About the product
The product chosen by us is a lipstick, which even though is a highly traditional cosmetic item, but still has a lot of relevance and market amongst the female consumers. While the lipstick is used as a beauty enhancement product for the lips, but over the years, the product focused is also aligned with skincare of lips as the female consumers are now more meticulous about the quality of lipstick as well and not just colors.
It is considerable that there are many cosmetic brands offering the product, thus increasing the competitive landscape in the market. Many leading international brands such as Loreal, Maybelline launch new range of lipsticks every new season, and even the local brands that are popular in the regions are also enticing the customers with a new range of lipsticks from time to time. While each brand has its own market, but lipstick as a product comes at varied prices ranging from $5 to $500, depending upon the brand itself. However, for the purpose of this assignment, we will stick to the medium price range of $50, that is afforded by majority section of the society. Therfore, all the calculations here will be performed at the price level of $50 and the demand schedule will be created accordingly.
Discussing ‘a’ and ‘b’ in the demand equation
In the given demand equation, ‘a’ refers to intercept of the demand equation, i.e. the price level when the demand turns zero. On the other hand, ‘b’ refers to slope of the demand equation, i.e. how much will the price change with 1% increase in the demand level.
