Managerial Economics

Continuous Assessment-3

Mini Project

MONOPOLISTIC MARKET

Firm: Handloom Business

INTRODUCTION

We are going to take you through our newly based Handloom company.

Everybody knows about Handloom industries though let me just introduce this
industry first. The handloom industry is a group of related industries which uses a
variety of natural(cotton, wool etc) and synthetic fibre to produce fabric. It is also
a significant contributor to many national economies, encompassing both small
and large scale operations worldwide.

Now let’s come to our company. The name of our company is “Eclectic Prints”.
We are a Bangalore based company and we compete in monopolistic market.
Basically we make any kind of clothes that you want and you can opt for
customization as well. For a better viewing and customizing experience our
company uses digital dye. In our company we put the choices of the customers as
our main priority.

Cost of production :

For land and Labour and capital we have decided that:

• LAND as we are startup we are taking a building for rent and paying rent. •
Labour we are taking 30 employees 10 skilled and 20 unskilled . • Capital we
have decided it as 2 crore as its huge venture capitalist agreed to invest in us
because they loved the digital dye concept.
 • On the other hand the venture capitalist has agreed to invest another 3crore if
we meet our break even point, in order to develop our app and infrastructure.

1) a) Here we are facing the monopolistic competition in

our market:

• According to the monopolistic competition there are large number of

buyers selling the similar type of product but not the substitute of the
product.
• And this has the free entry and free exit in the industry.
• We have entered the industry very ease with huge capital.

1) b) The short run and long run of the monopolistic curve

Explanation of the graph

• This shrinks the demand for a successful firm's products. When new firms
enter the market, the demand curves of established firms shift leftward and
become more elastic, ultimately leaving all firms in an equilibrium.
• Marginal revenue equals marginal cost, and the long-run average cost curve
is just tangent to the demand curve.
• This tangency allows the firm to sell its output at a price just equal to
average cost yielding only normal profits in the long run. Product
differentiation allows the prices of comparable goods to vary in
monopolistic competition, but only within a narrow range.
2. Using a possible chart find out the Break Even Point
(BEP) for the industry. For example, in the restaurant
business, the assumption maybe of Rs.100 per meal. In
that case interpreting the costs of production, what would
be my mean price for every unit sold?

BREAK EVEN POINT

It is defined as that level of sales in which total revenue equal total costs and net
income is equal to zero

This is known as no profit no loss point.

FIXED COSTS

It is a payment made for fixed factors in the short run. It doesn’t change with the
change in the level of production.

Example: Rent of the factory, etc.

VARIABLE COST

It includes payment made to the variable factors of production. It changes along

with the quantity of output.

Example: Raw Materials, etc.

SALES REVENUE

The income that a firm receives from the sales of a good or service to its
customers.
 No of units 0 100 200 300 400

Fixed cost 4000 4000 4000 4000 4000

Variable Cost 0 1000 2000 3000 4000

Total cost 4000 5000 6000 7000 8000

Sales Revenue 0 3000 6000 9000 12000

• Firstly, the base price that was we are assuming as 30$ per unit. •
And the fixed cost we assuming as 4000 for any number of units. •
We assumed as the number of units increases the variable cost also
increases.

14000
12000
eu 10000 2000 TC FC
n

v
8000
e

6000
R

e
BEP
l

4000
a

0
50 100
150 200 250 300 350 400 450
No of Units Sold
So now we are going to Calculate the total cost, the formula

is, Total cost = Fixed cost + Variable cost

• So, for 0 units the total cost is,

TC = 4000 + 0 = 4000

• So, for 100 units the total cost is,

TC = 4000 + 1000 = 5000

• So, for 200 units the total cost is,

TC = 4000 + 2000 = 6000

• So, for 300 units the total cost is,

TC = 4000 + 3000 = 7000

• So, for 400 units the total cost is,

TC = 4000 + 4000 = 8000

So now we are going to Calculate the Total Sale Revenue, the formula is

Total Sales Revenue = Total number of units * Base price • So, for 0

units the Total Sale Revenue is,

Total Sale Revenue = 0 * 30 = 0

• So, for 100 units the Total Sale Revenue is,

Total Sale Revenue = 100 * 30 = 3000

• So, for 200 units the Total Sale Revenue is,

Total Sale Revenue = 200 *30 = 6000

• So, for 300 units the Total Sale Revenue is,

Total Sale Revenue = 300 * 30 = 9000

 • So, for 400 units the Total Sale Revenue is,

Total Sale Revenue = 400 * 30 = 12000

❖ From the above table we can understand that at 200 units the Total cost and
Total sale revenue is equal so that was the break-even point.

So now we are going to Calculate the Mean Price, the formula

is Mean price = Total variable cost / Total number of units

• So, for 200 units the Mean price is,

Mean price = 2000 / 200 = 10

• Here, Mean price is also known as Total variable cost.

3. To stay alive in any business, innovation and

improvement from the existing businesses are important.
How will you compete with the competitors?

Digital dye or electronic dye

We through our extensive research and development has invented a new

technology called digital dye or electronic dye. the main advantage of this dye is :

• Is highly customizable.
• Colors can be changed with just the help of an integrated app •
Users have the luxury to change the patterns, prints etc.
• Personalized images can be integrated.
• Personalized quotes can be integrated.
❖ In short this is the most customizable, personalized clothe material any one
can find in the market and the company has already applied for the patent
 and is in final stage for approval.
❖ The technology of digital dye is a class leading idea and has the potential to
redefine the clothes industry forever. Since this material can incorporate
whatever the color, patterns, images etc. the users wish for. Personalization
is the main ISP for this product.
❖ The dye is made by mixing charged electric chips of minute size in white
color dye so that few changes in the chips can make it emit different colors
or patterns which can be controlled using the app.
❖ The focus is mainly emphasized on the youth, teenagers are the most
fashionable and they are the most updated in terms of fashion. So, the digital
dye has huge potential to attract the teens as they can customize it to
whatever color or pattern, they want it to be.
❖ We have found a few dye manufacturers who can help us make this digital
dye and integrate it with our clothes. We can also provide 1 year warranty
for the dye and 2 years warranty for any manufacturing defects.

E-Commerce App:

❖ The pandemic inculcated a fear of stepping out among people all over the
world. Therefore, everyone started turning to online shopping apps for
buying clothes and accessories.
❖ This gives users a wide variety of apps to choose from.
❖ Technology has given a push to the online sales of the brands as almost
everyone is using a smartphone these days. And what can be better than
shopping at the convenience of your home.

Benefits of Fashion Mobile App Stores to Customers

• Convenience to Shoppers
• Offers & Discounts
• Constant Reminders
• Free Fashion Consultant
 • Useful Filters

Some of the Customer Panel Features include:

• Social sign-up/sign-in,
• Browse and filter products
• View offers and discounts
• View loyalty programs
• View product details and reviews
• Add product to cart
• Add product to Wishlist
• Apply discount code
• Real-time shipment tracking
• Multiple payment options
• Earn reward points
• In-app wallet and integration with 3rd party e-wallets •
Apply for return/exchange of products
• Rate and give reviews for products
• Create a support ticket
• Live chat support
• Personalized product suggestions.

Thank you
We the Group of:

Yesh.P MBA13378

Sonia Dubasi MBA11609

Varshini Chandar MBA16498

Pushpam Raj Singh MBA12685

Abinay Rana MBA14306

klalrinfeli MBA17426

Poola Anil Kumar MBA13408