Economics is the study of making choices, It examines how people choose the product in satisfying their unlimited wants by considering many factors.

Economics is “The study of how society decides what, how and for whom to produce”.

(Begg,2003)

COMPANY PROFILE

Nestlé was founded in 1867 on the shores of Lake Geneva in Vevey, Switzerland and its first product was “Farine Lactée Nestlé”, an infant cereal specially formulated by Henri Nestlé to provide and improve infant nutrition. From its first historic merger with the Anglo-Swiss Condensed Milk Company in 1905, Nestlé has grown to become the world’s largest and most diversified food Company, and is about twice the size of its nearest competitor in the food and beverages sector. In 2004, Nestlé had around 247,000 employees worldwide, operated 500 factories in approx. 100 countries and offered over 8,000 products to millions of consumers universally.

In India Nestle has its headquarters in Gurgaon,Haryana. One of the main brand is Chocolates and Confectionery which is been studied here.

DEMAND

Demand is the quantity buyers wish to purchase at each conceivable. The demand of the product can vary from consumers to consumers and product to product. Demand is not a particular quantity but it is the price at which the consumers will purchase the product. In case of chocolates the demand can vary if the price increases.

The supply of the product is also very much essesntial, The product is to be reached to the consumers in right quantity at the right time with the right price.

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The demand of goods can be classified into three types:

• The Price of related goods : This relates to the price and demand for the substitute product , If the Nestle Chocolates are not available in the market the people will start buying the substitute goods such as ice cream, cakes etc. But there is a major role for competitors, if the nestle chocolates are not available consumers can go for Cadbury chocolates also. The price increase in the complementary products such as milk, sugar, choco powder will effect the price of the product . So the price of related good playes a important role in fixing the price of the product.

• Consumer Income : The income of a person plays a major role in the market, if the person income goes high the demand of the product goes high as the people start buying more chocolates. The person consuming low priced chocolates will buy good quality chocolates this is the situation where the inferior goods demand gets lower. When the income increases the per capita income of the person increases which rather increases the purchasing power of the consumer.

• Taste : This is one of the major factor which controls the demand of a product, when the income of the consumers are high the people will think of buying good quality chocolates, when there are competitors for nestle like Cadbury, amul etc the consumers depends on taste, the taste and preferences of a product plays a major role in setting the demand of a product.

ELASTICITY

Elasticity is the sensitivity of change in percentage of one variable with respect to the proportional percentage change in other variable. The Elasticity can be classified in to three :

• Price Elasticity of Demand – This is explained as the difference between the percentage change in demand by the percentage change in price.

Ed = % change in Quantity Demanded

% change in Price

From the above figure if the price of chocolate is been reduced by 20 pounds from 30 pounds the degree of change in demand increases from 30 kg to 50 kg , the change in price can give a very good result on the products sale ,where as when the price is been increased by 50 pounds the demand falls to 20 kg there is a great loss and the sales and demand of the product has fell down.