Chinese Beer Industry

Topics: Supply and demand, Consumer theory, Price elasticity of demand Pages: 10 (2468 words) Published: December 31, 2012
4087 Economics and policy

Student Number 298556
Zhao Peng

1 The main factors affecting the microeconomic environment of Chinese beer industry
1.1 Demand
Price of the product
Other factors
1.2 Supply
Price of product:
Other factors
1.3 Supply and Demand in equilibrium market price
1.4 Elasticity
1.5 Government Intervention
Price control
Indirect taxation and subsidy
2. Market structure of Chinese beer industry

2.1 The types of market structure
2.2 Condition of Chinese beer industry
Product differentiation
Number of firms
Barriers to entry
3. Porter’s five forces

Suppliers bargaining power
Buyer bargaining power
Threat of new competition
Threat of substitute
Intensity of competitive rivalry


With the development of Chinese economy, China has more and more places in world economic system. A large number of people have paid attentions in Chinese economy. On the other hand, as the biggest market in the world, China has been the aim market for almost all the industries of world including beer industry, but they need analyse Chinese economic environment, competitive environment and market structure first. In this report, the author will analyse and discuss them.

1 The main factors affecting the microeconomic environment of Chinese beer industry Microeconomics is the effects of demand and supply on individual consumers, markets and firms. It is different to macroeconomics, which is focused on whole economic system like national and international economy (NELLIS, PARKER, 2002).

1.1 Demand
Demand refers to the quantity of a good or service that consumers are willing and able to buy. Effective demand is supported by purchasing power. The factors, which can influence demands, include price of the product, price of other related goods, disposable income, tastes/fashion and others (Deng, 2003).

Price of the product: In price mechanism, which is one of methods to make resources allocation decisions, demand can build relationship with price (as the table below), assuming other factors of demand are constant. As the so-called law of demand, if other conditions keep constant, the higher price will be with lower quantity demanded and lower price will be with higher quantity demanded. It means the demand and price can influence each other (Deng, 2003).

It is the exception. In fact, all the conditions cannot keep constant. It will be changed (Deng, 2003).

Other factors: When the other factors change, the demand and price curve will move to right if the quantity demand increased and the curve will move to left if the quantity demand decreased. As the table below (Deng, 2003):

There is a table to show which factors will influence customers’ demands of Chinese beer.

(Deng, 2003)

1.2 Supply
On the other side to decide resource allocation is producer, which provide economic resources like land, labour, capital and enterprise to get reward. Supply is the amount producers are willing and able to offer for sale in a time period (Deng, 2003).

Price of product: The same as demand, with assumption of ceteris paribus, the supply can build relationship with price and both of them can influence each other. The lower quantity supply means the lower price. Oppositely it will be same (Deng, 2003). As the table below:

Other factors: If the other factors, which can influence supply, changed, the curve will move like the demand/price curve, too (Deng, 2003).

(Deng, 2003)

1.3 Supply and Demand in equilibrium market price
All the analysis above is about single demand and supply based on the Price Mechanism, but neither of them can determine market price. The balance point of the beer’s demand is same as beer’s supply in price where no tendency exists for...
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