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Chanel Bags Company micro-economic analysis

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Lecturer
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General public
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economics
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Moi

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Wakaba J.
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documents in English
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case study
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4 pages
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General public
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  1. Introduction
  2. Microeconomics Analysis
  3. Demand
  4. Market structure
  5. Macroeconomic analysis
  6. Conclusion

There various factors that affect the demand and supply of channel bags, in this case, leather bags will be the specification. The major factor affecting demand of these Channel bags is price. Every time there is change in the prices of these channel bags there is always a movement caused in the demand curve. For instance, if there happens to be a fall in the prices of the channel bags, the curve moves to the right implying that there is a rise in demand levels and if there is a ascend in the charge of these products, there is a consequent fall in demand (Schotter, 2009). Therefore, the profit margin always increases with fall in the prices of these channel bags.

Another crucial factor that affects the supply of these products is the income differences. In any case, there is an increase in the income levels of a population holding other factors constant, the sales for channel bags increase because the extra amount will be spent on purchasing them and an increase in profit margin is realized. Although when income spent decreases, the households will only concentrate on the most essential commodities lead to a fall in sales of channel bags, as it will be considered a luxurious need. The price at which other related goods are sold will affect demand in that if a bag like travelling bag with the same features is offered for a relatively low price compared to that of channel bags there will be a fall in demand for the channel bags, which results to low sales and profit. Advertisement also affects sales in such a way that whenever there is an effective awareness created on the channel bags there is a boost in sales and profits. The channel bags being in fashion is another factor that has boosted its sales. Many customers always prefer whatever product that is in fashion hence there is increased demand.

[...] For instance, the increase for bags represents growth of the economy. It is always measured in GDP when the economy is assumed to be at full employment (Jones, 2002). Fluctuations in the growth of economy lead instability of an economy that is brought by inconsistency in production. This leads to hiking of prices of goods hence inflation. Inflation in an economy will force the economy to take credits in order to maintain the GDP but this will just worsen the situation. [...]


[...] The supply of channel bags can be affected by price changes. If an increase in the price of channel bags is factored in, the supply of this product will increase with an expectation of widenig the profit margin but if the prices fall the supply will be low. Low supply leads to a decrease in sales while an increase in supply leads to incresed sales. Lastly, change in technoloy employed matter a lot. Up to date technology makes production to be very effective and efficient hence increased supply that enjoys from economies of scale hence incresed profit margin. [...]


[...] In this market, there are many other sellers. All these companies are allowed free entry into these markets where there are many buyers. The channel bags company should move from this kind of market structure because there is maximization of profits. The most ideal market structure is the monopoly kind of market where the firm can dictate its own profits and prices. The most proper way to do this is to fashion an invention or innovation and patent the new idea. [...]


[...] Norton and Co. Schotter, A Microeconomics: A Modern Approach. International ed. [...]

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