Economics Assignment Essay Example | Topics and Well Written Essays - 1750 words

Economics Assignment - Essay Example In the final stage, the paper would explain several further businesses and operational strategies that the company can adopt in future. With the help of these theories, the company would be able to improve its business in future. The learnt from the essay would help to understand the importance of economics in the current state of business affairs. Contents Contents 3 1. Introduction 4 1.1 Report Brief 4 1.2 Company Background 4 2. Literature Review 5 2.1 Demand Theory 5 2.2 Market Structure Theory 6 2.2.1 Differentiation and Revenue Maximizing Theory 7 2.3 Long Run Theory 7 3. Case Study 8 3.1 P&G and Theory of Demand 8 3.2 P&G and Market Structure Theory 10 3.3. P&G and Long Run Theory 12 4. Conclusion and Recommendations 13 Reference List 15 1. Introduction 1.1 Report Brief This essay will analyze the business of the famous American consumer goods company named Procter & Gamble (P&G). The researcher would analyze the business performance of the company on the basis of economic the ories by scrutinizing the company’s annual report. In the later stage, the researcher would explain the business and operations strategies undertaken by the company through the analysis of its corporate activities. 1.2 Company Background P&G, the famous consumer goods company in America has its headquarters in Cincinnati, Ohio, United States. The products which are produced and sold by the company are primarily categorized in terms of three segments. These are cleanup agents, pet foods and individual care products. The company enjoys a high brand value in the market, with annual sales of about $83.68 billion (2012). The organization also enjoys a wide social presence in the market. It operates in almost all the countries in the world and as recorded in 2012, its operating income was $13.29 billion (P&G, 2012). The following context of the paper would explain the performance of the company by analyzing its annual report on the basis of economic theories. 2. Literature Review 2 .1 Demand Theory Demand for a commodity or a service in the market is the want of an individual backed by proper purchasing power. If a demand is created by a single household in an economy, then it becomes an individual demand. The horizontal integration of all the demand curves is termed as the market demand curve. According to the law or Theory of demand, considering the other factors affecting demand to be constant (Ceteris Paribus), the quantity demanded for a product is inversely related to its prices and vice versa (Mullerat, 2011). Thus, a market demand curve is always negatively sloped in nature with the assumption of Ceteris Paribus. Figure 1 Demand Curve Price Demand Curve (Market or Individual) Quantity (Source: Authors Creation) A shift in the demand occurs when other factors affecting demand, apart from price, changes. These other factors include tastes and preferences of the consumers, price of substitutes and price of complements along with income of the consumers. F igure 2 Shifts in Demand Curve Price Initial Demand Curve New Demand Curve Quantity Demanded (Source: Authors Creation) The above diagram shows a shift in the demand due to changes in any of the demand determinants. 2.2 Market Structure Theory The market structure theory explains the exact type of market in which organizations can operate. The market structural differentiation is mainly categorized on the basis of the strength of the seller and buyer in a