to the chosen company that is Polo Mints, which is a very old company and had a
huge demand all over the globe in the earlier days. But now polo mints are generally not seen
in the market. This is due to the intense competitive market the company earlier had very less
competition but with progressive days the competition in the market is growing and the
demand for Polo Mints is decreasing alarmingly. The polo Mints earlier had a huge demand
they brought new products and supply of their products was also very high but with gradual
time the demand started falling and the competitors started capturing the market this led t the
downfall of the business.
Equilibrium is the concept in economies which means that the demand and the supply are
meeting at the same point. This implies that the demand and the supply in the market for the
commodity is same and then price fluctuation being normal. The fluctuation in prices also
determines the demand and supply of the commodity. The customers tend to seek
commodities that have low price in the market and will serve their requirements equally. The
companies also try o maintain their production cost and make the finished product in the
minimal cost they can so that the price the customers will pay for the product will be
beneficial for the company and make the earn a good revenue.
In context to Polo Mints, earlier there demand and the supply of the products was also very
stable even new entrants have tried to make their presence effective in the market the position
of polo mints was not deviated from their position of supply. Equilibrium is that stage of the
economy when the supply of the commodities is very smooth and the demand of the
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customers is also normal this helps in building a good market. This also decreases the
chances of fluctuation in the market (nestle.co.uk. 2019).
The price of the commodities rises only when there is very less supply of products that in
great demand is of the customers. This is the time when the company releases the product
that they store in warehouses to cater the requirements of their customers and this makes the
price go way too high and customer tend to avoid buying those products. Equilibrium means
that the customers have the demand of the products and there is no urgency to flood the
market with extra products by the companies this also makes the supply of the products stable
and this also makes the price of the products convincible for the customers to buy it. This also
makes the market stable and less chances of fluctuation in demand, price and supply of the
commodity occurs. The flow of the commodities decreases only when the company’s
production process is being affected due to certain sever reasons. That can be low availability
of resources from the suppliers or less raw materials, dissatisfaction of the employees, or it
can be disputes between the management and the employees this can be the reason for
affecting the production process of the company.
Figure 2: Equilibrium model
(Source: Hua et al., 2019)
The change in demand means either an increase or decrease in the supply and demand
volume that tends to disturb the equilibrium level of the market. The stable demand and the
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supply make the market free from the unnecessary fluctuations that can disturb the cycle of
demand and supply. Price is not the only factor that brings a change in the demand curve but
there are some other factors that bring a change they are the wages of the customers. The
consumers will purchase commodities that they find affordable. The main objective of the
customers is buy products that will serve heir necessities first then they think of buying items
that will give the luxury and comfort (Knittel and Pindyck, 2016). This will bring a threat to
the companies that only produces luxury products as the customers might not be interested in
buying those products. Technology and population are also the factors that affect the
demands and beings a change in the equilibrium.
Figure 3: Change in demand
(Source: Heckl et al., 2015)
The advancements that are occurring in the technology are being a threat to the companies
that still follow the strategies that are related to the traditional methods. Customers tend to
adore the products that have latest technologies implemented in them to make the life of the
customers easier and faster (Liu et al., 2016). The companies that try to implement the latest
technologies in their production process bring a gap in their production and this also reduces
the supply f the product in the market. The either factor that is population is also affecting the
demand chain because the increasing population he demand is also raising its level to an
alarming level. The companies are also facing difficulties in producing that huge number of
products. The companies are facing the difficulties because they have limited supply of
resources from the suppliers and limited raw materials hence, to cater the requirements of the
customers. This as a whole affects the equilibrium structure of the market. This leads to many
problems for both customers and the company (Stern, 2017).
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Mainly there are changes in the demand curve when it shifts to the right side of the graph it
implies that the demand in the market is increasing and if goes to the left side that the demand
is decreasing. when the price and supply of the products remains unchanged but there is an
increase he purchasing power of the customers due to an increase in their age structure that
leads to the a hike in the market this will increase the demand keeping the proc end supply
unchanged. When the demand for a commodity falls it is considered that the purchasing
power of the customer has reduced and the other factors like supply and price remains
unchanged yet the demand for the commodity decreases (Telser, 2017).
The change that occurs in supply implies that the production process of the company has
changes which are causing a delay in production of the products which makes the supply of
the products get delayed and this again affects the equilibrium of the market. The supply
curve when bends towards the right implies that the supply in the market has increased and
when the supply curve bends towards the left it implies that the supply in the company has
suffered a downfall (Azevedo and Leshno, 2016). The downfall in the production process
occurs mainly they are incorporating new technologies or new implements in their production
process that makes them get delayed in producing the next lot of commodities and the decline
in the supply of commodities (Becker, 2017).
Figure 4: Change in supply Curve
(Source: Tan et al., 2015)
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The concept of supply and demand is that how both the factors are interrelated to each other
and how their relationships have an impact of the process of the goods and commodities in
the market. The time in the market when the demands exceed its level and supply remains
constant the price of the commodity also increases. There is an interrelationship between
supply and demand for the commodities and also the price that is a big determinant of supply
and demand. Inflation is the term that is used to describe when the fluctuation in the price
which is noticed to be high. This implies that the demands of the commodities have risen
which has brought an increase in the price.
Deflation is the term to describe the position when the demand for a commodity is low and
supply of the commodity is at the stable state and price for that commodity falls drastically
(Friedman, 2017). The relation of supply with price is different when the demand for the
commodities remains constant. It is very important to maintain a sustainable market because
that will lead to less fluctuation and make the market free from conflicts between the
suppliers and the customers (Doraszelski et al., 2018).
In context to Polo mints the inflation and the deflation issue has not occurred with the
company because the supply and the demand was always at the equilibrium point in the
market. But with progressive days the demand for the mints started decreasing yet Polo has
managed to hold its image in front of their customers and maintained their customer loyalty.
Polo is a brad that has been capturing the market from a long time so the new entrants are
facing difficulty in making their position in the market. Polo mint is brand from the Nestle
Company yet their other products have managed to gain the market but Polo mints slowly are
losing its existence (Cardenas et al., 2016).
The market must have a flow of equilibrium so that the demand and supply of the
commodities remains constant without affecting the price of the products. Elasticity of price
the demand of the products that gets affected due to the increase in the price rate is called the
elasticity of price. It has already been explained the idea of inflation and deflation and on
what grounds they tend to occur.
The impact that it is been casted upon demand and supply is very intense. It implies that the
market is completely based on the preferences of the consumers if they do not want to buy a
product they will not be forced by any external factor to purchase the product. The customers
make their purchase only at on will hence; the market’s demand about a product always
depends on them. The customers also tend to find for products that are cheap and will serve
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their purpose equally (Ball, 2017). The supply of the products in the market depends on h
company as they are managing the production process it wholly depends on them. The factors
that both ways affect the price of the commodities this can be negative for the market and
positive as well. All the companies seek to serve their customers in all possible ways to make
them satisfy and maintain their brand image in the market. Price is the main determinant that
brings not only revenue to the company but also the customers seek products that are low
priced.
In context to Polo mints it is seen that the company continues to own the market position
globally and they have not yet lost the strong position that they have acquired in the market in
from the vast years. The new entrants have not become effective in earning the position that
the company had acquired. Hence, the company has kept their brand image and market value
strong and maintained their loyalty towards their business and the customers have also
responded to the company’s effort positively.
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Conclusion
From the following study it can be finally concluded that the company that is chosen that is
Polo mints have still managed to hold the position in the market. The customers still prefer
polo mints over other mints and that is making the company threat to other new entrants in
the market. The detail study that encircles about the equilibrium of the market is stated n the
study paper. The shift or changes in supply and demand that widely affects the price is also
explained in the above study with suitable diagrams.
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Reference List
Azevedo, E.M. and Leshno, J.D., 2016. A supply and demand framework for two-sided
matching markets. Journal of Political Economy, 124(5), pp.1235-1268.
Ball, R.J., 2017. Inflation and the Theory of Money. Routledge.
Becker, G.S., 2017. Economic theory. Routledge..
Cardenas, L.M., Franco, C.J. and Dyner, I., 2016. Assessing emissions–mitigation energy
policy under integrated supply and demand analysis: the Colombian case. Journal of cleaner
production, 112, pp.3759-3773.
Doraszelski, U., Lewis, G. and Pakes, A., 2018. Just starting out: Learning and equilibrium in
a new market. American Economic Review, 108(3), pp.565-615.
Friedman, M., 2017. Price theory. Routledge.
Hansen, B., 2016. A Study in the Theory of Inflation. Routledge.
Heckl, I., Halász, L., Szlama, A., Cabezas, H. and Friedler, F., 2015. Process synthesis
involving multi-period operations by the P-graph framework. Computers & Chemical
Engineering, 83, pp.157-164.
http://www.nestle.co.uk. (2019). A 'hole' lot of history – Polo turns 70!. [online] Available at:
https://www.nestle.co.uk/media/newsfeatures/a-hole-lot-of-history-polo-turns-seventy
[Accessed 11 Apr. 2019].
Hua, Q.S., Li, Y., Yu, D. and Jin, H., 2019. Quasi-streaming Graph Partitioning: A Game
Theorectical Approach. IEEE Transactions on Parallel and Distributed Systems.
Knittel, C.R. and Pindyck, R.S., 2016. The simple economics of commodity price
speculation. American Economic Journal: Macroeconomics, 8(2), pp.85-110.
Liu, Z., Zeng, X.J. and Ma, Q., 2016, July. Integrating demand response into electricity
market. In 2016 IEEE Congress on Evolutionary Computation (CEC) (pp. 2021-2027). IEEE.
Stern, R., 2017. Balance of Payments: Theory and Economic Policy. Routledge.
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