Case study: Mintel batteries report
a) What happened to sales of batteries in the period 2004-8? Provide a quantitative estimate. How do you explain the fact that over that period the amount of batteries sold increased whereas the value of sales declined?
From figure 20 we can see that the volume of sold batteries from 2004 (584 million batteries) to 2008 (611 million batteries) has increased by 27 million batteries. During that period of time the volume has slightly raised, where in 2006 was the highest volume of batteries sold 620 million batteries. Being a difference the value at 2004 to 2008 prises has decrease, started with £450m in 2004 and falling down to £391m in 2008. Here the conclusion which we can drew, as the prices of the batteries fall down , the volume or the demand for them will go up and the way around. The competitors selling batteries are too many, that makes the price of them goes down as the demand is too high and consumers have got big selection. We consider that as price elasticity of demand, where the elasticity measures the extent to which demand will change. Where we have % change in demand greater than % change in price, we have elastic demand same as in this case. In those recent years, the market for batteries sold has become bigger as producers of batteries have increased under the influence of huge demand of batteries. The prices of batteries had felt down because of that and also competition is pretty high. Because of the low prices of the batteries, the sales still increasing, because of need of batteries for all technologies this required batteries in order to work. Figure 21.We can see there are several classifications as purchasing batteries made by adult population, number of buyers of batteries and number of batteries purchased per buyer. They all have slightly increased by approximately 1% or less per each category. Situation for the figure 21, which presents purchasing of batteries events, is almost the same. Figure 24. The average spending on batteries per battery buyer based on adults started with 49.44 in 2005 and has grown to 50.64 in 2008. The average spending for batteries per buyer stood almost the same during the period from 2005 to 2008, it was 10.6 in 2005 and felt down to 10.00 in 2008. The number of buyers of batteries started with 38.96 in 2005 and reached to 41.18 in the following year , kept falling down in 2007 (40.05) till reaching almost its starting point (38.89) in 2008.
Figure 26 we can see over the volume sales of batteries by type. We can see that Recharge cells batteries have growth rapidly independently by the small segment of the market. In 2005 they started with 1.5 % of market volume sales and reached to 2.3% for 2008, and growth with 56% since 2005. However, alkaline batteries accounted for 79% of value sales, are the biggest segment of the market. In 2006 value of sales was £326m and felt down to £307m in 2008. There is no visible change in volume of sales for alkaline batteries, the difference is 1%. The value sales of Zink carbon batteries have decrease from 2005 to 2008 with 14 million and the volume of sales has fallen down from 13.4% in 2005 to 10.6% in 2008. Specialists hold their own. The value sales of this type of batteries have decreased slightly with £3 from 2005 to 2008, there has no change in percentages, and the volume of the sales has increased by £4m, starting with £16m in 2005. There specialist/other have 2.6% which has grown to 3.3% in 2008.
b) Using the data supplied for that period show how it can be calculated that the price elasticity of demand for batteries is about -0.46. Interpret this figure and explain what it implies about the behaviour of consumers.
Percentages change in price:
P = (2008 price -2004 price) / (2004 price)
To find value, current price has to...
References: Samuelson.P, Nordhaus.W. (1995),Economics, fifteenth edition, McGraw-Hill, Inc.
Powell.R, (1993), Economics for professional and business studies, second edition
McConnell. C. (1999), Economics principles, problems, and policies, fourteenth edition, McGraw-Hill
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