Cadbury and Economics

CADBURY CHOCOLATES

Price Elasticity.

Product is brand loyal, so if we increase the price of by 20% then demand of the chocolates may decrease by 5% that means elastic price is >1. So, the product is less elastic.(If we increase the price by Rs 1 then demand will fall by 5 pcs /100 pcs.

Economies Of Scale.

In 1968, Cadbury was merged with Schweppes. Since they had invested in new machinery in one of their modern confectionery plants (run by Cadbury Schweppes) they were able to switch part of factory capacity from lines where demand was in decline, to where demand was on the increase through well organized production management.

Diminishing Marginal Utility.

Dairy Milk box cost Rs 200, but if you 100 boxes the price drops to Rs 180 per box. However if you wont be able to consume 100 boxes before they expire, there is less satisfaction in having so many boxes.

People Respond To Incentives.

When we recharge or buy anything from Paytm app we get a certain amount of cash back, similarly when we buy a Cadbury Dairy Milk we get a coupon code which we can redeem in Paytm app to get a guaranteed cash back. People buy Dairy Milk to get cash back offers.

Income Levels.

Consumers with high level of income can afford chocolates like Cadbury Bournville where as consumer with lower income can only afford relatively cheaper Dairy Milk. We can conclude that Cadbury takes care of all levels of income consumers.