Business Environment Essay Example | Topics and Well Written Essays - 1500 words - 2

Business Environment - Essay Example This paper approves that the PMT brand of organic products is also part of a monopolistically competitive industry, but a recent visit to their business advisor informed them that the Price Elasticity of Demand for their products is inelastic. But being in the monopolistically competitive industry, the stiff competition from rival businesses does not affect the profit margins of PMT. There is a niche market for the PMT products, which are unique in their own way and add to the variety of organic cosmetics, soaps and perfumes. People who buy such products will prefer to have variety, and so a good number of buyers will regularly come back to the PMT brand, though they test out other brands in the mean time. The factors that would affect this demand curve and hence the PED include the variety of substitutes available for buyers to try around, the proportion of income required for the item and degree of necessity or luxury. This essay makes a conclusion that disposable income is the amount of income a person or an organization has, after the taxes have been deducted from the total amount. It is being assumed that disposable incomes are going to fall in the next two years. With the decrease in the people’s income, the Income Elasticity Demand for the organic products would turn positive or high positive and the niche market catered to would reduce. The organic perfumes, soaps and cosmetics would thus, come under the category of luxury goods.But the fall in disposable income is not likely to affect the services offered by the salon, since people would still be catering to their basic needs. The income elasticity demand for the services is likely to fall between one and zero.