ASSIGNMENT

OF
MANAGERIAL ECONOMICS
ON
SONY LCD TV

SUBMITTED TO: - DR.HIMANI JOSHI

PRESENTED BY:
Sagar paghadar
Stevens Business School, Ahmedabad

IMPORTANT INFORMATION

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 COMPITITORS
1) Hitachi 5) Samsung 9)Onida
2) Sharp 6)Sansui 10)Akai
3) JVC 7)Videocon 11)Philips
4) Panasonic 8)LG 12)Toshiba

DIFFERENT FACTORS AFFECTING THE DEMAND OF

SONY LCD TV
There are many factors affecting the demand of the Sony LCD
TV like…

MAIN FACTORS
1. Price
2. Income of consumers
3. Price of related goods

SUB FACTORS
1. Government policy
2. Technology
3. Geographical location
4. Market share of other competitors
5. VAT
6. After sales services
7. Other product of the SONY company

OTHER FACTORS
1. Festival offers

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 2. Recession
3. Brand ambassador
4. Advertisement
5. Durability of the product
6. During Olympics and world championships.

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MAIN FACTORS
1. PRICE

PRIC DEMA
E ND
115, 2500
000 0
90,0 4500
00 0
23,0 6000
00 0

140000

120000

100000

80000

60000

40000

20000

0
25000 45000 60000

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 PRICE DEMAND
26,000 45,000
24,000 50,000
23,000 60,000

26500
26000
25500
25000
24500
24000
23500
23000
22500
22000
21500
45000 50000 60000

In the first graph we can see that when the product was
launched in 2000, the initial price was Rs.115000/-. At that time
the demand comprised of rich people only, so when the price was
increased to Rs.120000/-, there was not much effect on demand.

But we can see that in second graph that reduction in price

increases the demand in lower levels, for e.g., at a price of Rs.
24,000 the demand of the product is 50,000 and at a price of Rs.
23,000 the demand is 60,000 it can show the high price elasticity of
demand.

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 Thus we can see that the price of the product is highly affected
in lower level but it is not much affected in higher level (i.e., rich
class).

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  KINKED DEMAND CURVE

From the KINKED DEMAND CURVE, we can see that, reduction

in the price from 26000 to 25000; increased the demand by 15000
units. Further reduction in the price from 25000 to 23000 results
in increase in the demand but not with the same proportion as
before. This happens because, previously the price was reduced by
only one company (i.e., Sony LCD TV), but after that the price of
other competitive products were also reduced.

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 2. INCOME OF CONSUMERS

Income of the consumers highly affects the demand of

LCD TVs
INCO DEMA
ME ND
10,000 10000
20,000 15000
25,000 19000
35,000 25000
50,000 28000

30000

25000

20000

15000

10000

5000

0
10000 20000 25000 35000 50000

Here, we can see that income of consumers and demand of

LCD TV has a positive relation. As this product comes under
normal goods, so when income of the consumers increased then
demand of LCD TV also increased.

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 3. PRICE OF RELATED GOODS

PRICE OF RELATED GOODS DEMAND

25000 70000
23000 60000
22000 50000
20000 45000
18000 30000

30000

25000

20000

15000

10000

5000

0
30000 45000 50000 60000 70000

Price of the other goods and demand has a positive

relation. If the price of the other competitive goods decreases
then demand of our product reduces and vice-a-versa.

If the price of Complimentary goods increases then the

price of production increases, thus the price of the product
also increases.

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SUB FACTORS
1. Government policy
Government policy also affects the demand of the
product. If the government policies are liberal and government
give relief in taxes and other benefits like subsidy then it helps
in reducing the cost of the production and it will help the
company to compete with competitors.

2. Technology
Technology has the ability to increase and decrease the
demand. When improved technology is used for the production
purpose the total cost of production goes down, in turn cost of
the product decreases and its demand increases. If new
technology is used in the product, initially it increases the cost
of the product hence demand decreases, but eventually the
demand increases again.

3. Geographical location
The demand of the product is more in urban areas as
compared to rural areas, hence geographical location is also
an important factors.

4. Market share of the competitor

It is obvious that if the market share of competitors is
high, then the demand of our product is less and vice-a-versa.
The other effect is that because of high market share of
competitors, our price factor becomes very sensitive; a very
small increase in the price of our product may lead to a drastic
fall in its demand.

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 5. VAT
It will affect the price of the commodity and thus affect
the demand, if VAT on product is high then automatically the
price of commodity will increase and it will reduce the demand
and vice-a-versa.

6. AFTER SALES SERVICES

“After sales services” can also be considered as a factor
affecting demand. It helps in increasing and maintaining the
reputation and prestige of the company. People prefer those
brands which provide better services as compared to their
competitors.

7. Other products of the SONY Company

There are many products of the company like…

Air Conditioners | Audio Systems | CD Rom & DVD Rom

| DVD Player | Digital Camera | Fax Machines | Micro Wave
| Monitors | Printer| Mobile Phones | Televisions

If the prestige of other products is good then consumers may prefer

to buy other products (such as LCD TVs) of the same company.

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OTHER FACTORS
1. Festival offers
Mostly during the festival season people prefer to buy new
commodities. So the companies provide attractive offers to
increase the demand.

2. Natural calamities
Natural calamities are uncertain factors. If any natural
calamity occurs then demand of commodities like televisions,
decreases.

3. Recession
Recession and demand are negatively related. During
recession the demand of the LCD TVs decreased by big
amount, even after reduction in the price.

4. Brand ambassador
An influential brand ambassador can help in creating a
good image of the product. SONY LCD TV does not have any
brand ambassador. If the company makes any popular
cricketer or actor as its brand ambassador then it may further
increase the demand of the product.

5. Advertisement

Attractive ads on TV, in news papers and in magazines

create good impact on customer’s mind and that helps in
increasing demand of the product.

6. Durability of the product

It depends on the quality; if the quality of the product is
good then its demand will increase.

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 7. During Olympics and world championships
We all know during such events, demand of televisions
increase.

 BANDWAGON EFFECT
Bandwagon effect means, when the popularity of the
product reaches at a high level, then people are eager to
purchase that product and the demand of the product increases
at full fledge.

When the slim SONY LCD TV was introduced it gained

popularity among the masses because of its unique feature, and
good reputation of the company, the company got a vast share of
market. Because of this SONY became one of the leading
companies which produced slim LCD TV all over India. So, in
that year company took advantage of that product and covered
7% more market share.

 SNOB EFFECT
In the near future snob effect will occur in this product, as
everyone is buying LCD TV, some may prefer to buy LED TV to be
an exception from the crowd.

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  PRICE ELASTICITY OF DEMAND

PRIC DEMAN
E D
26,00
0 45,000
24,00
0 50,000
23,00
0 60,000

EP= Δ Q*P/ ΔP*Q

= (50000-60000)*24000/ (24000-23000)*50000

= -4.8 ≈ -5

This means that the quantity demanded decreases by 5% for

each 1% increase in demand. It shows the price of the product is
highly sensitive, so company should be careful about the price of
the product.

 ARC PIRCE ELASTICITY OF DEMAND

EP = (Q2 – Q1) * (P2 + P1) / (P2 – P1) * (Q2 + Q1)
= (50000 – 60000) * (24000 + 23000) / (24000 – 23000) *

(50000 + 60000)

= -4.28

This means that a 1% change in price results on average

opposite change 4.28% in the quantity demanded.

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  INCOME ELASTICITY OF DEMAND
INCO DEMA
ME ND
10,000 10000
20,000 15000
25,000 19000
35,000 25000
50,000 28000

EI = ΔQ * I / ΔI * Q

= (28000 – 25000) * 50000 / (50000 – 35000) * 28000

= 0.357
This means that a 10% increase in income would have
resulted in a 3.5% increase in the demand of LCD TV.

 ARC INCOME ELASTICITY OF DEMAND

EI = [ΔQ * (I2 + I1)/2] / [ΔI * (Q2 + Q1) /2]
= (Q2 –Q1) * (I2 + I1) / (I2 – I1) * (Q2 + Q1)
= 3000 * 85000 / 15000 * 53000
= 0.32
Here, EI is positive
This comes under “normal goods” so an increase
in income leads to an increase in demand for the
commodity

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  CROSS-PRICE ELASTICITY OF DEMAND
PRICE OF RELATED DEMAN
GOODS D
25000 70000
23000 60000
22000 50000
20000 45000
18000 30000

EXY = ΔQX * PY / ΔPY * QX

= (10000 * 25000) / (2000 * 70000)

= 1.78 ≈ 2

This means that a 1% change in price of other products

results on average opposite change of 2% in the quantity
demanded.

 ARC CROSS-PRICE ELASTICITIES OF DEMAND

EXY = (QX2 – QX1) * (PY2 + PY1) / (PY2 – PY1) * (QX2 + QX1)

= (60000 – 70000) * (23000 + 25000) / (23000 – 25000) *

(60000 + 70000)

= 1.85 ≈ 2

This means that a 1% change in price of other products

results on average opposite change of 2% in the quantity
demanded.

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  References

 www.Google.com
 www.sony.com
 Managerial economy

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