Option 1: Microeconomics

Brexit is a short term for “Britain Exit.” On Thursday 23^rd June 2016 a referendum was conducted that saw a popular vote cast to have Britain leave the European Union. The European Union is a trade union of 28 European countries that was meant to ensure political and economic partnership within the region. The main objective for which the union had been established was to establish a single economic market that would see trade tariffs removed such that member states would trade freely in the European market. Notably, prior to Brexit much of what the union had intended to achieve had been achieved. As many had anticipated, a vote to have the UK leave the European Union would have adverse economic effects on the United Kingdom. Though the vote from the referendum had the popular vote being for the exit of the United Kingdom, the country has not yet left the union completely due to the legal formalities established in article 50 that guide the exit of a member state of the European Union. However, the effect of Brexit is already showing up even before the United Kingdom fully exits the European Union. The purpose of this essay is to review a commodity sold in the United Kingdom that had its price influenced by the referendum held to decide whether the United Kingdom was to stay or leave the European Union. Marmite is the product that is under review in this essay.

Marmite is a food product that is sold in the United Kingdom by Unilever. Unilever is a multinational company that sells its products in the international market with the United Kingdom’s market being one of the markets in which the Marmite maker sells it. Unilever had been selling marmite in the United Kingdom through Tesco, which is the biggest retailer in Britain. Following the Brexit speech by Theresa May who took over from David Cameron, the former prime minister of the United Kingdom who resigned following the Brexit vote, the value of sterling pound depreciated significantly against the dollar. According to Varian et al., (2010, p. 196), in economics depreciation of the currency used by a certain country against other currencies indicates that it becomes more costly for firms operating in the country whose currency depreciates. On the other hand, buying goods from such a country is deemed to be cheaper from other countries, and hence this triggers an increase in exports made by the country. Hence, the marmite maker (Unilever) perceived the depreciation of the pound would increase the cost incurred by the organization in selling the product in the United Kingdom. As a result, the company in fear of making losses had to establish a strategy that would help it adjust accordingly such that it would continue realizing profitability in the selling of Marmite in the Britain market.