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Market Analysis Practice: Gasoline

The gasoline market is a highly competitive market that hinders stations from making independent decisions compared to other providers in the business environment. For instance, when a gas station raises its unit price for gas by $5, it will experience a decrease in demand as consumers shift to other providers in the market. In a perfectly competitive market, corporations and consumers are price takers because of the availability of products in a ready market. Likewise, firms can easily enter and exit a market without experiencing any challenges because of the high demand for the identical products. However, suppliers have an upper hand compared to consumers because of their ability to influence the gas prices by responding to the market demand. From this realization, the ability of firms to generate revenue is largely influenced by its output, as opposed to the quantity sold in the competitive market.

The retail price for gasoline consists of different aspects that influence its value in the market. In this regard, the cost of crude oil, refining costs, and distribution or marketing costs are some of the primary factors that determine the retail price for gasoline. Likewise, taxes imposed by the government also influence the ability of suppliers to avail the different gas products at different prices that cover the production costs and profits. Importantly, gas consumption in the market is influenced by the type of cars in the market (Tscharaktschiew, 2015). For example, sedans and the hybrid models have a lower gas consumption compared to SUVs, whose consumption contributes largely towards the demand for the fuel commodity. In this case, a significant shift of consumers from low-consumption vehicles to SUVs is likely to increase the demand for gas, an aspect that compels suppliers to increase the cost of the product to cover for the increased expenses. However, new entrants in the gasoline market may exploit this opportunity by lowering their costs to attract many consumers, a move that yields profits through the economies of scale.

Market Analysis: Handbags

While the demand for beef has been decreasing over the years as consumers shift to more vegan options, the market for leather handbags has also received its fair share of the adverse outcome. Consumer awareness has contributed largely to the decline in beef consumption and the rearing of cows for leather. An increase in demand for beef is likely to have a direct impact on the demand for leather handbags in contemporary business environment. However, this will be largely influenced by the focus of consumers towards available vegan options and their desire to embrace the leather bags made from cowhides (Saha, Ngwabebhoh, Nguyen, & Saha, 2020). Observing the disparity in the leather handbags market presents an interesting scenario that demonstrates the growing influence of the consumers, as opposed to the producers. In the same vein, an increase in the demand for beef will provide consumers with a wide range of choice between vegan leather options and handbags made from cowhides. Therefore, understanding the market requires firms to identify the connection between consumer interests and their willingness to embrace available market options.

It should be noted that an increase in demand for beef will not translate to an increase in demand for leather handbags. Importantly, many consumers associate with reputable market brands that satisfy their consumer interests through brand loyalty programs and appealing design approaches. From this realization, different brands may have unique methods of production that are not necessarily controlled by the demand and supply of beef in the business environment. Given the wide range of options available to consumers, the leather handbag market is disassociated from the beef market, a move that introduces an interesting perspective to the two related markets. Currently, innovative technologies have led to the realization of quality synthetic leather, which is retrieved from ground coffee and fruit peels. From this observation, many consumers today are more willing to embrace the quality synthetic leather handbags, as opposed to the products made using cowhides. For this reason, the above-mentioned outcome explains the decreasing prices for leather handbags in the global business environment.

Discussion

Dear Lerner,

I am in agreement with your argument that both sedans and SUVs are fashionable vehicles that appeal to different population groups. While their fuel consumption varies significantly, many consumers associate with either vehicles because of their ability to complement their way of life. Many students are likely to opt for sedans because of their low-consumption rate while those in the corporate world will go for SUVs, which reflect their career growth and development (Bagnai, A., & Ospina, 2018). From this realization, the aspect of affordability and social status play a significant role that influences the consumer shift from low-consumption vehicles to SUVs. Likewise, the cost of maintaining both vehicles, has a direct correlation to the amount spent on gasoline, which can either drive up or reduce the demand for gasoline in the business environment.

When consumers shift from fuel-efficient vehicles to SUVs, the demand for gas is likely to increase because of their high has consumption. In an interesting twist of events, gas stations are likely to increase their gas prices to reflect the sudden demand for gas, a move that will compel consumers to switch to stations with a low price offering on gas. From this realization, the gas price will eventually decrease while the quantity consumed within a fixed timeline will increase significantly. Therefore, understanding the dynamics of the laws of supply and demand in different markets requires one to identify the factors that contribute to price changes.

Dear Lerner,

I am totally in agreement with your belief that the average American women spend up to $160 on leather purses. While the high-end leather bags attract premium prices, many consumers often use cheaper options that complement their style of fashion. On many occasions, women excuse their leather products on the basis of the raw material is a byproduct of beef rearing. From this realization, the strong belief that an increase in beef demand will likely trigger an increase in demand for leather handbags can be misleading. On many occasions, women align their interests with brand promotions and awareness campaigns where reputable fashion organizations expose consumers to an enabling environment that breeds brand loyalty (Kaolawanich, Oe, Yamaoka, & Chang, 2020). In this case, the purchases made in the handbag market are largely influenced by the efforts made by the leading fashion brands in meeting consumer expectations. For instance, Louie Vuitton handbags attract premium prices while the cost of leather production is low. From this perspective, consumers pay premium prices for the brand identity and experience provided by the reputable organization in the handbag market.

 

 

References

Bagnai, A., & Ospina, C. A. M. (2018). Asymmetries, outliers and structural stability in the US gasoline marketEnergy Economics69, 250-260.

Kaolawanich, R., Oe, H., Yamaoka, Y., & Chang, C. Y. (2020). A Discussion of a Luxury Apparel Brand Strategy in an Emerging Market: Conceptual Model with Network PerspectivesSIASAT5(2), 58-72.

Saha, N., Ngwabebhoh, F. A., Nguyen, H. T., & Saha, P. (2020, November). Environmentally friendly and animal free leather: Fabrication and characterization. In AIP Conference Proceedings (Vol. 2289, No. 1, p. 020049). AIP Publishing LLC.

Tscharaktschiew, S. (2015). How much should gasoline be taxed when electric vehicles conquer the market? An analysis of the mismatch between efficient and existing gasoline taxes under emerging electric mobility. Transportation Research Part D: Transport and Environment39, 89-113.

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